Turn a Taxing Time into a Profitable One
By Marcello Paolinelli
When librarian Fabiano Takashi came to Canada from Japan, six years ago, he had no idea that as an international student he was eligible for a tax rebate. Only five years later, a friend, who was also a student, explained to him that all students were eligible and that he should get a tax form at the post office. “I was naive and not well informed [enough] to understand that international students are also eligible for tax rebates. It would have been helpful, if at the time, I’d been admitted into the country and given the student authorization, I’d also have been given some information on how to claim income tax [refunds],” says Takashi.
Since so many years had passed, he had to get an accounting firm to deal with the paper work from the prior years. However, for the current year, Fabiano was able to fill in his own forms, with the help of two other friends who were also international students. The funny thing about the whole process, he remembers, is that all of them did it together trying to follow all the instructions in the guide. “We were all doing our undergraduate degrees in Humanities and Social Sciences. None of us were that well-versed in mathematics and formulas – it made no sense at all. Anyways, we finally decided to submit it to Revenue Canada.”
A few months later, they received their statements from Revenue Canada, with all the corrections that had to be made to the forms. “Although slightly embarrassed, we were all happy that we finally got our money back!” says Takashi.
Gean Oliveira, a Brazilian web developer living in Toronto for four years, doesn’t have good memories from his first experience at tax time either. When he asked his landlord for receipts for the rent of the apartment he had lived in for a couple of months, the landlord simply refused to give it out saying “it was not his obligation”. Although the rent was the only major expense he had to declare at that point, Oliveira preferred not to go through all the stress the situation could cause him and his wife. “The landlord even threatened to call the police. I was new to Canada and inexperienced, so I chose to fill out the tax form without the rent expenses.”
Gean says he now knows that he could have claimed the rent expense without the receipts because it is possible to use mail such as telephone bills and bank statements to prove he had lived in that apartment. “After all that confusion, I’d lost $850 that I’d been eligible to receive back from the government.” A new multimedia campaign to be launched this year for the Canada Revenue Agency could help avoid situations like those experienced by Takashi and Oliveira. This campaign focuses on compliance and targets new Canadians in particular.
The CRA is concerned about non-compliance among recent immigrants. Research conducted by the agency indicates “that a certain percentage of new Canadians surveyed do not realize that they may have had to file a tax return, while some didn’t know how.” The campaign’s ads will be tested on focus groups in Toronto, Montreal and Vancouver, concentrating on Mandarin, Arabic and Punjabi speakers. This research should tell CRA how best to inform newcomers that they are required to file a tax return if they have taxes to pay, and that they must file a tax return to receive benefits to which they are entitled.
But newcomers don’t need to wait for the new CRA campaign to be informed about how to deal with taxes. If you are unable to complete your income tax and benefit return by yourself and are unable to pay for assistance, there are many organizations that offer Volunteer Tax Preparation Clinics as well as classes and workshops in preparing your own taxes. When a simple tax return for an individual costs about $50 for a tax preparation company to prepare or $150 for an accountant to do so, these volunteer clinics are a great choice.
The Institute of Chartered Accountants of Ontario (ICAO) has a Tax Clinic program where volunteer chartered accountants assist low-income individuals with their tax returns for free. Clinics operate between February and April of each year in a variety of agencies – food banks, charities, hospitals, senior centres and homes, community centres, social service agencies and libraries.
Chartered Accountant Ben Seto, from Chim & Seto LLP Chartered Accountants, agrees that one of the biggest problems for newcomers is not being familiar with the Canadian tax system, which he considers to be very complicated. “It is easy to miss something. Some people don’t know what they are allowed to claim. They don’t know that the ‘child benefit’, for example, should be applied for separately.”
Seto also alerts tax payers about the dangers of wrong information. “There is a lot of misinformation out there. You see unqualified people doing tax returns. They’re giving out wrong information.”
One interesting observation made by Seto is related to newcomers coming from countries where they face authoritative governments. Frequently, they were afraid to challenge their governments about tax issues. Here in Canada, underlines the CA, “nothing is black and white.” In other words, there are different interpretations for the same topic, and we can eventually challenge the government. And if new information comes to light, corrections or amendments can be made to old tax returns long after they are filed and paid.
Valeria Sales, counselling at the Abrigo Centre (a charitable organization that places its emphasis on Portuguese-speaking communities in the Toronto area), gives some tips for newcomers not familiar yet with the Canadian tax system. “It is always good to try getting help in your own language. Go to a community centre close to your area and ask for a free tax clinic.” About 900 clients get help from Abrigo each year to fill out tax forms for free. Most of those clients are from the Portuguese community, but there are also many Spanish-speaking clients and others who are able to communicate in English. Valeria explains that the basic tax form is referred to as T1 General. Everyone needs to fill it out. If you do not receive one in the mail, you should pick one up at your nearest Canada Post or Revenue Canada offices. The income guideline for which to qualify for the agency’s help is $16,000 maximum total income for individuals without dependents and $26,000 maximum total per-household income for couples without dependents. For each child, you can add $3,000 per year to the maximum income qualifier. Sales says that it is worthwhile to file for income tax even if you were unemployed, since you will still receive the GST Tax Credit.
The free clinics cannot complete income tax and benefit returns for deceased persons, bankrupt individuals, or individuals who have capital gains or losses, employment expenses, or business or rental income and expenses. More information about income tax can be reached at 1-800-959-8281.