However, it is important to learn about taxes and exactly how and why we file them! This post will include information about the taxing system in Canada, as well as free resources for filing and education regarding taxes.
Taxes 101
So what are taxes and what are they even for? A tax is a percentage of a payment that can be taken from our income, or perhaps added onto a bill, that goes towards federally and provincially funded programs. Many social programs are funded through our taxes and set up so that we Canadians can have access to them when it is needed. There are many different types of taxes we pay and different social programs that they all go towards. Some are funded federally, and some, municipally.
Types of Tax We Pay
Income Tax
Income tax is something that everyone pays on what they earn through their job. Whether you work for someone else or own your own business, everyone must file tax for their income. The amount of taxes is based on your amount of income and credits or benefits you may receive. When you file your income tax, it is calculated through the Canada Revenue Agency whether you owe money on your taxes or whether you are entitled to a refund.
Sales Tax
Sales tax is a tax we pay on almost all goods and services that we purchase in our country. There are different types of sales tax, those being Goods and Services Tax (GST), Provincial Sales Tax (PST) and Harmonized Sales Tax (HST). Some Provinces use a combination of GST and PST, and some have adopted HST, which is a combination of GST and PST together.
Property Tax
Property tax is paid on buildings or land owned by a person. It is calculated and developed on how much your building or land is worth.
Customs – Duties or Tariffs
Specific imported and exported products can generate an extra charge based on the amount the goods are worth.
Health and Services Tax
Some provinces charge an additional Health and Services Tax to fund their healthcare system.
What Our Tax Money Funds
There are many different programs that the government funds through our taxes that Canadians use at every stage in their lives. It could range from a basic necessity like healthcare or an assistance program like Employment Insurance (EI). Here is a list of services that the government funds through our taxes:
• Education, like elementary and secondary school
• Healthcare and hospitals
• Roadwork, bridges and construction
• Police services
• Fire services
• Ambulance and paramedic services
• Libraries
• Arenas & event spaces
• Public parks, playgrounds and pools
• Waste management, like garbage and recycling pick up
• Security and conservation of wildlife and green spaces
• Development of quality of life and the economy
• Military and national defence
Your taxes can also aid those who may be struggling due to low income, students attending post-secondary school, senior citizens or persons with a disability. These groups may rely on government assistance that our taxes pay towards.
As an employee of a business, your income tax also goes towards funding social programs such as employment insurance (EI), The Canadian Pension Plan (CPP), and Old Age Security (OAS). Quebec has their own separate programs that are run provincially such as the Quebec Pension Program (QPP) and the Quebec Parental Insurance Plan (QPIP), which aids in those taking parental leave. For example, maternity leave.
There are a lot of working parts when it comes to understanding and filing your taxes, and Canada wants you to learn all about it! There is a series of lessons with quizzes that you can use to learn and text yourself when it comes to tax information, you can find the lessons here.
Besides the funding of programs our government puts in place to better our economy and society, there is a big reason as to why we file our taxes. That reason is to keep up to date the benefits and credits that we receive from filing our taxes. A common benefit/credit that Canandians receive from filing their taxes is the Canada Child Benefit (CCB) which grants a certain amount to families for each child they have under the age of 18. Another common benefit/credit is the GST and HST, an amount that is calculated based on your income is granted to you every 3 months to offset some of the cost of GST and HST when purchasing goods and services. There are many benefits and credits that a Canadian can cash in when filing their taxes, you can use this benefits finder to see if you qualify for any!
Filing Your Taxes
There are numerous resources available to help you file your taxes. You can pay a business to help you do them but there are also many resources available where you can file them for free! One online tax filer that is free and easy to use is the Wealthsimple Free Online Tax Filing Software. This site is especially great for those learning how to file their taxes because it is very simple to use and input information.
here are also due dates and deadlines that you must follow, make sure to take note of any dates that are important when it comes to filing. This website has all due dates and payment deadlines for filing. It is important to stay on top of these deadlines to avoid interest accumulating if you owe any money on your taxes. You also will not receive benefits or credits on time if you do not file your taxes before the due date, and the same is true for your tax refund if you are entitled to one. Thankfully, you won’t lose any benefit or credit you are entitled to if you file late, but you won’t receive them until you have filed.
There are also different tax brackets for when you file. The more you make the more in tax you have to pay. A full list of all tax brackets based on yearly income and province is available here. Lastly, make sure you always know your rights and responsibilities while filing your taxes. It is important to include all accurate information when submitting your forms. Not only that but it is especially important to know your rights so that you can be treated fairly and positively while doing your taxes for the season.
Taxes in a Official Proposal or Insolvency
Official Proposal
When you are in a consumer proposal, you are responsible for filing your taxes every year that you are on the program, 5 years at the maximum. When you are in a consumer proposal you are still entitled to any tax refund that you receive, unless you have debt specifically with the Canada Revenue Agency (CRA). If you have debt with the CRA, a tax refund within the first year of your consumer proposal will be held by the CRA. This is only true for the first year, each year after that you will receive your full tax return.
Insolvency
In a bankruptcy, it is up to your trustee to collect all your information and file your taxes for you. If you are entitled to a refund, the refund will be taken by your trustee and used to pay towards your creditors. A bankruptcy generally only lasts for one year, so you will only have to give up your tax return for the year that you are in the bankruptcy. After that you file your own taxes and receive your refund normally.
While filing your taxes may seem like a daunting task, the good news is there are always resources out there to help you successfully and accurately file your taxes, whether you are filing for the most recent tax season, or a few years behind. Learning and filing your taxes couldn’t be easier in this day and age! However, it is important to file every year to ensure you receive all benefits on time and stop any interest from accumulating. If you have let any interest accumulate or have had tax debt build up over time, reach out to DebtReview and see if we could help you alleviate some of that debt! Give us a call at 800-335-8176.