filing system for income taxes

Why you should file an income tax return

Filing a tax return is important, even if you had no income for the year, as you may be eligible for credits that could result in a refund. Here are several reasons why you should file a tax return. 


It’s that time of year again – tax season. Whether you have income or not, there are many reasons why you should file an income tax return each year.

You owe tax or will receive a refund.

When you file your taxes, there are two outcomes – either you’ll owe tax or you’ll get a refund.

Of Canadians who have filed their 2018 income taxes, approximately 71% have received a refund, with the average refund being just over $1,600.

Owing tax is not as fun as receiving a refund, but it’s important to file a return and pay these taxes by the deadline to ensure you’re not charged interest which will increase what you owe.

Take advantage of non-refundable and refundable tax credits

You may be eligible to receive certain credits from the government but must file an income tax return in order to determine eligibility and your benefit amount.

Non-refundable tax credits:

Non-refundable credits lower your tax payable. They are named “non-refundable” as these credits cannot, by themselves, get you a refund. A few examples include:

  • Tuition
  • Charitable donations
  • First-time homebuyers amount
Refundable tax credits

Refundable tax credits are a specific amount of money deducted from the amount of tax you owe and is the same amount whether you owe $100 or $1000. For refundable tax credits, the government will pay you the refundable tax credit you qualify for whether you owe tax or not, meaning if you had no tax payable, theses refundable amounts would result in a refund on their own. Examples include:

  • Working income tax benefit
  • GST/HST credit

Recuperate any tax you overpaid from your pay cheque

If you’ve switched jobs part way through the year or worked multiple jobs last year, you may have overpaid taxes on your paycheque(s). When you file an income tax return, it allows you to recover any taxes you may have overpaid.

Carry forward or transfer any unused tuition, education or textbook amounts

If you attended a post-secondary level course, you may be able to claim the tuition credit. This credit is non-refundable, meaning if the tuition is greater than the tax you owe, the tax credit can only be used to reduce or eliminate what you owe. Any unused amounts can be carried forward to a future tax year, or you can also transfer to a spouse/common-law partner or parent/grandparent.

Even if you have no tax to pay, it’s important to file an income tax return to claim your tuition, education and textbook amounts so that you can update any unused amounts, and carry them forward to future years.

 

When it comes to doing your income tax return, there are many tools and resources to assist you including information on the Government of Canada’s website.  As well, often organizations within different communities offer free income tax preparation services which you can usually find through a quick Google search. Are there any free income tax preparation services available within your community? Share with us below by telling us which community and who offers the services.

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