What You Need to Prepare For Your Income Tax Return in Canada

February 18, 2021 | Written by: Sohail Afzal

What You Need to Prepare Your Income Tax Return in Canada

To prepare your income tax return, there are certain forms, schedules, and supporting documents that you need to submit to the CRA along with your tax return. You need to make sure that you keep all important tax documents with you in case of the CRA audit. It is not only the T1 General Income Tax & Benefit Return that you will have to complete but also you need to fill out relevant provincial forms and schedules to be attached to your income tax return.

If you split pension income with your spouse, you will need to submit Form T1032. If you are applying for the Disability Tax Credit (DTC), you don’t need to submit Form T2201 every time you file your tax return; you just need to submit the form for the first year. Once you are approved for this credit, you do not need to submit this form for subsequent years. The CRA approves the DTC for a limited number of years and the CRA will send you a letter notifying you that your DTC period of approval has expired and you need to submit a new T2201 before filing your next tax return.

Following are some of the important slips that you need to gather before filing your annual income tax return:

  • T4 Slip (Employment Income)
  • T4A Slip (Pension, Retirement, Annuity and Other Income)
  • T4E (Employment Insurance and Other Benefits)
  • T3 Slip (Trust Income)
  • T5 Slip (Investment Income)
  • T4RSP (RRSP Income Withdrawal)

If you file your income tax return via mail, you need to attach these slips to substantiate your income claims. If you file electronically, you do not need to submit these slips as your tax software automatically downloads all slips for you. The CRA gives you certain tax credits and allows you to make certain allowable deductions to offset medical, child care, and other expenses. You need to make sure that you have the evidence to claim such credits and deductions. You will need to furnish your record if requested by the CRA during the assessment process.

Federal & Provincial Taxes

In Canada, your income is taxed both by the federal and provincial government, your taxable income is the amount that is used to determine your federal and provincial income tax rate. You can find your taxable income on the Line 26000 of your Income tax and benefit return (T1 General). Your taxable income is calculated from your Total Income Line 15000 minus certain deductions and losses. Canada has a progressive tax system which means that the CRA will tax you more if your income is high and vice versa. It is important that you calculate your taxable income correctly and you should not miss to claim deductions and credits when calculating your income tax, otherwise, you will end up paying more tax to the CRA. This year, personal taxes can be a bit tricky as there are some allowable tax credits and deductions you should be aware of while preparing your T1 return.

Please feel free to reach out to us at GTA Accounting and we will discuss in detail that how we can reduce your tax liability while evaluating all possibilities to claim allowable tax credits and deductions for you in your personal tax return.

Sohail Afzal CPA Toronto

Sohail Afzal, CPA, CMA, MBA

Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.

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