Service Canada Income Tax Mix-Ups Explained: Educate Your Employees on Tax and Benefits

Michael Pignatelli
Apr 16, 2022

As an e-commerce business owner, learning the ropes of taxes is not easy. Tax itself is already a complex subject; what more if you’re trying to make it in the e-commerce world? 

Luckily, you can easily access the internet to learn about these matters. However, there's still another problem. Let’s say you’re looking for information on taxes and benefits in Canada to educate your employees. Then, you notice one of the most commonly searched words: Service Canada income tax.

There seems to be confusion regarding Service Canada and income taxes. Many people may want to know where they can pay income taxes, and this term is quite not right. It gets even more confusing because you can find Service Canada and Canada Revenue Agency (CRA) in one website.

Now, you're unsure of where to file your taxes, what requirements you will need, and who should work on them. This article tries to clear some of these mix-ups for you.

What Does Service Canada Do?

Service Canada is a government organization providing a range of services and benefits to Canadian citizens. It is a part of the Employment and Social Development Canada (ESDC), whose duty is to develop, manage, and deliver social benefits, programs, and services.

Service Canada offers many programs, including:

  • EI - Employment Insurance
  • SIN - Social insurance Numbers
  • GIS - Guaranteed Income Supplement
  • CPP - Canada Pension Plan
  • Veterans Affairs
  • Passport Service
  • OAS - Old Age Security
  • International Benefits

These are only some of Service Canada's many benefits. You can look up their official glossary for a more specific list of these programs.

Who are the Beneficiaries?

The beneficiaries of these programs are Canadian citizens, permanent residents, and temporary foreign workers. Below is a list of specific programs divided into different groups.

ChildrenSIN, Canada Child Benefit, and Canada Education Saving Program
YouthYouth Employment Strategy (e.g., Canada Summer Jobs), Canada Student Loans, and Apprenticeship Grants
AdultsEmployment Insurance, Job Bank, Veteran Services, and Social Insurance Number for immigrants
Supporting EmployersTemporary Foreign Worker Program and Record of Employment online
Vulnerable GroupsIndigenous Peoples programs, Homelessness Partnering Strategy, Canada Pension Plan – Disability, and Indian Residential Schools Settlement
SeniorsCanada Pension Plan, Old Age Security, and Guaranteed Income Supplement
All CanadiansPassports
service canada income tax return - puzzle pieces with income tax prints

6 Service Canada Mix-Ups Explained: Educate Yourself and Your Employees to Get Your Taxes Right

We hope the brief section about the basics of Service Canada has given you a clearer insight into the agency's role. Now, let's try to clear up six misconceptions and mix-ups on Service Canada involving taxes and other related subjects.

#1: Service Canada vs. Canada Revenue Agency: Are They The Same?

The main confusion between Service Canada and the CRA is that they are both service-oriented organizations you can access online through the same website (Canada.ca). However, they handle different things.

Service Canada mainly deals with the administration of social programs and services, whereas the CRA is responsible for tax collection.

#2: Employer vs. Employee Duties: Who's Filing Income Taxes?

In Canada, both the employer and employee must pay income taxes. The employer is responsible for deducting the taxes from their employee's paychecks and then remitting those deductions to the government.

Meanwhile, employees must file an annual tax return to report any additional income earned outside of their regular job duties. In addition, some Service Canada programs like the CERB and EI are the beneficiary's responsibilities.

#3: CERB and Service Canada Income Tax Return

Although CRA is mainly responsible for taxes, you can still use Service Canada when filing tax returns on specific programs. The Canada Emergency Response Benefit (CERB), for instance, is a taxable benefit that gives temporary financial assistance to eligible workers who lost their income due to the pandemic.

The beneficiary may use either CRA or Service Canada to file a return. However, since CERB is a program for employees, business owners are not obligated to intervene with the processes.

#4: Requirements for Filing Income Tax

CRA will require certain documents and information when you file income tax, including some data you can acquire from Service Canada. A good example is your SIN. 

Aside from that, you will also submit documents like T-slips, receipts, financial records, and any government benefit statements that might have relations with Service Canada's programs.

#5: Taxable and Non-Taxable Service Canada Benefits

Naturally, Service Canada programs are available to all Canadian residents and workers. However, confusion may arise regarding taxable and non-taxable benefits.

For instance, the OAS pension and the GIS payments are non-taxable. Meanwhile, the CPP and EI are taxable. Make sure to ask the authorities about this before complying with your income tax.

#6: Filing Service Canada Income Tax Online

Here's another search term that can confuse many people. You can file your income tax online but only through the CRA platform. Service Canada doesn't provide that. How do you file a tax return online? First, you will need to use a NETFILE-certified (an electronic tax-filing service) tax software.

Once your software is ready, follow the tutorial provided by the Government of Canada's official website. You can then file a maximum of 20 returns per online account and device every tax year.

service canada income tax online - tax spelled out on red square blocks with Canadian dollars in the background

Tax Management Tips 

We hope that the six points above helped clear your confusion about Service Canada and taxes. Now, let's discuss the bigger picture: tax compliance. You must learn proper financial management so that you are consistently accurate and compliant on tax time.

Here are some quick tips on tax management for e-commerce businesses.

  • Learn the basics again if necessary. It's not unusual to forget how things work, especially when you have so much on your plate. If you're confused about tax-related matters (e.g., how to calculate net taxable income in Canada or determine tax nexus in a certain state), ask your accountant or financial analyst about them.
  • Never skip monitoring and Q&A sessions. These things are important to keep everyone updated and on the same page. Tax laws are constantly changing, so you have to watch them closely. Otherwise, you're at risk of inaccurate compliance when tax time arrives.
  • Automate your bookkeeping and accounting systems. Even if you think you can still manage your finances manually, it is best to acquire technological aid as early as possible. Eventually, you will need automated tools to handle a large amount of data when your business starts growing.
  • Prepare for tax compliance. Research what you need to prepare ahead of time. Determine what kind of reports, documents, and other information you will need for filing and remitting your taxes. Complete them beforehand and avoid stressing over a missing requirement on tax collection day.
  • Leave the work to a bookkeeping and accounting team. You are a business owner. Focusing on financial management all day isn't your role. Therefore, leave it to reliable bookkeepers and accountants to manage your financial documents and information. That said, you should still oversee everything and ensure zero discrepancies.

Unloop Can Help You Achieve Bookkeeping and Accounting Accuracy For Tax Compliance

There seems to be confusion regarding Service Canada and income tax from online searches. Many people, including you, might be under the impression that Service Canada is in charge of collecting income taxes, but this is not the case. 

Instead, they primarily administer various social programs for Canadian citizens and foreign workers. As a business owner, we hope this can help you educate yourself and your employees on where different taxes go and who pays for them. 

Need some help with your books and taxes? Unloop is just one call away! We work with e-commerce businesses all over Canada and the USA, providing reliable bookkeeping services and collaborating with partner accounting firms to help you with tax compliance. Book a call today for a thorough discussion about our packages!

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About unloop
Unloop is the first and only accounting firm exclusively servicing ecommerce and inventory businesses in the US and Canada. With the power of people and technology, our team dives deep into COGS and inventory accounting.. You are paired with a dedicated bookkeeping team that prepares accurate financial statements, financial forecasts, and can also pay bills or run payroll for you. Come tax time, everything is organized and ready to go, so you don't need to worry. Book a call with an ecommerce accountant today to learn more.
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