Every year at about this time, advertisements for income tax services appear everywhere. Tax preparation services and the leading software providers post advertisements on billboards, radio, television and the internet. For the average full-time student, the subject of taxes seems far-fetched and not very interesting. Many students do not understand the concept of filing income taxes and may feel as if they will need to pay the Taxman, rather than getting paid by the Taxman and benefiting from all that Revenue Canada has to offer to full-time students.

Do you have to file a return? As a student you are required to file a tax return if any of the following situations apply:

  • You have to pay tax for the year.
  • You have worked during the year.
  • You have not yet paid back all the amounts withdrawn from your Lifelong Learning Plan.
  • You have received the Working Income Tax benefit advance payment in 2009 and wish to apply for advance payments in 2010.

Even if none of these situations apply, you should still file your income tax return for the following reasons:

  • You want to apply for a tax refund.
  • If you will turn 19 years old before April 2011 you may be eligible to receive GST & HST credits. For this tax year this amounts up to $549 if you are living alone.
  • You would like to carry forward or transfer your unused tuition credits.
  • You want to report income which will start opening up RRSP contribution room.

So what does it mean to apply for a tax refund? As a Canadian resident you receive a basic personal exemption of $10,320 for 2009 which means that you can earn up to this amount during the year tax free! If you worked during the year and your employer deducted Federal and Provincial Income Taxes, you will be refunded back all this money when you file your tax return. If you do not file your tax return, the government will not come knocking at your door to tell you that if you file your taxes you are entitled to get this money back!

How does the GST/HST credit work? Why am I getting money even if I was not employed during the year? The GST/HST Credit program issues payments to Canadians with low and modest incomes to help offset all or part of the GST/HST they pay on the purchase of goods and services. Even if you did not work during the year, you are still eligible to receive payments. GST payments are made quarterly in July, October, January and April.

What is required from my school to prove my student status and to report my tuition paid during 2009? Each year during the month of February, schools will issue official tax slips to all students on record. The Federal slip is titled T2202A and if you live in Quebec, the Provincial slip is titled Releve-8. Print these slips or save them digitally in a secure location. If your tuition tax credits cannot be used in the current year, you will be able to transfer them to a parent or spouse or carry them forward to a future year. In many cases, if your tuition credits are carried forward to the future, you will receive some large tax refunds in the first few years when you begin to work full-time after school.

What is an RRSP? Isn’t that for my retirement? I’m young, why would I want to worry about this now? An RRSP stands for a Registered Retirement Savings Plan and yes the RRSP is an investment vehicle geared to help you save for retirement. However by opening up some contribution room early it will allow you to make contributions right away when you begin to work full-time. When you contribute to your RRSP, you receive valuable tax credits which can amount to refunds of 30-40% of your RRSP contribution!

Before you get started on filing your taxes, you are required to have a Canadian Social Insurance Number. If you don’t have one, please contact Service Canada www.servicecanada.gc.ca for an application. If you are an International Student there is the Individual Tax Number which will still allow you to file your income taxes and reap the same benefits. The form is available on the Service Canada website as well.

The deadline to file your income taxes is April 30 each year. If you are expecting a refund, this deadline will not apply and you can file anytime, however it is not recommended as the money is better in your pocket than that of the Government.

As a student, there are many different routes you may take in order to get your taxes filed on time. You may opt to try to file on your own or you may visit your local Accountant and/or Tax Preparation Service. Many Accountants or Tax Preparers offer discounts to Full-Time Students, so please go ahead and inquire.

This is a guest post by Allan, he will be providing us with a few tax related articles of the next few weeks. Allan is a CGA residing in Montreal and works at Better Tax Services.  Each year he prepares hundreds of Personal Tax files and serves individuals across Canada.  To learn more, check out the website or follow Allan on Twitter.