While most of us think tax season in Canada doesn’t really kick off until April, the truth is that you can—and should—start preparing your income tax return well before spring. This guide should give you all the information you need to make filing your taxes as stress-free as possible, including the new and updated tax breaks available on the 2021 income tax return and when all the deadlines are.
What’s New for Taxes in Canada 2022?
Each year, the federal government adds, removes or changes eligible deductions, credits and benefits that can save you money on your annual tax return. While there are a couple of changes to existing claims (see below), there is just one new tax credit to be aware of when you file your 2021 return: the Digital News Subscription Tax Credit. This new federal non-refundable tax credit applies to fees you paid for a digital news subscription from a qualified Canadian journalism organization. You can claim up to $500 in eligible subscriptions, which could save you up to $75 in taxes (15%).
What’s changed for taxes in Canada 2022
Similarly, take note of the following tax deductions and credits that have been tweaked on this year’s return:
- Increased Home-Office Expenses Deduction: Last tax year, the government introduced an easier flat-rate method to claim a deduction for home-office expenses, given that millions of employed Canadians worked remotely during the pandemic. Since those work-at-home conditions have continued for many of us into 2021, the simplified claim will apply again this year—with the maximum tax deduction increasing to $500 (up from $400 last year).
- Enhanced Eligible Educator School Supply Tax Credit: This existing tax credit, which allows teachers and early childhood educators to claim a 15% refundable tax credit on up to $1,000 of eligible supplies, is bumping up to a 25% credit. This will apply even if the teachers used those supplies at home rather than in the classroom/daycare.
How to File Taxes in Canada
There are several ways for Canadians to file their taxes:
- File Online: The CRA calls its online filing for individuals NETFILE (as opposed to EFILE, which is the service that tax preparers use). To send in your return via NETFILE, choose a certified desktop, online, or mobile software product, like TurboTax, to prepare your return and follow the prompts to submit it to the CRA. If you use NETFILE and have set up direct deposit, you should receive your refund in about 8 days. NETFILE opens on February 21, 2022.
- Mail-in a paper copy: If you filed a paper return last tax season in Canada, the CRA should automatically mail you the 2021 income tax package by the end of February. Otherwise, you can view and download forms from the CRA website starting Jan. 18, 2022.
- File by Phone: Canadians with low or fixed incomes, and whose tax situation doesn’t change much each year, are invited by letter to use the CRA’s automated phone service, File My Return.
COVID-19 and Taxes in Canada
Any COVID-19 benefit relief payments you may have received during 2021 are considered taxable income and must be reported as such on your return. The government agency (CRA or Service Canada) that issued the payments will mail you a T4A or T4E tax slip by the end of February, showing the total amount of benefits you received. (If you don’t receive your slip(s) by then, check your My Account for electronic copies.)
Depending on your total income and tax bracket, the government may not have withheld enough taxes on these payments, which means you could owe more money than you expected when you file your return. Because of this, it’s important to prepare your return as early as possible, so you know exactly how much you owe well before the payment deadline.
If you collected benefits that you were not eligible for, you will have to pay them back. However, there is one notable exception: students who would have been eligible for the Canada Emergency Student Benefit (CESB), but instead mistakenly applied for and received the Canada Emergency Response Benefit (CERB) will be allowed to offset their CERB repayments by whatever amount they would have received in CESB benefits.
Frequently Asked Questions
When is Tax Season in Canada in 2022?
Tax season in Canada starts early, with forms and publications for the 2021 tax year available to view, download and order from the CRA website as of January 18, 2022. You can prepare your return as soon as you receive all the necessary slips and paperwork—such as T4s, T4As, T5s, T3s and RRSP receipts—from your employers, banks, government agencies, etc. (If you’re missing any slips, check your My Account for electronic copies as of February 2022.) The CRA will begin accepting returns online for the 2021 tax year on Feb. 21, 2022.
What is the Deadline for Filing Taxes in Canada?
The tax filing deadline for most Canadians is April 30, 2022. (However, because April 30th falls on a Saturday this year, your return will be considered filed on time if the CRA receives it on or before May 2, 2022.) Those who are self-employed have until June 15, to file their returns. Either way, the CRA must receive any taxes that you owe on your 2021 income by May 2, if you want to avoid interest charges. Note that individuals, businesses and first responders impacted by the flooding in British Columbia and Eastern Canada can request taxpayer relief if they are unable to file or pay their 2021 taxes on time.
How Do I Fix a Mistake on My Tax Return?
If you notice a mistake on a return that you’ve already filed, wait until you receive your Notice of Assessment from CRA and then file an adjustment request online, or by mail using Form T1-ADJ, T1 Adjustment Request For paper adjustments, also include all the necessary supporting documents, including receipts, slips and schedules. Also, consult our article on The Biggest Mistakes Canadians Make on Their Taxes – and How to Fix Them.
How Do I Pay My Taxes in Canada?
There is certainly no shortage of ways to remit your tax payment to the CRA. You can use your online banking service, pay by credit card, PayPal or e-Transfer, set up a pre-authorized debit, use a third-party service provider, pay in person at bank or post office, or send a cheque by mail. If you pay your taxes by credit card, consider getting one of the best cash back credit cards or one of the best travel rewards credit cards so you can earn back a little something on the spend.
What Are the Penalties For a Late Tax-Filing?
If you owe money on your taxes and do not file by the deadline, you’ll get dinged financially in two ways. First, you’ll pay a 5% late-filing penalty and an extra 1% for every month after that (up to 12 months). Second, CRA will charge you compound daily interest on your unpaid balance starting the day after your taxes were due. If you file on time but are late with your payment, you’ll pay interest charges but avoid the late-filing penalty.
Is Tax Filing Mandatory?
Generally, you are required to file a return if you owe income taxes, or if the CRA asks you to file. There are a few other situations in which you’re obligated to file a return (e.g., if you’re repaying amounts you borrowed from your RRSP for the Home Buyers’ Plan or Lifelong Learning Plan. But even if it’s not a must, you should file anyway so you can collect a tax refund, and apply for various benefit programs, such as the GST/HST tax credit and Canada Child Benefit.
How Can I Avoid Making Tax Mistakes in the First Place?
A simple way to avoid tax mistakes is to use an online tax filing software like TurboTax. Just answer a series of questions accurately, and the system does all the hard work of putting together your return. You can also use the handy TurboTax Live Assist and Review. The virtual service lets you ask questions and get advice about your taxes from a real tax expert — from the comfort of your computer. The software even reviews your return line-by-line to make sure nothing is overlooked.
When Does NETFILE Open for 2021 Income Taxes?
NETFILE opens on Monday, February 21, 2022, for filing personal tax returns for the 2021 tax year. To file online, you must use CRA-certified tax-filing software products that use the NETFILE web service. You can also file previous tax years back to 2016, but returns for tax years earlier than 2015 must be done on paper
The Final Word
Tax time doesn’t have to be painful. There are plenty of resources online to help you through it as well as reliable online tax filing software to make it easier. Just schedule some time to get it done before the deadline. Late filers risk being hit with penalties. Wouldn’t you rather spend that money on something you want? And if you’re getting a refund, get those funds as soon as possible so you can do what you like with them. In either case, file on time!
Lastly, don’t forget to review our handy guide on How to Get More Money Back from your Tax Return! It could put a little more change in your pocket.