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First Year Income Tax Return Tips for Newcomers in Canada

Most immigrants are not quite familiar with the Canadian tax system. They lack information and face difficulties in filing taxes. To help newcomers this article will focus upon the first-year income tax laws. After that, you are no longer considered a newcomer.

To start with the first-year income tax process, you need to establish significant residential ties in Canada. These are readily established once you land in Canada. These ties are formed once you rent or own a house or when your spouse is in Canada. People who were once residents of Canada and have now a non-resident status been still eligible to pay their income taxes once they re-establish those ties.

All newcomers are required to obtain their social insurance number (SIN) to receive tax benefits. To apply for the tax benefit, all newcomers are supposed to send two different forms to the Canada Revenue Agency (CRA) with complete and authentic information. These forms must be sent with the following details,

  • Citizenship Certificate
  • Temporary or Permanent Address
  • Children’s Birth Certificate

It is not necessary to apply for benefits each year but you should always file for your income tax and benefit return. It does not matter if you had any income that year or not, you should not miss a date. You and your spouse or a common-law partner must file for taxes every year. It is equally important to keep your personal information up to date with the CRA. It can be used as part of the validation process. If you face difficulty preparing for your taxes, you can always consult a professional for your income tax services.

How to Calculate Your Income?

If you are moving from another country to Canada, you might have some properties over there. If you are immigrating to Canada, you might have sold them at the fair market value. Fair market value provides an idea of the nearest market value of an item at present. So, if you had some jewellery, land, or shares, you can sell them off at a fair price before arriving in Canada. In case of any losses, you can deduct that amount from the same asset type. This fair market value gives you an idea of the estimated amount that you will get after disposing of your asset, which you can do so later on.

Steps to Complete Your Tax Return

Here are some areas which you should never forget to fill while completing your tax return form

  • ID Details
  • Date of Entry
  • Report Income

ID Details:

All newcomers should complete their entire personal details carefully on all forms. Any discrepancy can cause big complications. Once you have submitted the Child Benefits Application and Income Information, you should complete the first page of the income tax return form for the CRA. It allows them to calculate any benefits or returns under your current status.

Date of Entry:

As stated before, newcomers are subject to the income tax laws once they establish significant ties in Canada. Hence, when you arrive in Canada, buy a home or rent an apartment you are labelled as its resident. You have to mention this date on your income tax return form when you become a resident of Canada for income tax purposes.

Report Income:

Under this section, you have to report your spouse or common-law partner’s income from all sources. This income should cover all income streams in and out of Canada over the past year and the time when you got your residency. This income is termed as net world income. You have to mention your spouse or partner’s name below the form as well.

What Income Should You Report:

All newcomers have to report their income when they were not residents of Canada and when they got the residential status. This includes the income from all sources incurred from in and outside of Canada. It also covers the sale of taxable Canadian property, income from employment and the taxable part of fellowships or scholarships.

What Deductions Can You Claim?

Deductions are the amounts that you are allowed to deduct from your total taxable income. Here are some deductions that you can claim. They include,

  • Registered Retirement Saving Plan (RRSP)
  • Pension Income Splitting
  • Moving Expenses

However, you can not deduct the RRSP amount from your income if it is the first time you are filing for an income tax return in Canada. For pension income splitting, you need to fill and submit a form for your tax returns. You can only deduct your moving expenses if you have full attendance and a scholarship.

First-year tax preparations can become tough for newcomers. Therefore, it is preferred to hire professional income tax return services.