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Six Tips To Consider Before Filing Your 2022 Taxes
It is that time of the year again! You guessed it, it’s Tax Season.
In Canada, individuals who may owe income tax or may be eligible for Canadian government tax credits or benefits file “income tax and benefit return” by the end of April, every year. Indigenous people are subject to the same tax filing requirements as non-Indigenous residents in Canada, even if income is eligible for the tax exemption under Section 87 of the Indian Act.
How do I know if I am eligible for tax exemption as Indigenous person?
According to Section 87 (1) (a) of the Indian Act, “The personal property of an Indian or a band situated on reserve” are exempted from taxation in Canada. This means the income of registered Status Indian will be exempted if that income is located on a reserve.
This exemption does not apply to all Indigenous people living in Canada because there are conditions to meet for a tax-exemption approval.
If you are unsure if your income qualifies for tax exemption, speak to your employer. There are a variety of criteria that must be assessed including a connecting factor test that assesses related criteria such as the domicile of your employer, working from home, location of work duties performed and proration rules.
Learn more about the connecting factors test here.
My employment income is considered tax -exempt, should I still file a tax return?
My employment income is considered tax -exempt, should I still file a tax return?
As Indigenous person, you have access to the same benefits and credits as non-Indigenous Canadians. If you choose not to file your tax return, you may be ineligible for specific benefits and credits that you may be entitled to.
To ensure that you are receiving benefits and credits, you must submit your tax return on time, every year even if your income is considered tax-exempt or if you had no income at all. You spouse or common – law partner needs to do their taxes as well so that CRA can calculate the payments based on household income.
Some of those payments include Goods and services tax/Harmonized sales tax credit (GST/HST), Canada child benefit (CCB), Northern residents’ deduction, Canada workers benefit, and Canada training credit.
Continue to read the rest of our newsletter to learn about the six tips we recommend considering before filing your tax for the year 2022.
1. Use a simplified paper tax and benefit return
You may be able to file your taxes using “Let Us Help You Get Your Benefits! Credit, and benefit” short return. If you are a member of a First Nation, you may also be eligible for the T1S-D, Credit and Benefit Return.
To access these forms, you can contact your local friendship center, community representative, or band council office. You cannot download these forms online. Learn more here.
2. Create online account with Canada Revenue Agency (CRA)
A great way to keep track of all your previous years’ taxes, benefits and credits, balancing owing, and more is through creating an online account with Canada Revenue Agency. Your CRA account helps you easily manage your taxes and credit information online, from the comfort of your home. Here are a few excellent ways you can utilize your online CRA account:
- Apply for benefits and credits
- Update your account information (marital status, address, phone number, etc)
- View your notice of assessment or reassessment
- Pay your payments
- Review historical tax information for up to 7 years
Register for your CRA account here.
Electronic returns are usually processed within two weeks whereas paper returns may take several weeks for processing. According to research, 92% of tax returns are filed electronically due to their convenience, security, and faster processing.
If you are registered for “My Account” with CRA, you can use “Auto – fill my return” to quickly fill in parts of your return with your information the Canada Revenue Agency has on file. If you choose to file your 2022 tax return digitally this year, access Canada.ca to learn more about the certified tax software you can use to file your tax.
3. Enter your income and other benefits payments.
If you are employed, you should receive your T4 from your employer by the end of February 2023. You may receive other slips from different payers such as pension providers, financial institutions, and educational institutions that you should also include when filing your income tax return.
If you have received benefits from CRA such as Canada Recovery Benefits, and Canada Recovery Caregiving Benefit, you will receive a T4A information slip that you should add as an income for the year 2022. You should also receive these slips from the Government of Canada by the end of February 2023.
Other sources of income are still required to be reported but may not generate a tax form, such as:
- Income from sales of goods and services regardless of whether payments were in cryptocurrency or traditional monetary currency.
- Income earned through buying and selling crypto assets.
- Tips and gratuities earned at your place of work.
If you also generate a world-wide business income, you should report that through the platform economy. One example of this type of income is social media influencers’ income that is generated through social media platforms.
These income sources may be generated through advertisement, referral codes, merchandise sales or commission on sales, sponsorships, or barter transactions.
Click here to learn more about reporting international income.
4. Claim your benefits, credits, and deductions
You may be eligible for tax deductions, credits and expenses on your tax return for the year 2022. CRA uses the information from your return to calculate your benefits and credit payments. Some of these payments include:
- Canada Child Benefits
- Good and Services Tax/ Harmonized Sales Tax (GTS/HTS) Credits
- Provincial or Territorial Benefits.
You might be able to claim a deduction that can reduce the amount of tax you may owe. Examples of those expenses are childcare expenses and home office expenses (if you work from home as an employee and have arranged deductions with your employer). If you are self-employed, you may be able to claim certain business expenses such as a motor vehicle, and business–use–of–home expenses (heating, home insurance, & electricity).
Learn more about the tax credits and benefits you might be entitled to here.
5. File on time, pay on time!
Filing your taxes on time will ensure your taxes returns and benefits will not be delayed or interrupted.
If you owe a balance to the CRA, it is important to note that retirement income benefits such as the Old Age Security (OAS) and Guaranteed Income Supplement (GIS) may be held back if you do not file on time.
The deadline for filing for 2022 income tax is April 30th, 2023. If you, your spouse, or common law partner are self-employed, you have until June 15th, 2023, to file your taxes and benefit return. If you don’t file your taxes by deadlines, you may be subject to late filing penalties on any money you owe.
In addition to filing on time, any balance owing is also due by April 30, 2023. Paying your dues in full ensures interest will not be charged. If you are unable to pay your balance owing, contact the CRA to make payment arrangement that suit your ability to pay overtime.
Learn more about payment arrangement here.
6. Maximize your tax return with Registered Saving Programs
An excellent way to reduce taxable income is through contributing to a Registered Savings Plan.
If you are a non-Status individual or a Status individual earning taxable income, a Registered Retirement Savings Plan (RRSP) may be a good option for you. Contributions you make to an RRSP will attract a tax deduction annually. The savings within your RRSP account will grow on a tax-deferred basis. Taxes will be payable at retirement or upon withdrawal, based on your marginal-tax rate (MTR) at that time.
Generally, the contribution room (limit) for RRSP is 18% of annual earned income from the last tax year (up to a maximum of $27,830 for 2022), however, each individual has a unique RRSP limits subject to multiple factors. Check your online CRA account to find more information about your personal contribution limits.
Find more information about RRSP here.