Many people wonder whether to file an income tax and benefit return if they have not made any income in the year.
This article explains why you may need to file taxes despite not earning any income or not having any tax payable.
Filing a Tax Return with No Income
You do not need to file a tax return if you do not earn any income in the year.
However, you may need to file a tax return in some situations, even if you did not earn any income.
For example, to receive certain government benefits such as the Canada Child Benefit (CCB), the Guaranteed Income Supplement (GIS), or the Canada Workers Benefit (CWB), you will need to file your tax return.
The Canada Revenue Agency (CRA) uses your tax return to determine the amount of child benefit you are entitled to receive in the current year.
Some people fail to realize that government benefits are also a source of income.
So if you have received any government benefits in the year, you will be required to file a tax return.
Likewise, if you have taxes payable and need to repay benefits such as old age security (OAS), employment insurance (EI), or Canada Recovery Benefit (CRB), you will need to file your taxes.
Note that CPP is taxable and you will have to claim it as income and file a tax return.
Despite not making any income, if you have outstanding balances under the Home Buyers’ Plan (HBP) or Lifelong Learning Plan (LLP), through your registered retirement savings plan (RRSP), you need to report this through a tax return.
If you intend to contribute to an RRSP, a pooled registered pension plan (PRPP), or a specified pension plan (SPP), you need to file a tax return.
The CRA calculates your registered pension plan contribution room using your income tax and benefit return information.
I Don’t Owe Taxes, Do I Need to File a Tax Return?
If you do not owe taxes or do not have to pay tax in the current year, you do not need to file a tax return.
However, it is recommended that you file a tax return as it allows you to access certain government benefits or get a tax refund.
You could get a tax refund if your employer or a financial institution withheld more taxes than you owe to the CRA.
In this case, even though you do not owe taxes, you would not receive a tax refund without filing a tax return.
Most times, you need a tax assessment to determine if you owe taxes or not.
Filing your tax return allows the CRA to assess your information and specific situation to determine if you owe taxes or not.
You can incur late payment charges and penalties that compound over time if you have incorrectly determined that you do not owe taxes without filing a tax return.
When you file a tax return without owing taxes, this gives you an extra level of confirmation with the CRA that you truly do not owe taxes.
Keep in mind, many lenders may also ask for your Notice of Assessment (NOA) as one of the documents to verify your income when applying for loan products.
Frequently Asked Questions
- Can you get a tax refund if you have no income?
You can receive a tax refund if you have no income. This situation is possible when you have refundable tax credits that the CRA needs to pay you. An example of a refundable tax credit resulting in a tax refund is the Ontario Childcare Access and Relief from Expenses (CARE) tax credit.
- Who is required to file a tax return in Canada?
If you need to pay taxes on your income or claim a tax refund, the CRA requires you to file a tax return. There are other circumstances when you are required to file a tax return. For example, if you have taxable capital gains or want to claim allowable taxable loss, you will need to file a tax return.