Thursday, March 3, 2011

Benefits of Filing a Tax Return for Low-Income People

Young people who have minimal income and don’t owe any income taxes often don’t bother to file a tax return. However, this can be a mistake. There are some benefits of filing a return.

To begin with, filing a return for a simple tax situation can be extremely easy. In a recent case where I helped out, I was able to just use my own copy of tax software and the return took just a few minutes to file.

Some advantages of filing when you’ve got low income and are going to school are

1. You can accumulate some RRSP room for the future.

2. You can file T2202A information related to school costs that will give a tax reduction in a future year.

3. If you happened to have any income tax, excess CPP deductions, or excess EI deductions taken from pay cheques from a part-time job, you may get this money back.

4. The simple tax return you file is a gentle introduction to more complex tax situations in the future.

This article isn’t likely to be read by many young people in the situation I describe, but parents should consider helping their children file a return.

1 comment:

  1. I'll throw in another one.

    (your province may vary)

    Where I live there is a provincial prescription drug benefit that is income tested. If your drug costs are "high" in relation to your income, you get help on your prescription costs. But since this is income tested........... no tax return, no benefit.