Economical Financial Statement Preparation for Canadian Businesses

Canadian income tax is built up in layers. You total your income for the year, subtract the deductions you qualify for to arrive at taxable income, then apply the federal brackets and your province's brackets to that figure. Each bracket rate applies only to the income sitting inside it, so earning more never retaxes the dollars below. Non-refundable credits, starting with the basic personal amount, come off the tax afterwards. Look up the CRA bracket table for the tax year you are filing.

A tax deduction is an amount subtracted from your income before tax is worked out, so it reduces the income being taxed rather than the tax bill directly. Its worth depends on your marginal rate: the higher the rate, the more the deduction saves. Common examples are RRSP contributions, child care costs, union dues, moving expenses and business expenses. Credits work the other way, reducing the tax calculated on that income.

Work out the tax you actually owe for the year, then compare it with what has already been paid. Total your income, subtract deductions to reach taxable income, apply the federal and provincial brackets, take off your credits, and set the result against the tax withheld on your T4 and other slips plus any instalments. If more was withheld than you owe, the difference is your refund. Tax software approved for NETFILE runs the same arithmetic once your slips are entered.

Yes, the CRA does telephone people, usually about a balance owing, a missing return, an audit or to verify information, and calls can come from many different numbers, so caller ID proves nothing either way. A real agent never demands payment by gift card, cryptocurrency or e-transfer, never threatens immediate arrest or deportation, and never asks for a password. If a call feels wrong, hang up, check your balance and mail in My Account, then call back using a number from canada.ca.

Sign in to CRA My Account and open the tax returns section, which lists your assessed returns, notices of assessment and reassessment, and carry-forward amounts for earlier years. You can also download a proof of income statement, request a copy by phone, or ask whoever prepared the return for you. Keep your own copy and the supporting records for six years from the end of the tax year they relate to.

Medical costs give a non-refundable credit rather than a deduction. Eligible items include prescription drugs, dental work, eyeglasses and contact lenses, fees paid to medical practitioners authorised to practise, private health plan premiums, attendant care and travel for treatment unavailable locally. Over-the-counter products and most cosmetic procedures do not qualify. Only the portion above an income-based threshold counts, the claim period may end at any point in the tax year rather than following the calendar year, and pooling the family claim on one spouse usually helps.

Owning your home creates no deduction by itself, and mortgage interest and property tax on a personal residence are not deductible in Canada. You do have to report the sale of a home on the return for the year you sell, even when the principal residence exemption removes the whole gain. A home office used for employment or business, a rented portion, or a first home purchase can each change the return.

Yes. Tips are income whether they come as cash, on a card, or out of a pooling arrangement, and they are reportable even when no slip shows them. Controlled tips that run through the employer appear on your T4 with tax, CPP and EI already withheld. Direct and pooled cash tips are not withheld on, so you add them to your return yourself and may owe a balance. Keep a daily log and set money aside.

Tax revenue is the money governments receive from taxes: personal and corporate income tax, GST/HST and provincial sales taxes, payroll contributions, excise duties and property taxes. It funds health care, schools, roads, defence, pensions and benefit programs, and it is also used to shape behaviour through targeted credits and levies. In Canada the CRA collects most federal and provincial income tax and GST/HST, while municipalities collect property tax directly.

Yes. Canada uses a social insurance number rather than a social security number, and if you are not eligible for a SIN you can apply to the CRA for an individual tax number and file with that. Apply before or together with your first return, and allow processing time. Without one of those identifiers the CRA cannot match the return to you. Non-residents with Canadian income most often file using an individual tax number.

Marital status does not change your tax rates, but it changes what you claim and what you receive. Once you are married or living common-law, the CRA treats you as a couple for income-tested amounts, so the GST/HST credit, the Canada child benefit and similar payments are calculated on combined income. In return, couples may claim the spouse or common-law partner amount, transfer certain unused credits, split eligible pension income, and pool donations and medical expenses.

Improvements that add living space or materially raise market value, such as an addition, a finished basement suite, a garage or a gut renovation, are usually picked up by the assessment authority and reassessed, which raises the tax. Building permits are how the change is normally flagged. Routine repairs and maintenance, such as a new roof, replacement windows or paint, generally do not change the assessed value on their own. Ask your assessment office before a large project.