Who Should File a Tax Return?

Evelyn Jacks & Walter Harder

Filing a tax return is always a good idea, but chances are CRA will owe you money even if you don’t have any income at all.  That’s because you may be eligible for some refundable tax credits. However, for the majority of people who have at least some income – and that includes teenagers who qualified for the CERB and other pandemic supports this year, it’s important to know the answer to this question:  who should file a tax return and who must file one? 

You must file if:

  • You owe a balance due.  Late filing penalties and interest will result otherwise, but there is a break on interest payable until April 30, 2022 if your income is less than $75,000 and you received taxable pandemic relief benefits.
  • Should CRA ask you to file do not ignore this. They mean it.
  • You disposed of capital property (and that includes a tax-exempt principal residence) or you realized a taxable capital gain in the year
  • You have to repay all or part of your OAS (Old Age Security) or Employment Insurance benefits or Canada Recovery Benefits
  • You have to contribute to the Canada Pension Plan (CPP) for 2020. This can apply if your total net self-employment income plus pensionable employment income total more than $3,500
  • You are paying employment insurance premiums on self-employment income or other eligible earnings
  • You participated in the Home Buyers’ Plan or Lifelong Learning Plan and have an amount to be repaid int eh current year.

You will want to file a tax return if:

  • CRA owes you money – so file early and claim your tax refund
  • You want to claim refundable tax credits:
    • The Canada Workers Benefit (CWB). Also file to report the CWB advance payments received in 2020
    • You or your spouse or common-law partner want to begin or continue to receive the following federal refundable tax credits (and any related provincial or territorial payments):
      • Canada Child Benefit (CCB)
      • Goods and services tax ⁄ harmonized sales tax (GST/HST) credit
  • You are a senior and you want to
    • Receive the Guaranteed income supplement (GIS).  Remember, if you have a spouse or common-law partner, they also have to file a return.
    • Jointly elect to split pension income with your spouse. In this case you must file form T1032.
  • You are a student or a potential student and
    • You want to report income that will allow you to increase your Canada training credit limit
    • You want to transfer unused tuition fees, or carry forward unused tuition, education, and textbook amounts to a future year
    • You want to repay withdrawals you made from your RRSP under the Home Buyers’ Plan or Lifelong Learning Plan 
  • You are an investor and you want to
    • Report income to create contribution room under an RRSP, a pooled registered pension plan (PRPP), or a specified pension plan (SPP) 
    • Carry forward unused investment tax credit on expenditures you incurred during the current year
    • You have incurred a non-capital loss in the year that you want to be able to apply in other years

Additional Educational Resources: Take the newly updated Professional Income Tax Course – Entry Level, which now features assignments using the 2020 tax software programs.