Filing taxes can be stressful for many Canadians, particularly if they’ve never done it before or have diverse income streams. While many Canadians successfully file their own taxes, others rely on tax accountants to file their taxes correctly.
No website or article can replace the value of an experienced tax professional. And though ABDA is not an accounting site, there are a few common documents and forms most people will need to file their taxes in Canada.
Except for corporations, all Canadians must file a T1 form. It is the main form when it comes to filing taxes in Canada and summarizes all the income you generate in the year. Benefits like the Canada Child Benefit and GST/HST tax credits are calculated based on the information on your T1 form. You can get the T1 income tax package online or have it sent to you in the mail. However, many people choose to use tax filing software to submit their taxes themselves.
Whether you use software, a hard copy of the form, or a tax accountant, you will probably need to consult other documents and complete extra forms and submit them with your T1 form.
Your employer will mail or give you a T4 slip sometime in February. It shows your employment income before and after taxes and any deductions, such as Canada Pension Plan contributions (CPP),Employment Insurance (EI),any health premiums you may pay, etc. You will use this slip to help you fill out your T1.
If you have multiple employers, you will need a T4 slip from each of them. Employers are required to send out T4 slips by the last day in February, so if you have yet to receive one by early April, you should let them know.
If you’re self-employed, filing your taxes in Canada requires more diligence and a little more time. For this reason, many small business owners choose to work with a reputable tax accountant.
Regardless of how you file your taxes, you should keep a detailed record of your business income and expenses. Your record should include as much information as possible, including, but not limited to:
-The amount you received or spent
-Dates
-Currency
-Client information, such as name, address, and contact information
-Receipts
-Details about the expense, e.g., what it was for, why, etc.
This information will help you fill out form T2125, Statement of Business of Professional Activities, available on the CRA website. The details from this form will help you calculate your gross income for the year, which needs to be recorded on your T1.
You will also use form T2125 to calculate any business expenses you may be able to claim. Use receipts to calculate this. For information on how to fill out this form T2125, the CRA provides a guide called T2004.
If you’ve sold your principal residence, you should complete forms T2091IND and Schedule 3, available on the CRA website. Filling out these forms allows you to officially designate the house as your principal residence and alerts the CRA that you have sold it. This exempts many homeowners from paying tax on any gains made from the sale.
If you moved in the last year and meet the eligibility requirements to claim the expenses, you should complete form T1-M, also available on the CRA website. This form asks for details about the move, including your old and new addresses, kilometers traveled, temporary living expenses, and more. Again, you should be able to support these expenses with receipts.
In addition to the documents previously mentioned, you’ll need your social insurance number and receipts from any eligible charitable donations made throughout the year.
Every situation is different. And this is not a comprehensive list of all the documents you may need to file your taxes. To make sure your taxes are filed properly, it’s always best to consult a reputable tax accountant in Canada.
While ABDA is not an accounting company, we assist in writing content for the websites of accountant companies throughout Canada. Our expertise lies in creating high-quality, informative, and engaging content that helps accounting firms establish a strong online presence and attract more clients. By partnering with ABDA, accounting firms can benefit from our expertise in content creation while focusing on their core business of providing accounting and tax services to their clients.
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March 31st 2023