Even though tax season is over, it will return again in future years and the same issues may pop up as in the past. If you do your own taxes, you can ask yourself the same questions when you prepare them to see if any of the ideas apply to you. This article serves as a handy reference of things to have at your fingertips for any tax season.
There are some assumptions being made here which will be stated in this paragraph. The tax rules being assumed here are the Canadian Tax Code, using Ontario as the province levying the taxes. These ideas can be applied to the other provinces of Canada, but always check with the Canada Revenue Agency or applicable tax agency for changes, which occur frequently. These concepts can be applied to other countries, but the same caveat applies. The situation referred to here as a personal income tax situation. For self-employment or any kind of business, some of the rules may be different.
Does my refund depend on the income taxes I have paid throughout the year? The answer is yes. The government will only give you money as a refund if you have paid income taxes during the year, or you paid more than the amount of income taxes you “should pay” according to the tax calculations. The refund is calculated only on your taxable income, and not on other money you receive from the government. Examples of money that would not be taxed are lottery winnings or gifts. Other monies that are not taxed are credits like the GST/HST credit, Ontario Trillium Benefit, or the Child Tax Benefit. What this means is that if you are thinking of claiming a credit, or putting money into an RRSP, you should check the money you earned during the year and see how much taxes you have actually paid. The taxes in question here are only the income taxes – not property taxes, HST or taxes in the form of registrations or fees. How do you know if you are paying income taxes? Your pay stub will show the taxes being deducted. If you have a casual job, a temporary job or self-employment, there may not be any taxes deducted because you are either not expected to make much money, or you are expected to pay all the taxes when you file them at the end of the year. If you haven’t paid any income taxes throughout the year, do not expect a refund at tax time.
Can my tax return be changed in a following year? The answer is yes. When would you do this? If you discover a credit that you could have claimed after the fact, but did not claim it, you can file for an adjustment and have the return recalculated at any time. Many people believe that once a tax return is calculated that it is carved in stone. This simply is not true, however it is easier to claim credits in the current year versus going back into previous years. The rules sometimes change if you are going back to previous years versus claiming in the current year because adjustments may affect credits that you received, or because the income used to calculate the credits would be changed. You can also file for an adjustment if you made a mistake, or if you something happened in a later year which affects the tax returns of prior years. An example of this would be a tuition amount from going to school that was not claimed in the year in occurred.