Tax Season 101: You Ultimate Guide for 2022

Tax Season 101: Your Ultimate Guide for 2022

Personal finance and travel expert Nora Dunn of NerdWallet.

02.18.2022 - Intro by Anastasia Barbuzzi, Q&A by Nora Dunn

Today's cost of living is stressful enough. Taxes shouldn't take you over the edge.

That’s why we produced a handy guide to conquering tax season in collaboration with NerdWallet’s Nora Dunn. You can also listen to our latest podcast episode, Tax Season 101, on all things income tax.

Nora has been a digital nomad since 2006 and created The Professional Hobo, where she decodes financially sustainable long-term travel. She is also a contributor to NerdWallet Canada.

Whether it's your first time filing or you're curious about which pandemic-related tax credits you can take advantage of, prepare to have all your questions answered in this blog post.

When Do I Have To File My Taxes?

If you're an employee, you have to file your taxes by April 30. You also have to pay any taxes owing by that date. However because in 2022 April 30 falls on a Saturday, your taxes owing are due the following Monday, May 2.

If you're self-employed (or the spouse of somebody who is self-employed), the filing deadline is June 15. But before you set aside the task, remember that you must have paid your taxes for 2021 in full by April 30!

Here is some more information about filing tax returns.

What Are Some Tax Credits I Should Know?

If you're not quite sure what a tax credit is, then check out NerdWallet's guide to tax credits.

While there are a ton of federal and provincial tax credits that may or may not apply to you given your personal circumstances or financial criteria, here are some common tax credits to be aware of:

Basic Personal Amount – This is the main tax credit, and everybody with an income of $151,978 or less can claim it. It sets a baseline for income that isn't taxable. For the 2021 tax year it's $13,808. So the first $13,808 of your income is considered tax-free after the credit, and technically results in a 15% or $2,000 credit.

However don't expect an automatic $2,000 refund. Most employers take the basic personal amount into account when they calculate the overall tax to deduct from your paycheques.

Home Buyers Amount – This is a non-refundable tax credit of up to $750 for first-time home buyers.

GST/HST tax credits – These tax credits are automatically applied to everybody and can result in quarterly repayments by the government depending on your income. They are geared mostly to low to moderate income people, to help offset the GST/HST taxes they pay throughout the year.

There are also various child care credits offered both federally and provincially depending on your situation.

What Is Capital Gains Tax Canada?

If you have equity or real estate investments (outside of your primary residence), then selling those investments for a profit results in a capital gain. You have to report this gain on your tax return and pay tax on that gain.

The good news is that capital gains are only 50% taxable. If you have a capital loss, you can also use the loss to reduce the taxable capital gains. If you don't have enough capital gains to offset a capital loss, you can carry forward capital losses to use in future years.

Are There Any COVID-Related Tax Credits to Take Advantage of?

Indeed, there are a few! The most common COVID-related tax credit is probably the Work-From-Home tax credit. Because the pandemic required so many people to work from home, this special working-from-home tax credit was developed to reimburse employees for home office expenses.

Ironically, despite calling it a “credit”, it’s actually a tax deduction.

There are a couple of different ways to calculate the working-from-home tax credit, depending on your employment situation.

Other COVID-related tax credits and incentives include:

Canada Recovery Caregiving Benefit (CRCB)
Canada Recovery Sickness Benefit (CRSB)
Canada Worker Lockdown Benefit (CWLB)

Check the CRA website for the most up-to-date info on the various credits and who is eligible.

If I’ve been Traveling and Working During the Pandemic, Is There Anything I Need to Worry About Tax-Wise?

While on the surface this may seem to be a simple question, the answer depends on a lot of factors, including your employer, employment status (eg: employee, contractor, freelancer, self-employed), the industry you're in, and more.

From a CRA perspective, it's important to note that you are required to claim your worldwide income on your Canadian tax return every year.

Tax Deductions vs. Tax Credits: What’s The Difference?

Tax credits reduce the amount of tax you need to pay on your taxable income, and in some cases can result in a tax refund.

By contrast, tax deductions (also referred to as write-offs) reduce your overall taxable income.

The two go hand-in-hand in that if you have tax deductions that reduce your taxable income to a certain amount, you may qualify for resulting (lower-income) tax credits.

How Long After I File Will I Get My Tax Return?

According to the CRA website, their goal is to send you your refund within two weeks if you file online, and within eight weeks if you mail in your return.

But they are also saying that some tax returns could be delayed because of the pandemic and various tax measures they introduced to help people whose incomes have been affected by the pandemic.

Do I Have To Pay Taxes On My Side Hustle?

Yep. You are supposed to claim all your income, regardless of where it was earned or in what form it was paid.

The good news is that self-employment income also means you can deduct any expenses you incur in the process of earning that income. This requires more record keeping, but can reduce your tax liability, and sometimes even result in a refund.

Do I Have To Pay Taxes On My Cash Gigs & Tips?

Absolutely. And if you don't claim your cash tips and gigs and CRA finds out, you could be in for a penalty.

The good news is that there are some benefits to claiming all your income, even if you have to pay a bit of extra tax:

You will have a better chance of qualifying for a credit card, loan, or mortgage.
With a higher reported earned income, you'll also have more RRSP contribution room (which in turn allows you to invest – and deduct – more).
The additional CPP/QPP (Canada Pension Plan/Quebec Pension Plan) contributions will increase your ultimate pension payouts when you retire.

If I File My Taxes And Forgot A Tax Deduction, Credit Or Made A Mistake, Is It Too Late?

Mistakes happen, and if you realize you made one, you can correct it. Once you have your Notice of Assessment, you can actually make the correction online in the MyCRA Account website, using the “Change My Return” feature.

If you're correcting a tax return from more than nine years ago, or applying for certain tax credits, you may instead need to make an adjustment request.

CRA has more information on the above here.

What Happens If I File My Taxes After The Deadline?

There's no penalty for filing your tax return late if you don't owe money, but if you owe taxes that you haven't paid by the deadline, you are charged a 5% late-filing penalty on the balance owing, plus 1% for each month you are late.

Are There Any Covid Tax Extensions?

While some tax deadlines were extended in 2021 for the 2020 tax year, this year we are back on schedule.

Remember: if you owe tax and are late filing and paying, you're going to pay a penalty. And if you are owed a refund and file late, you have effectively given CRA an interest-free loan on your money. So don't be late!

Have more tax questions? Leave them in the comments below!

To hear more from Nora, listen to EP. 54, Tax Season 101, here.