How To Pay Taxes in Canada (2023–24)
As a Canadian, whether you are a small business owner doing your taxes for the first time, or an individual filing your income tax, it is important to understand all of the steps involved. The government uses taxes to support all levels of government, and the Canada Revenue Agency (CRA) requires all qualifying citizens to pay their share.
The following article will cover everything you need to know about how to pay taxes in Canada.
- In Canada, there are income taxes, property taxes, corporate taxes, and sales taxes.
- Gathering all of your important documents before starting your tax return will make things easier.
- You have the option to file your taxes on the internet, or mail in a paper copy to the CRA.
- You can pay individual income taxes owed online, through the mail, or in person at Canadian banks, credit unions, or post offices.
- What Kinds of Taxes Are There in Canada?
- When Do You File Your Taxes In Canada?
- What You Need to File a Tax Return
- How Do You File Your Taxes in Canada?
- How Do You Pay Your Taxes in Canada?
- What Are the Advantages of Filing a Tax Return?
- Tax Preparation Made Easy With FreshBooks
- Frequently Asked Questions
What Kinds of Taxes Are There in Canada?
There are several different types of taxes that must be paid in Canada. These include:
- Income tax, charged on all income earned within and outside of Canada during the past year
- Property taxes for those who own a home, which is a local taxation amount based on where you live
- Corporate taxes, charging corporations, non-profits, and inactive corporations tax on profits and on capital
- Sales taxes, including the Goods and Services Tax (GST), Provincial Sales Tax (PST), and the Harmonized Sales Tax (HST) that you pay when shopping in Canada
When Do You File Your Taxes In Canada?
The deadline for filing your personal income tax return is April 30th every year. If you are mailing in your paper income tax return, it is considered filed on time if it is postmarked on or before this date. If you have a balance owing after completing your taxes, the total amount is due on April 30th as well.
If you, or your spouse have self-employment income, you can file as late as June 15, but the payment is still due April 30. If April 30th or June 15th fall on a Saturday, Sunday, or statutory holiday, the deadline is pushed to the following business day.
If you are receiving credits or benefits, you should file before the deadline to minimize the chances of experiencing an interruption to your expected income.
It is important to file and pay on time, or you will face financial consequences. For example:
- If you miss the deadline to file your taxes, you will be charged a late-filing penalty of 5% of your 2023 balance owing, plus an additional 1% for each month that you file after the due date, to a maximum of 12 months
- There are late payment penalties and compound interest applied when the money does not come in on or before the 30th of April. This includes any balance owing if your return has been reassessed by the CRA
- If you set up installment plans, you will be charged interest on your total amount due if you miss any payment due dates, but only if your installment interest charges are more than $1000
Not sure where to start with filing your 2023–2024 taxes? FreshBooks accounting software can make it easier for you to complete and send in your taxes while budgeting for your income tax payments and ensuring you are not hit with unnecessary penalties. Please see the following video to find out how FreshBooks makes tax preparation easier.
What You Need To File a Tax Return
There are several key documents you will need to be able to file your tax return in Canada. These include:
- All of your T-4 slips which must be provided to you by each of your employers by the end of February
- Any T-4A, T4RSP, and T4RIF slips for pension, retirement, annuity, and other income
- T4E or T5007 Statement of Employment Insurance (EI) or Benefits
- All employment income from outside of Canada
- Any untaxed or freelance income earned including tips
- T3 and T5008 statement of savings and investments
- All details on your dependents including their SIN and date of birth
- Credits and income tax deductions that apply to your unique tax situation (i.e. medical expenses, home office expenses, or child care costs)
- Any instalments paid to the CRA
Social Insurance Number (SIN)
This is the nine-digit number that was assigned to you when you first started working in Canada. It is necessary to access all government programs and benefits and to legally work in the country.
Individual Tax Number (ITN)
This is a unique number that the Canada Revenue Agency (CRA) assigns to each individual, so they can identify you for income tax purposes if you are not eligible for a social insurance number. This includes non-residents and international students.
Additional Supporting Documents
If you have claimed any deductions, it is a good idea to save all receipts, invoices, bank statements, and other supporting documents, in case the CRA asks for proof.
How Do You File Your Taxes in Canada?
Approximately 92% of Canadians are now filing taxes online, but the option to send in a paper income tax return is still available. You can also authorize a representative like an accountant or a family friend to do your taxes for you on your behalf.
Electronic filing, either done by you or a representative, typically has a processing time of 2 weeks, whereas if you mail the paper form to the CRA, processing can take up to 8 weeks if you file on time, meaning you may have to wait a bit longer for your refund.
Businesses that are filing six or more information returns (slips and summaries) must file online rather than using a paper return to avoid expensive financial penalties. This is a new rule in 2024 that replaces the clause allowing a filer with 50 or fewer information returns to file by paper.
Do Your Own Tax Returns
Many people opt to do their own taxes when they have a simple return to complete. The Canada Revenue Agency (CRA) has approved different types of tax software that have been created to calculate and file your taxes electronically. All you have to do is fill in the appropriate details about your income, benefits, and deductions, and the software will do the rest.
FreshBooks is the most user-friendly accounting software, designed to make it easy to complete and NETFILE your income tax return on time, making tax time stress-free.
