We're almost at the end of the year and the next thing we know, return deadlines could just be around the corner. This is probably the best time to recall some basics of Canada's personal income tax.
The Canadian income tax system is a self-assessment approach. This means that taxpayers assess their tax liability by filing a return with the Canada Revenue Agency (CRA). CRA will then assess this return based on the return filed and on information it has already obtained from employers and other sources, and correcting them for obvious errors. A taxpayer who does not agree with CRA's (re)assessment of a particular return may appeal this (re)assessment.
T1 Tax Return
A tax return is basically a report of all our income and some other financial details for a given year. While it is true that our personal tax return may show we have to pay more tax, we may also be entitled for a tax refund if we have more credits such as taxes paid, or expenses for health care, child care or school to name a few.
Tax payable before credits is determined using tax brackets and tax rates on taxable income. Canadian federal marginal tax rates for 2015 are as follows:
15% - $0 to $44,701
22% - $44,702 to $89,401
26% - $89,402 to $138,586
29% - over $138,586
Canada levies personal income tax on the worldwide income of individuals resident in Canada and on certain types of Canadian-source income earned by non-resident individuals. After the calendar year, Canadian residents file a "T1" Tax and Benefit Return. It is due April 30, or June 15 for self-employed individuals and their spouses, or common-law partners. It is important to note, however, that any balance owing is due on or before April 30. Outstanding balances remitted after April 30 may be subject to interest charges, regardless of whether the taxpayer's filing due date is April 30 or June 15.
There are various ways to file your T1 tax return with CRA and the easiest would be filing electronically. Talk to us today, and we would certainly help you with your tax planning and filing needs