You probably already know that you must report the wages you make to Canada Revenue Agency (CRA). But the tax agency also considers your other sources of income, and it is important to report those as well. Under-reporting your total income can subject you not only to back taxes, but to interest and penalties as well.
Whether this is the first year you have filed your taxes or not, it pays to brush up on the sources of income you must report. Paying careful attention to all those sources of income is the best way to avoid problems with the CRA.
You should receive a T4 form from your employer each year, showing the amount, you received in wages during the previous year. If you held more than one job during the previous year, you should receive a T4 from each employer. The T4 form also shows the amount already withheld from your paycheck for income tax, Canada Pension Plan, Employment Insurance, and any benefits received. Your wages include: wages, overtime, commissions, and benefits.
Wage Loss Replacement
If you received payments from a wage-loss replacement plan shown in box 14 of your T4 slips, you may not have to report the full amount on your return. Report the amount you received minus the contributions you made to the plan if you did not use them on a previous year’s return. Do not include this amount when you calculate your total income on line 150.
Pensions or Superannuation
You must report your Canada Pension Plan (CPP), and Old Age Security (OAS) benefits received during the year. You do have to report the Guaranteed Income Supplement (GIS), however, that is only used to calculate certain credits not for taxes. Also, report any income from a company pension or government pension, RRSP withdrawals or RRIF withdrawals. You will receive slips for the above that include the amount received and the taxes withheld.
Note: You do not claim income earned in or withdraws from a TFSA.
You must report the interest you receive from your bank as income when you file your taxes. The bank should send you a T3 or T5 form showing exactly how much interest you received for the previous year. If you earned interest from more than one bank, you should receive a T3 or T5 form from each one.
Dividend income is taxable as well. If you earned dividends on stocks or mutual funds you own, the brokerage firm or mutual fund company should send you a T3 or T5 form. Contact the brokerage firm or mutual fund company if you do not have this form in hand by the end of February.
If you sold stock during the year, you must pay capital gains taxes on the profit you made. The brokerage firm sends you a statement showing the net proceeds of the stock sale, but it is up to you to determine how much you paid and compute the profit and the capital gains taxes you owe. You may also have to claim a capital gain if you’ve sold any personal property during the year.
Self-Employment or Business Income
Whether you run a business or do some freelance work on the side, you are required to report the money you make to the CRA. If you are a freelancer, your major clients may send you a T4A form detailing exactly how much they paid you, but you are required to report all the income you made, whether you get a T4A form or not. If you did get a T4A form, you still claim this as business income on the T2125 Statement of Business Activities.
What does your CRA Notice of Assessment Mean?
What you Should do with your 2019 Tax Refund
Covid-19 Now is the Time to get Serious About Your Financial Wellness
When can you Expect your Tax Refund this year?
Are you one of the Almost 50% of Canadians Taking Advantage of the Tax Deadline Extension?
How to Minimize Taxes on Your Small Business
What you Need to Know About Filing Coupled Tax Returns
4 Tricks Wealthy People use to Reduce Taxes – you can try them too!