How to File Your Taxes for The First Time

With the 2022 tax deadline of April 30 fast approaching, it’s time to start preparing your paperwork. If you’re a first-time filer, you might think things would be simpler, but when you factor in tuition, student loans, side hustles, CERB and COVID-19 subsidies, and any potential investments, things can get confusing real fast.

The good thing is, the more you take the time to learn about taxes, the easier they become to tackle. Below are five common questions and answers every first-time tax filer needs to know.

Do you file a tax return if you have no income?

According to the Canada Revenue Agency (CRA), you don’t need to, but it can actually benefit you if you file anyways. By filing, you’ll be able to claim a refund and see if you qualified for the working income tax benefit. You’ll also find out if you qualify for the goods and services tax/harmonized sales tax (GST/HST) credit or the Canada child benefit payments. These things may not matter to you, but at least you’ll have your records up to date with the CRA.

Do I pay tax on my side hustle?

If you made any money from a side job, whether it was from making deliveries for DoorDash or selling art on Etsy, you need to report that income. Fortunately, you’ll be able to write off quite a bit of your business expenses by filling out a T2125 form, which is a statement of your business activities. Now, if you’re tempted to not report your extra income because there’s no paper trail, stop. Not reporting any income is called tax evasion and it’s something you don’t want to do.

Can I file my own taxes online?

Let’s be honest, lessons on filing your own taxes is probably something that should be taught in high school. This is your sign to stop relying on parents or other adults and learn this important skill.

The good news is that doing your taxes has never been easier thanks to online software like UFile and TurboTax. While using free tax software may be tempting, keep in mind that it’s meant for people with the most basic returns. Paid versions are a better choice for people who have multiple streams of income, business expenses, and investments since it’ll walk you through your tax return and ensure you don’t miss out on any credits.

What should you do with a tax refund?

Before you blow that “free” money, consider this: the reason you got a tax refund is that you paid too much in taxes to begin with. You’re essentially getting back the money that you loaned the government for free. The best thing you can do with your tax refund is to reinvest it into your RRSP so you can get a bigger refund next year. Alternatively, you could pay off any high-interest debt such as credit cards. It’s satisfying to spend some of your tax refund but try limiting it to 25 percent and saving the rest.

How long do you keep tax records in Canada?

Don’t throw away all your documents after you’ve filed your taxes and received your refund (or paid your taxes). The CRA recommends that you hang onto all documents for at least six years. These documents include anything that relates to your tax refund such as T4s and receipts from all your expenses. To keep things organized, you can store everything in a file folder or take pictures of all your receipts and keep them on the cloud. In the event that you get audited, you’ll have all the paperwork readily available.

Where can I get help with my taxes?

Use government resources to your advantage — the team at the CRA is truly there to help. From payment plans if you land up owing money, to helping you figure out the impact of COVID-19 on the 2021 tax season, rely on their expertise if you find yourself in a jam.

Doing your taxes may be intimidating, but it doesn’t have to be. Stay organized, know your deductions, use software and everything will be alright.

Read more:

Tips For Preparing Your 2021 Taxes

Tackle Tax Time Right In 2022