Hire an Accountant
You can pay a tax professional to take care of completing and filing your taxes for you, which is often a smart choice for small business owners and people who have more complex tax situations.
How Do You Pay Your Taxes in Canada?
If you are unsure how to pay taxes in Canada, the following methods are accepted by the Canada Revenue Agency (CRA). Make sure to pay on time to avoid having to pay any additional fees.
If you need to know how to pay tax in Canada fast, for example, if a deadline is approaching, paying taxes online is the quickest method. It is also the most popular, as there are many avenues you can use to pay. These include:
- Using your financial institution’s online banking, mobile apps, or telephone banking service. Pay to the payee “CRA (revenue)” and use your social insurance number as your “account number”
- Using the “My Payment” service, which can be accessed through the MyCRA app or the MyAccount option on the CRA website, to pay using Visa, Mastercard, or Interac Online
- Using the MyAccount website to set up a pre-authorized debit agreement, with payments coming out of your chequing account to pay in instalments, or pay an amount due
- Paying taxes by credit card or debit, Paypal, or Interac Debit e-Transfer through a third-party service provider
- Wire transfer is an option for non-residents
- The government will never email you with links to click, nor will they ask for cryptocurrency payments or gift cards as a payment method.
You can mail in a Canadian cheque or money order payment through the mail with Canada Post, along with a remittance voucher. Do not send cash.
You can pay in person at any Canadian financial institution, with a remittance voucher, which can be ordered, or printed at home.
You can also pay your Canadian taxes at any Canada Post location with cash or a debit card with a remittance voucher that has a QR code (if yours does not have a QR code, you can create one using My Account, but a fee will be charged to you).
What Are the Advantages of Filing a Tax Return?
The major benefits to filing a Canadian tax return are:
- You may be eligible for receiving a tax refund, because the government may owe money back if you have paid too much in taxes, or because you did not earn enough income over the tax year
- You will find out if you owe income tax (and how much), which, while not a pleasant part of life, will allow you to budget and pay on time, so you can avoid penalties and interest charges
- You may be eligible for refundable government benefits like the GST/HST credit, a quarterly payment that is tax-free from the government to help lower-income individuals and families offset the GST and HST they pay
- You could get the Canada Worker Benefit, which is a refundable tax credit to help people who are working but earning a low income
- You may receive the Canada Caregiver Credit, a non-refundable tax credit that you can use to offset Canadian taxes owing if you support your spouse, common-law partner, or dependant who has a physical or mental impairment
- You might be able to get the Canada Child Benefit if you are the primary caregiver to any children under 18 years of age
- You may be eligible for the disability tax credit, reducing the amount of taxes people with disabilities or their support person has to pay, and also makes more federal, territorial, and provincial programs available to them
- If it is your first time filing Canadian taxes online, you will set up your CRA My Account profile, which is a handy online tool allowing you to track your tax information, and communicate easily with the CRA
- It makes it easy to update your personal information like your marital status and your address with the CRA
Tax Preparation Made Easy With FreshBooks
Using accounting software like FreshBooks makes it so much easier to do your taxes. Whether you are an individual or running your own business, by using FreshBooks for your day-to-day bookkeeping, you will have everything you need at your fingertips, with income tracking, and organized, tax-ready reports available when you need them most.
If you are ready to simplify your finances and make tax season a little less painful, you can try FreshBooks free and see how easy bookkeeping and income tax filing can be.
To learn more about tax deductions, please read the following article, listing some of the most common tax write-offs for small businesses in Canada,
FAQs About How To Pay Taxes in Canada
The following are some of the most frequently asked questions Canadian taxpayers have about their obligations when it comes to taxes.
How do you know if you owe money to CRA?
If you owe income tax, the CRA will phone you three times and send one written legal warning letter before taking action against you to collect the money. To be proactive, you can log in to the CRA’s MyAccount tool and navigate to Accounts and Payments, where you will see your Account Balance.
Can you pay your taxes with a credit card in Canada?
Yes, you can use a third-party service provider like PaySimply to pay with your credit card. If you need assistance staying organized and keeping track of incoming and outgoing payments to make tax time easier, consider using FreshBooks accounting software.
How long do you have to pay taxes in Canada?
Taxes are due on April 30th of each tax year, but you can delay payment with a payment arrangement for up to 12 months if you must. There will be late penalties and interest charged, so it is always in your best interest to pay on time and communicate with the CRA when they call.
What is the minimum income to file taxes in Canada?
There is no minimum income in Canada. Even if you don’t make much, you should always file your taxes. If you earn less than $15,000 in a tax year, you will not have to pay personal income taxes, as the basic personal amount credit offsets this income to zero.
Do students pay income tax in Canada?
Yes, anybody earning taxable income in Canada is paying taxes. Accounting software like FreshBooks can help you file taxes correctly, and if you don’t earn much, you may even get money back in an income tax refund.
About the author
Kristen Slavin is a CPA specializing in accounting, bookkeeping, and tax services for small businesses. In addition to her 16 years experience in the accounting field, she also holds a Master’s Degree in Business Administration. In her spare time, Kristen enjoys camping, hiking, and road tripping with her husband and two children. In 2022 Kristen celebrated opening her own firm; K10 Accounting. Learn more about her services: www.k10accounting.com