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April is a special month. Spring is upon us, the flowers are blooming, and the sun is pushing aside the rain clouds (well, maybe not in Vancouver). And while April the 1st is traditionally the day of practical jokes, one thing that isn’t funny is tax season.
It’s a fact of life that the standard of living in Canada is one of the highest in the world, and that Canadians from all walks of life enjoy a wealth of benefits, including health care, unemployment insurance and well tended cities and parks. But the capital that makes this possible has to come from somewhere, and that’s why we groan each April about having to ‘pay the man’.
If you’re a new immigrant to Canada, navigating the ins and outs of the Canadian tax system can be – well, let’s just say that there are easier things to accomplish. Some things, like running a marathon or doing the Grouse Grind, are just difficult. So if you’re a newcomer to Canada, how do you ensure that you pay the man and pay him correctly?
The first step is to get all of your paperwork in order. Every employer you’ve had over the past year has a responsibility to send you a T4 tax slip. A T4 lists how much you’ve earned over the past calendar year and how much has been taken off to pay for things like the Canadian Pension Plan (CPP), EI (Employment Insurance), etc. This is also why it’s important not to work ‘under the table’. Sure, the easy payout you receive from doing work for an employer that doesn’t take off taxes might seem like a good option, but trust us, it isn’t.
Secondly, assemble all of your big purchase receipts. If you’re a student in Canada, you’re automatically eligible for a tuition tax credit. If you have a student loan, that also entitles you to a further tax credit. What’s more, you can get further credit from textbook purchases and transit passes. This is why it’s so crucial to save your receipts.
Once your T4s are in order and your tuition and other receipts are together, the next step is to decide on the tax route you want to go. In Canada you have three options:
Canada has a variety of online tax programs that you can use to do your taxes. These include, amongst others, TurboTax and UFile. The software for these programs is surprisingly easy to use, all you need to do is enter the correct information into the correct box, and the program calculates your return for you. Most of these programs are free to use for low-income earners and students. This is important if you find yourself cash-strapped come April. The problem with online tax programs, however, is that their options are limited in terms of what they can offer you. What this means is that the program can’t always get you the highest possible tax return. It’ll do in a pinch, but you’ll need to keep in mind that the dollar figure you’ll receive may not be as much as it could be.
2) Speedy Service
A second option available to you for having your taxes done is to visit a service like H&R Block. These types of services are usually found in pop-up booths in malls, and in most cases when you visit one, you can have your taxes completed within an hour. Sounds convenient? It is. But like in most things life, there is a catch: you’ll have to pay for it. With online tax programs if you’re a student, you can usually use the service for free. But with in-person services a fee will be deducted from your return. This may not be consequential unless you aren’t getting much back to begin with.
3) Visit an Accountant
A third option is to go and see an accountant. Accountants are professionals who know the ins and the outs of the Canadian tax system better than anyone else, including the ‘speed machines’ at places like H&R Block. The catch is, they don’t come cheap. For Canadians that own a small business or make a decent salary, not going to see an accountant simply isn’t an option. This is because they have a lot at stake in terms of how much they pay out in tax and how much they receive in return. But for students and low-income earners, going to see an accountant may not be worth the fees. A good benchmark for making this decision is that if you only have one T4 and a couple of tuition receipts, it might just be a safer to bet to use an online tax program.
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