Even with Low Income, filing a Return Can Benefit You

Filing a tax return is beneficial even if you have minimal or no income for the year. By submitting your return, you gain access to valuable federal and provincial benefits. Additionally, depending on your earnings, you may not owe any taxes at all.

Filing a Return Small Income

Why You Should File a Return:

  1. Access to Benefits: Filing a return ensures that you can take advantage of various benefits and credits offered by the government. These benefits can include the Canada Child Benefit (CCB), the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit, provincial tax credits, and more. Even if you have little income, you may still be eligible for these benefits, which can provide financial assistance for you and your family.
  2. Potential Tax Refunds: Filing a return allows you to claim any eligible tax refunds. Depending on your circumstances, you may be entitled to certain refundable tax credits, such as the Working Income Tax Benefit (WITB), the GST/HST credit, or the Climate Action Incentive. These credits can result in a refund, even if you didn’t earn enough income to owe taxes.
  3. Carryover of Unused Credits: Filing a return is important if you have unused tax credits that can be carried forward to future years. For instance, tuition and education credits, as well as certain investment losses, can be carried forward and utilized in the future when you may have more income.
  4. Establishing a Record: Regularly filing your tax returns helps establish a record with the Canada Revenue Agency (CRA). This can be beneficial in the future when applying for loans, mortgages, or government assistance programs that may require proof of income.

Remember, even if your income is low or non-existent, it’s still important to file your tax return. Doing so can provide you with access to valuable benefits, potential refunds, and the ability to carry forward unused credits.

Filing a Return Small Income

Regardless of Your Income

  1. Basic Personal Amount: A Tax Credit for Every Canadian Every Canadian resident is eligible to claim the basic personal amount, a tax credit that reduces the amount of tax owed. Regardless of your income, as long as you earned less than $150,473, you can claim the maximum amount of $13,229. Reporting less than $13,229 means you won’t owe federal taxes. Additionally, each province or territory offers a corresponding provincial basic personal amount.
  2. Canada Employment Amount: Another Valuable Tax Credit If you earned employment income, even a modest amount, you can claim the Canada employment amount. This credit helps cover work-related expenses like uniforms and home office supplies. In 2020, you can claim $1,245 or the total employment income reported (whichever is lower). Residents of Yukon eligible for the federal amount can claim an additional $1,245. Note that this credit is not applicable to self-employment income; it requires income reported on a T4 slip.
  3. Access to Provincial Tax Credits and Benefits Filing your return provides the necessary information to determine your eligibility for both federal and provincial benefits. These include the Canada Child Benefit (CCB), GST/HST Credit, BC Recovery Benefit, Ontario Trillium Benefit, and more. Failure to file a return means missing out on these valuable payments.
  4. Reduce Taxes Owed through Payroll Deductions Regular employment income is subject to deductions like Canada Pension Plan (CPP) or Québec Pension Plan (QPP) premiums and Employment Insurance (EI) premiums. However, you can claim non-refundable credits for these contributions, both federally and provincially, to lower your overall tax liability. Combining these deductions with the basic personal amount helps increase the income threshold before taxes are owed.
  5. Build Your RRSP Contribution Room for the Future Even if your employment income is modest, filing a tax return increases your future RRSP contribution room. Your RRSP contribution room grows by 18% of the earned income reported on your return. For instance, reporting $10,000 of employment income on your 2020 return means you can contribute an additional $1,800 to your RRSP the following year. This increased contribution room may prove valuable in the future, even if you choose not to contribute to your RRSP immediately.

Filing your tax return, regardless of income level, provides access to tax credits, benefits, and deductions that can positively impact your financial situation both now and in the future.