1. When are Canadian individual income taxes due?
For personal tax return without business activities, the due date is April 30th.
If your business is a sole proprietorship or partnership, you will declare your business income on your T1 Personal Income Tax Return. You have until June 15th to file your income tax return. But you will have to pay any income tax balance owing by April 30th to avoid interest on income taxes.
2. What happens if I don’t file my Canadian income tax on time?
If you file your income tax late, you will be charged the late-filing penalty, which is 5 percent of the balance owing and an additional 1 percent of the balance owing for each full month that your return is late, to a maximum of 12 months.
If you missed the income tax filing deadline because of circumstances beyond your control, the CRA may waive the late-filing penalty and applicable interest. You can get more information about this in the CRA’s circular IC07-1: Taxpayer Relief Provisions.
3. What happens if I can’t pay the Canadian income tax that I owe?
First of all, even if you owe more taxes than you can pay by the income tax filing deadline, you should still file your income tax return on time to avoid late-filing penalties
Once the CRA has processed your income tax return, they’ll send you a Notice of Assessment. If the Notice of Assessment shows an income tax balance owing that you can’t pay immediately, you should contact a tax services office, which will help you set up a mutually acceptable payment schedule.
It’s important to let the CRA know about the problem and arrange a payment schedule as quickly as possible, because daily compound interest is charged on any unpaid income tax balance, starting on the annual filing deadline and continuing until you’ve paid the income tax you owe in full.
4. What are my options for filing Canadian income tax?
- Netfile – The do-it-yourself option for Canadian tax filing online.
- Efile – the Canadian tax filing online option for tax service providers. So if you get your income tax done by a tax professional, they can use Efile to electronically file your tax return with the Canada Revenue Agency.
- Telefile – A service for filing income tax inCanada by phone. Generally, Telefile is for individuals with less-complicated tax situations.
- You can still file a Canadian income tax paper return if you are filing a T1 Tax Return – but this will slow down your return assessment process and delay your tax refund if you’re expecting one.
- If you are a non-resident individual, you should send it to the International Tax Centre inOttawa.
5. How do I report my business income and which Canadian income tax forms do I need?
The Canadian income tax returns you need to report your business income depends on the form of business ownership you’ve chosen.
If your business is a sole proprietorship or partnership, you report your business income on your T1 Canadian income tax return by completing Form T2125. This form is included in the T1 income tax form package. Note that if you have more than one business, you will have to fill out a separate Form T2125 for each business.
If your business is incorporated, you will report your business income on a T2 Canadian income tax return (the corporate income tax return) and complete and file a separate personal income tax return (T1). See my Corporate Tax Guide Canada for more information on filing corporate income tax.
6. If my business is a partnership, is there a special Canadian income tax form I need to fill out?
Generally, as a partner, you will report your business income on your T1 income tax return by completing Form T2125 (Statement of Business or Professional Activities).
You will basically calculate the business income for all partners, calculate the business expenses for all partners, claim any expenses the partnership did not reimburse you for and any other deductible business expenses, and complete the “Details of Other Partners” chart.
However, if your partnership has had six or more partners during the fiscal year, you will also need to complete a PIR (Partnership Information Return). In this case, you will normally have a T5013 slip (Statement of Partnership Income), and will fill out the appropriate sections of Form T2125 accordingly.
7. If my business is incorporated, do I still need to file a T1 personal income tax return?
If you run an incorporated business, you must still file your individual income tax (using a T1 tax return).
All corporations, except for corporations that were registered charities throughout the year, must file a T2 corporate tax return every year, even if there is no income tax payable.
8. I have a job as well as a part-time business. How do I report this on my income tax return?
Assuming that your part-time business is not incorporated, you will report your business income by completing Form T2125. When you’re calculating your total income, you will add your business income and your income from your job.
9. I have a few businesses. How do I handle this on my income tax return?
Once again, assuming that none of your businesses are incorporated, you will report your business income by completing Form T2125 (Statement of Business or Professional Activities). This form is included in the T1 income tax form package.
Assuming that none of your businesses are incorporated, you will need to fill out a separate T2125 form for each business or professional or business activity that you operate. You can get more copies of these forms from the Canada Revenue Agency (CRA) website or from your local CRA office.
Your income will be the sum of the income from your multiple businesses, which you will declare on the appropriate line of your T1 income tax form.
If any of your businesses are incorporated, you will need to file a corporate tax return (a T2) for each incorporated business.
10. How long does tax refund take?
When you get your Canadian tax refund depends on when and how you filed your Canadian income tax return.
The Canada Revenue Agency advises that they usually process paper tax returns in four to six weeks. Canadian income tax returns that are filed electronically are processed faster, within two weeks.
However, realistically, you can’t expect a Canadian tax refund before March at the earliest, even if you filed your tax return in January, because the Canada Revenue Agency doesn’t start processing income tax returns until mid-February.
11. As an employer, do I have to pay Employer Health Tax (EHT)?
In general, eligible employer are exempt from Employer Health Tax (EHT) on the first $400,000 of annual Ontario payroll. employer has to pay Employer Health Tax (EHT) when the annual gross payroll exceeds $400,000, the EHT rate is 1.95% which is only applied to the amount over $400,000. EHT annual return is due on Mar 15th of the following calendar year.
12. Is there any EHT relief to small business?
The government proposes to increase the amount of annual payroll that is exempt from the tax from $400,000 to $450,000. These proposed changes that would, subject to the approval of the Legislature, be effective January 1, 2014.