What Is Income Tax?
|This page is used in the Paying Taxes Lesson Module, a law-related ESL lesson for newcomers to Canada.|
For most people, the biggest tax you pay is income tax. This is the tax you pay on the money you make from working.
The Canada Revenue Agency (CRA) is the federal government office in charge of all income tax. The CRA collects taxes for the federal government and for the provincial government.
Each year you must tell CRA how much money you made. You report your income on a tax form called an income tax return.
- 1 What income tax must be paid on
- 2 Paying income tax
- 3 Does everyone pay income taxes?
What income tax must be paid on
Income tax on your pay at work
When you get a job, you fill out a tax form. You get this form in a package called General Income Tax and Benefit Package. Your employer uses the information on your income tax form to work out how much tax money you owe. Each time you are paid, your employer must take the tax money out of your wages and send it to the government.
Income tax on other money you make
Many people make money in other ways. Some have a business. Some get money from renting a house or apartment. Some get money from investments.
If you get money in these ways, you have to report it the Canada Revenue Agency. They may ask you to pay taxes on this income once every three months.
You must report your income from inside and outside of Canada. If you made some money in another country, you have to include it on your income tax return. You may have to pay a large fine if you do not do this.
|For example: Winston lives in Canada but earns money from his business in Hong Kong. Winston must declare that business income to Canada Revenue Agency.|
Paying income tax
Who has to send in an income tax return?
If you are a resident of Canada for part or all of a tax year, you must file an income tax return if you:
- owe tax, or
- want to get some money back, or
- want to receive benefits, such as a pension, medical benefits or social assistance.
When do I have to send in an income tax return?
You must send in your income tax return to Canada Revenue Agency by April 30 of the year after the tax year. If you have a business in Canada, you have until June 15 to send in your income tax return.
How do I get an income tax return?
If you have never sent in a tax return form in Canada, you can get the form from any post office or Canada Revenue Agency (CRA) office. Or you download the form from the CRA website.
After the first time, the government will mail you a tax return form each year. Be sure to provide CRA with a change of address if you move. The form comes in a package called the General Income Tax and Benefit Package. The package includes information about how to fill out the form.
How do I fill out my income tax return?
Many people fill out their own tax return. For those confident enough to do it themselves, there is computer software that can help you fill out your income tax return.
Many community groups help new immigrants with tax return forms. This help is usually free. You can pay an accountant, bookkeeper, or a tax preparation company to fill out your tax return.
How do I send in my income tax return?
You can send in your income tax return form by mail or online:
- Mail: Many people send their income tax return by mail to the CRA, or drop it off at their local tax office.
- Online: You can fill out your income tax online at the CRA website. This service is called Netfile. You cannot use Netfile if you are filing an income tax return for the first time with CRA and the CRA does not have a complete date of birth for you on record.
Does everyone pay income taxes?
Sometimes people sell things for cash or work for cash. They offer you a lower price because they do not pay tax. This may seem like a way for you to save money, but it is against the law. You can also have problems if you pay this way. For example, if something goes wrong, you cannot get your money back.
|This information applies to British Columbia, Canada. Last reviewed for legal accuracy by People's Law School, 2014.|
|Paying Taxes in BC © People's Law School is, except for the images, licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International Licence.|