One of life’s certainties is income tax. Keep track of all the changes to Canada’s income tax system and ensure that you meet all your obligations.
Canadian residents are subject to personal tax on many sources of income, including capital gains. Canada’s tax filing system is voluntary, which means that you generally only need to file a return if you have taxes payable or have received a request to file.
WHY YOU SHOULD FILE A PERSONAL TAX RETURNFiling a personal tax return permits you to participate in many social programs based on your income. Many Canadians are entitled to substantial tax credits and deductions which can result in tax refunds. Furthermore, to apply for mortgages or loans, or even contribute to an RRSP, your returns should be up to date.
FAILURE TO FILEIf you have taxes payable and fail to file your return on time, you will be subject to a late filing penalty. The penalty is equal to five percent of the tax owing. The Canada Revenue Agency will also charge arrears interest on late payments.
ADDITIONAL REPORTINGIf you sell your home, you must report this on your personal tax return. Failure to do so could result in significant penalties.
If you have foreign holdings with a cost of more than $100,000, you have additional reporting requirements. Failure to report details of these holdings can also result in significant penalties.