In Canada, we pay both federal and provincial / territorial income taxes.

The government taxes income from individuals as well as profit earned by businesses.

It’s common for your employer to deduct tax from your paycheque, and send it directly to the government.

There is currently no tax on inheritance or gifts in Canada, though it exists in some other countries.

• Inheritance is anything of value someone leaves for their loved ones after he or she passes away.
• A gift is anything of value someone gives to their loved ones during his or her lifetime.

House, condominium, and landowners pay municipal taxes based on the value of their property.

Whenever you sell property, you also have to pay land transfer taxes.

The government taxes our everyday purchases. Most goods and services have federal and provincial / territorial sales taxes (called GST and HST).

Merchants (sellers) pay additional excise taxes on alcohol, tobacco, and gasoline. Those taxes are often passed on to buyers (consumers) through increased prices.

If your income is low (student / low-paying job), you’ll likely qualify for this credit.

• It’s different from other tax credits. Instead of reducing the tax you pay, you get up to $300 back per year in the form of a cash refund.
• To get the GST/HST refund, you must be over 19 and have filed income tax the previous year.

Nice try. You may get this kind of reward when you apply for a bank account or a credit card. But not when you file taxes.

• The reason banks offer special deals is because they compete to have you as a client. There’s only one place to file taxes: with the Canadian government.

If you’re a student and are currently enrolled, you’re eligible for the tuition tax credit. Like other credits, it lowers the tax you have to pay on that year’s income.

You’re only required by law to file your tax return if you owe tax.

• You should file taxes every year, even if you don’t think you owe any. It’s a good habit to have and you may get a tax refund.
• You can technically start filing tax returns at any age.

If Zoe was born on the first Friday of April or before, she should have filed her first tax return this year. Then she’d be able to qualify for the April instalment of the GST / HST refund, next year.

There’s no reason Zoe shouldn’t file this year – it just won’t help her qualify for the refund any sooner. You CAN file a tax return at any age. You’re only REQUIRED to file by law when you owe tax. You SHOULD file every year – it’s a prudent and thrifty personal finance rule.

Zoe will turn 18 this September, after the tax season. Next year, before April 29th, she’ll file her first tax return, at the age of 18. Her birthday will come again in September and she’ll turn 19. She’ll get her first instalment a few weeks later, on the first Friday of October.

• Filing taxes the next tax season after you turn 18 ensures you qualify for the GST / HST refund, as soon as possible.

If Zoe waits two years, until she turns 19, she wouldn’t qualify for the GST / HST refund until the first Friday of July, that year.

• Tax deductions reduce taxable income before it’s multiplied by tax rates.
• They have more value for people who make more money / are in higher tax brackets.

• Tax credits reduce the amount you tax you pay on your income.
• They have the same value for everybody, regardless how much money they make / how much tax they pay.

It depends on what tax bracket you’re in.

• For example, assuming you’re in a 40% tax bracket, a $1000 deduction reduces the tax you pay by $400 – the $1000 is deducted before the 40% tax is applied. A $1000 credit always reduces your tax by $1000.
• In lower tax brackets, deductions have increasingly less value and tax credits become more useful. Under special circumstances, certain tax credits, called ‘refundable’ credits, can even pay you money.

Your SIN (social insurance number) is a confidential number. A government organization called the Canada Revenue Agency (CRA) uses SINs to identify us for tax purposes.

Never give out your SIN unless you absolutely have to. You are only required to share it with:

• Your employer (only after they hire you).
• Financial institutions (when you open savings / investment accounts and earn income from them).
• When you apply for government programs, like student loans or welfare.

Once you create a unique ID and password, you’ll enter your date of birth and postal code.

You don’t need to share your credit history with the CRA when you file taxes, they already have it.

If you fail to pay taxes (and it turns out you owed tax) or miss interest payments on owed tax, your credit history will be negatively affected.

The CRA will want to know your total income, based on the previous year’s tax return. You only have to enter your income once, when you open your CRA ‘My account’ – the following years are done automatically.

There is no such functionality in 'My Account'.

• If you need help doing your taxes, it’s okay to ask a trusted family member, adult, or friend for help.
• Instead of preparing your own tax return, you could hire a professional to do it for you – you’d pay them a fee, but would still have to gather your own receipts, tax slips, and certificates.

Other than tax deductions and tax credits, there are no additional tax discounts. Don’t believe anyone who tells you otherwise – a comprehensive list of valid tax credits and deductions can be found on the CRA website.

Once the CRA processes your tax return, they will send you a notice of assessment by email or mail – you can also use your CRA account to view it.

• It’s the official confirmation of your tax return for the year – including the amount to be paid (if you still owe tax) or refunded (if you paid too much).

This authorizes the CRA to send your tax refund (if you get one) directly to your chequing account. If you have a direct deposit set up, you should receive your refund 8 days after you submit your return.

Interest on owed taxes and penalties is extremely expensive. It shouldn’t be too hard to find a loan with more favourable terms.

• The late filing penalty for taxes is 5% of your owed balance plus 1% for each full month the return is late, up to a maximum of 12 months.
• Interest on late / insufficient tax payments is determined every 3 months and compounded daily.

Remember to come up with a plan to pay down the loan. Work with your budget and find the extra money – either cut into your savings or down on expenses. You can also get additional income - work more hours or get a part-time job.

If you under-report income from employment or investments, you will incur various additional penalties and have to pay interest on the rest of the owed tax.

If you did not report all your income or overstated credits by mistake, the CRA may waive the penalty if you contact them voluntarily and let them know you made a mistake. You’ll still have to pay interest.

If you discover you owe past taxes, deal with it now.

• It’s much better to initiate than wait for the CRA to contact you.
• If you find yourself in this situation, consider seeking professional advice.

If you owe taxes and cannot pay, you may qualify for a payment plan with the CRA to repay your tax debt over time, including interest.

To qualify, you may need to demonstrate that you already tried borrowing money (and were rejected), as well as show the CRA your budget. If you’re approved, login to your CRA ‘My Account’ and set up a payment plan.

Tax debt is like any other debt – you’ll continue to pay interest on the taxes you haven’t paid and penalties you’ve incurred, until they’re both completely paid off.

• The sooner you pay the taxes you owe, the less you’ll pay in interest.