Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.
Filing an income tax return is not your average everyday tax work. It requires focus and time to file the correct form and information that the Canadian government needs to evaluate your claim. As a result, many would skip the option of filing one to avoid the stress and hassle of dealing with data and taxes. However, failure to file income tax returns in Canada may lead to a big loss for you and your business.
Income taxes, in general, can be a confusing topic for business owners. But don't worry, we're here to help! With the recent changes in Canada’s income tax return law, it's more important than ever that you understand what this is and how it impacts your business. So please read on as we tell you everything you need to know about income tax returns and why they are necessary for entrepreneurs like yourself.
What Is an Income Tax Return?
An income tax is a record of your earnings and expenses throughout the year. This includes your personal income, income received in other means, business profit, and many more. Any business owner or individual who earns an annual salary of C$40,000 minimum must file an income tax to report their total income earned during the previous calendar year.
Income Tax Return is when the government returns excess money that you overpaid earlier that year. The Canadian Revenue Agency will review the income tax that you or your company filed on your behalf to check if they need to return money to you. However, most of the returns that the government owes you will go unnoticed unless you file them yourself. In some cases, the government will file it for you; however, this is not a guarantee.
Why Filing Income Tax Returns is Important?
No matter which industry you work in, whether you're in e-commerce or a traditional business, filing your yearly income tax claim is important. Not only will this allow you to report your total earnings, but it will also let you reduce your taxable income and take back the money that’s rightfully yours. Filing taxes allows business owners to claim tax-deductible expenses against their total earnings for the year. It's also important to note that not all of these expenses can be claimed at once—only those already paid or incurred during the fiscal period being reported on.
How filing an income tax return benefits you:
- You know exactly how much percentage of your total income goes to paying taxes
- You avoid overpaying tax
- You avoid losing money to tax, which could be used to improve your business, quality of life and acquire investments
Who can file an income tax return in Canada?
- Canadian residents - those who live and work in Canada
- Immigrants - those who migrated from another country to Canada
- A legal representative of the deceased - those who legally represent a deceased taxpayer who needs to file a final return
- Indigenous peoples - those who are considered indigenous who have received benefits and credit
Filing Income Tax Returns in Canada
Filing income tax returns in Canada is easy with an accountant or a software program. Of course, you can check on the CRA website to find out which tax forms to fill and submit, but it can be confusing without the help of somebody more experienced or knowledgeable, like a bookkeeper or accountant.
If you want to save money on your taxes, hiring an accounting firm that specializes in income tax return filing will allow you to focus more on running your business and less on filing taxes. Professionals will be doing the hard work for you.
When Should You Expect Your Refund?
The earliest you’ll get the money is two weeks after you file the income tax refund online. The latest will be up to eight weeks if you choose to file it via paper. Two weeks to eight weeks are expected, assuming you have sent the claim on or before the due date. If you are a nonresident and no longer living in Canada, it may take 16 weeks for you to receive your claim.
In some cases, the Canadian Revenue Agency will delay the return by reviewing your claim or holding your money entirely for the following reasons:
- When you owe money or are about to owe money to the CRA
- When you have a garnishment order, you owe assets to a third party that they need to seize
- When you have other federal, provincial, or territorial government debts, such as student loans
- When have any outstanding Good and Services Tax or Harmonized Sales Tax returns from a business, whether that is sole proprietorship or partnership
- When you only have a refund of $2 or less
- When the information you have provided in the claim does not match the third party's information or facts
- When the CRA chooses to review your Income Tax Return randomly
- When you have a compliance history
Let Us Do the Paperwork for You
While you do want to be a responsible citizen in Canada by paying tax and filing the proper tax forms the government requires, the truth is, handling money and taxes is difficult. This is especially true if you are balancing a job or a personal business alone or without a tax preparer. If you work in E-commerce, you might also face new questions on which of your online transactions can be included.
People who already have online businesses have a lot of data to deal with every day, and some of those might be tax data that might get buried and end up unaccounted for by the end of the year. This is why you need an e-commerce bookkeeping service like Unloop—combat these concerns and have your finances regularly managed and tax returns correctly filed.
Unloop consists of trained professionals offering online accounting services to make sure you are well-informed of the expenses you make. The goal is to professionally handle your finances, resulting in less or no income tax return by the end of the year, which is ideal. In addition, Unloop ensures you enjoy the money you earn now and get the refund that is rightfully yours.
Book a call and talk to one of our professional CPAs today!