how to do your taxes in canada

Tax season is upon us! I mostly talk books and life experiments on this blog, but I am an accountant by trade, and at this time of year tax stress gets the best of us. Even though tax was part of the compulsory curriculum for me, when I first started doing my own taxes a few years ago it was still a learning experience. If you’re a student or from a low-income family, there are usually some free tax clinics around to help you out, but it’s important to make sure you have the ability to understand enough of what’s going on to be able to deal with any CRA queries that may come your way a few months later. So for those of you new to doing your own taxes, I’ve written a beginner’s guide to help:

Caveat: This guide is only applicable to those filing Canadian tax returns. This is also not a comprehensive guide, and I’m not offering any formal advice here. This is a general overview of how to most efficiently complete a basic tax return. If you have undergone more complex transactions throughout the year (e.g. may be considered non-resident of part-year resident for tax purposes, have your own business and want to claim extra credits like SR&ED), you should do more research/ consult a professional.

Step 0: Keep relevant receipts

I named this first part step 0 because you should be doing this throughout the year rather than when tax season comes around and you need to start filing your tax returns. By relevant receipts, I mean anything that would be deductible on your tax return, or could help earn you a tax credit. Some common examples are:

• Business expenditures. This is for if you run your own business or are an independent contractor. For example, I used to teach English online as a side hustle, and the company I worked for didn’t consider me to be an employee, but rather a contractor. When reporting my income for that I was also able to deduct the operating costs of my “sole proprietorship”, like supplies, phone bill, and even a portion of my rent. I wouldn’t have been able to claim these if I hadn’t kept my receipts, because the CRA could come knocking asking for backup for my business expenditures.
• Moving expenses. If you moved from one city/country to another for work or school, you can often deduct any costs incurred to move. This can include more things than you think, like the cost of any hotels you stayed at along the way, and any meals you consumed. So if you’re making a move, keep all your receipts!

Step 1: Purchase your tax software ahead of time

The two most common are TurboTax and UFile. I personally have always used UFile, but I know many people (one of whom is my old tax professor!) who use TurboTax as well. These companies often have great deals and discounts on their tax software a few months ahead of the deadline, so watch out.

Step 2: Check the tax form deadlines

By this, I’m not referring to the April 15/ June 30 deadlines of your own tax return. Ideally, you should file your return way ahead of these deadlines because your return could include a refund that you’ll want to get as soon as possible. No, by deadlines I’m referring to the deadlines from the tax forms you’ll be getting from other organizations you’ve interacted with throughout the year. For most people, these are the basic forms you’ll have to watch out for:

• T4 from your employer
• T4A from anyone’s who has paid you money but is not your employer
• T5 from banks/whoever holds your investments
• T2022A from your school if you paid tuition during the year

It’s good to wait until these forms have all been submitted to the CRA and processed before starting to file your tax return, because CRA has a system called MyAccount which will allow you to automatically download information from these forms onto your return so you won’t risk any manual entry errors. Even if you don’t want to use MyAccount, it’s still easier to do your taxes once all of this together because sometimes you will need to aggregate numbers from all over your return. For example, if you moved during the year and want to deduct moving expenses, the income you can deduct would be an aggregate of all the income you’re earned since the move, which could come from more than one source.

Step 3: Make a timeline of your year

A year is a long time, and I can’t even remember what I had for dinner last week. This is especially useful if you’ve changed jobs, moved around, etc. You can refer to this timeline as you complete your return to make sure you’ve hit all the necessary points.

Step 4: File your return

Believe it or not, this is just one step! Tax software makes this pretty easy nowadays; just follow the software’s interview set-up and prompt. Any questions you have can either be answered through the software’s help function or with a quick Google search.

And that’s it! Wishing you all health, happiness, and a good marginal tax rate this season.