How to do taxes as a new immigrant to Canada

Newcomers and Canada

Canada is a newcomer haven, a land of economic opportunities, academic excellence, and cultural diversity that attracts hundreds of thousands each year. The country has some of the most supportive stances on immigration, with different ethnicities and cultures well represented within the government ranks and in all walks of life.

In 2024, the IRCC, the Canadian government's department responsible for immigration, plans to welcome 485,000 new permanent residents through various immigration programs.

While finding your way into Canada is more straightforward than in most countries, newcomers still need a period of acclimatization to navigate and master the Canadian system, including Taxation. It is one of your first major responsibilities as a Canadian resident that can land you in hot water if neglected.

Understanding how taxes work in your new home is crucial for your financial well-being. This guide aims to provide newcomers to Canada with a comprehensive overview of the tax filing process and important considerations.

Understanding Residency Status

Your residency status (not to be confused with immigration status) plays a significant role in determining your tax obligations. The Canada Revenue Agency considers all permanent residents, refugees, temporary residents, and newcomers to Canada for the first year. Once you establish enough residential ties, you are considered a resident of Canada for income tax purposes.

Significant residential ties in this context include:

• a home you own or lease in Canada
• a spouse or common-law partner in Canada
• dependants in Canada

Secondary residential ties that may be relevant include:

• personal property in Canada, such as a car or furniture
• social ties in Canada, such as memberships in Canadian recreational or religious organizations
• economic ties in Canada, such as Canadian bank accounts or credit cards
• a Canadian driver's license
• a Canadian passport
• health insurance with a Canadian province or territory

Alternatively, you may be considered a non-resident of Canada if you do not have significant residential ties with Canada and:

• You lived outside Canada throughout the year (except if you were a deemed resident of Canada)
• You stayed in Canada for less than 183 days in the tax year

Residents are taxed on their worldwide income, while non-residents are taxed only on income earned in Canada. You can complete Form NR74, Determination of Residency Status (Entering Canada), to clarify your residency status with the CRA.

Obtaining a Social Insurance Number (SIN)

A Social Insurance Number is one of the first requirements to be eligible to work or access government programs and benefits. It also allows you to file taxes and stay on the government's good side.

Newcomers can apply for a SIN online or in person at any Service Canada Centre or by mail.

Relevant documents when filing taxes in Canada

Relevant documents include T4 slips (for employment income), T5 slips (for investment income), receipts for deductible expenses, and other relevant paperwork.

If you have income from abroad, you may need to report it using additional forms, such as the Foreign Income Verification Statement (T1135).

Tax Credits and Deductions

Tax credits are directly subtracted from the taxes you owe, reducing your final tax payments. Deductions reduce taxable income, lowering the amount for which you get taxed.

Tax credits and deductions available to newcomers in Canada include the GST/HST credit- a tax-free quarterly payment for people with low to modest income, the Canada Child Benefit, and other deductions for childcare expenses, tuition fees, and medical expenses.

Filing Income tax returns

The most common reasons to file your income tax return are to:

• Pay tax for the year
• Claim a refund
• Claim and receive credits and benefits OR
• If the CRA sends you a request to file a return

Filing Options

You can file your taxes online using software approved by the Canada Revenue Agency (CRA), such as TurboTax or SimpleTax.

Related information required to complete your tax return can be found in your income tax package.

Alternatively, you can file by mail using paper forms on the CRA website.

Filing Deadlines

The earliest date to file your 2023 taxes is February 19, 2024, and the deadline for filing is April 30 for most individuals.

If you or your spouse or common-law partner is self-employed, the deadline is extended to June 15. However, any taxes owed are still due by April 30.

Where to Seek Assistance

If you're unsure about any aspect of your taxes, consider seeking assistance from a qualified tax professional or accountant.

Related information required to complete your tax return can be found in your income tax package and the Canadian government's Newcomers to Canada 2022 guide.

Community organizations and settlement agencies may also offer free tax preparation services for newcomers.

Conclusion

Navigating the Canadian tax system as a newcomer can be daunting, but it's manageable with the right information and resources. By understanding your residency status, gathering necessary documents, exploring available credits and deductions, and filing accurately and on time, you can fulfill your tax obligations and set yourself up for financial success in your new home.