Why should I file a tax return if I don't have income or have to pay tax?

If you have to pay tax or have earnings on which CPP contributions must be paid, you must file a tax return.  You must include your worldwide earnings in your taxable income.  You will usually have to pay tax if your taxable income exceeds the amount of the basic personal exemption.  See the tables of non-refundable tax credits for amounts for federal and provincial/territorial basic personal exemptions and other tax credits.  If you have net self-employment income or pensionable employment income  in excess of $3,500, you may have to remit CPP contributions.


There are other circumstances which also may require a tax return to be filed:

• You were requested by the Canada Revenue Agency (CRA) to file a return.
• You have disposed of capital property (real estate or investments, for example) during the tax year.
• You claimed a capital gains reserve on your previous year's tax return.
• You have withdrawn amounts from your RRSP under the Home Buyers' Plan or the Lifelong Learning Plan, and have not yet repaid the entire amount.
• Even if you are not required to file a tax return, it will often be to your advantage to do so, for some of the following reasons:
• Filing a return is the easiest way to establish your contribution room for a Tax-Free Savings Account (TFSA), even though the contribution room is not affected by taxable income.  CRA says that "Individuals who have not filed returns for prior years (because, for example, there was no tax payable) would be permitted to establish their entitlement to contribution room by filing a return for those years or by other means acceptable to the CRA."
• You have had tax withheld from your income, and want to receive a refund.
• The federal government and some provinces have refundable tax credits, which are payable to you even if you have no earnings and have paid no tax.  This means they will send you a cheque for the tax credit!  This includes the federal Working Income Tax Benefit, which is new for 2007.
• You want to apply for the GST/HST credit - If you are 18 years of age or older, you should file a tax return even if you have no income, in order to apply for the GST credit.  You must be 19 to receive the credit, but if you will turn 19 before April 1 of the following year, you should apply now so that you will receive your first GST payment as soon as possible after you turn 19.  Some provinces have benefits similar to the GST credit.  By filing your tax return, you are applying for these benefits.
• You want to apply for the Canada Child Tax Benefit - In order to receive or continue to receive Canada Child Tax Benefit (CCTB) payments for your children, you and your spouse must both file tax returns. CCTB payments are non-taxable monthly payments made to eligible families with children under age 18.  To learn more about the CCTB, visit the CRA web site CCTB page.  Many provinces and territories also pay benefits to families with children.  By applying for the CCTB and filing your annual tax returns, you will be eligible to receive these benefits.  For more information, see the CRA page on provincial and territorial child benefit and credit programs.
• You have "earned income" for RRSP purposes.  Even if you do not wish to contribute to an RRSP currently, the earned income amounts can be carried forward indefinitely.  Also, you can contribute to an RRSP, up to $2,000 more than your RRSP deduction limit, and wait until a future year (when you are making higher income) to deduct the contribution.  This gives your retirement fund an early start.
• For seniors who are receiving the GIS (Guaranteed Income Supplement), filing of their annual income tax return automatically renews the GIS.  For more information on the GIS, see the article on GIS information on the Seniors page.
• You have a non-capital loss, which you can carry back to prior years or carry forward to future tax years.
• You have unused tuition, education and textbook amounts that you would like to carry forward to use in the future.

From Taxtips.ca

Who has to pay CPP or QPP contributions?

Employers in all provinces except Québec are responsible for deducting CPP contributions from employees who are 18 to 69 years old, unless the employee is collecting a CPP retirement or disability pension.  The employer pays the same premium as the employee.  Self-employed people must pay both the employee and employer portions of CPP premiums.  The amount payable is calculated on the self-employed person's personal income tax return.  See our article regarding the changes that have been proposed for rules on when CPP contributions must be deducted. The rules for employers in Québec, who must deduct Québec Pension Plan (QPP) contributions instead of CPP contributions, are generally the same, except that QPP contributions must be withheld from employees even if the employee is 70 or over, or receives a retirement pension under the CPP or the QPP. There are some types of employment and other payments from which CPP or QPP contributions do not have to be deducted.  Canada Revenue Agency (CRA) information on employment income not subject to CPP: Employment not subject to CPP Benefits & payments NOT subject to CPP CRA also has a section titled CPP/EI Explained, which talks about different types of earnings and how they are treated for CPP and EI purposes.  It includes information on tips and gratuities status of workers placed by employment agencies real estate agents Heavy machinery operators workers engaged in construction workers engaged in fishing Revenu Québec information re employment not subject to QPP: TP-1015.G-V - Guide for Employers:  Source Deductions and Contributions, section 6.4. When a person has both employment and self-employment earnings, the total CPP or QPP contribution paid will be based on total employment plus self-employment earnings.  See the following example of the calculation, for 2008, as it would be calculated on Schedule 8 of the personal tax return. Pensionable net self-employment earnings $20,000 Employment earnings not shown on a T4 slip on which you elect to pay additional CPP contributions Subtotal (zero if negative) $20,000 Pensionable employment earnings from T4 35,000 Total pensionable earnings $55,000 Less basic exemption -3,500 Earnings subject to contribution (maximum $44,900 - 3,500 = $41,400) $41,400 CPP contributions @9.9% 4,098.60 Less contributions paid through employment (from T4) $1,559.25 x2 = -3,118.50 Contributions payable on self-employment and other earnings (zero if negative) $980.10

The taxpayer would have to remit $980.10 of CPP contributions along with taxes payable.  In calculating taxes payable, a non-refundable tax credit would be allowed based on CPP of $1,559.25 paid on employment earnings, plus 50% of the $908.10 CPP on self-employment earnings, or $454.05 The other 50% of CPP on self-employment earnings, or $454.05, is allowed as a deduction from income.  This deduction is the employer portion of the CPP contribution. When an employee files a tax return, a non-refundable tax credit is calculated based on CPP contributions paid.  See also our article on getting back overpayments of CPP/QPP or EI premiums. From taxtips.ca