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Filing a Tax Return a Must for 18-Year-Olds

by Wayne Cheveldayoff, 2003-03-30

Whether or not they earn income, 18-year-olds should file an income tax return. It is the only way they will be eligible to receive the federal GST tax credit as soon as they turn 19. Another reason to file a return is that persons aged 16 and over may also be eligible for provincial and territorial tax credits, which, when combined with the GST credit, could add up to hundreds of dollars a year.

Many turning 19 are failing to get the benefit of the GST credit, formally known as the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit, because they just don’t know about it. Canada Customs and Revenue Agency (CCRA) conducts outreach programs to inform students attending colleges and universities about the credit. But tax accountants say they still see lots of situations where the credit is being missed.

One of the reasons is that CCRA only requires people to file a return if they owe CCRA money. Most teenagers have part-time or summer jobs and rarely earn enough to pay income tax.

For those who have missed the GST tax credit, however, it is possible to file or re-file tax returns for previous years to get the credit for those years.

The GST tax credit was implemented by the federal Government to help low-income Canadians pay the 7% federal Goods and Services Tax levied on almost everything we buy. The credit for those with no income starts at $213 a year and can range higher, depending on income and if there are dependents (more below).

The rules for the GST tax credit are as follows: Every Canadian resident is eligible for it as soon as they turn 19. The credit is paid quarterly in January, April, July and October. It is paid by cheque through the mail or it is directly deposited into a designated bank account.

To receive the credit, however, you must have filed a tax return for the previous year, and you must have indicated in the return that you are applying for the GST tax credit.

This means that if you turn 19 before April 1, 2004, you should apply for the credit on your 2002 return. That way, you can receive the credit with the first payment after the month of your 19th birthday. For example, if you turn 19 in September 2003, the first GST tax credit payment will be made to you in October 2003. If you wait to apply for the GST credit until you file your 2003 return (in 2004), you will not receive the credit until July 2004.

If you apply for the credit on your 2002 return, CCRA will let you know as early as July 2003 how much, if any, you will receive.

The amount of the credit you receive each year depends on your income for the previous year. Full details are available at CCRA’s web site at www.ccra.gc.ca.

For those earning income of up to $6,911 a year, a single person with no children, for example, would receive the base amount of $213 annually ($53.25 quarterly).
The credit goes up as income rises, with the credit reaching a maximum of $325 a year at an income level of $27,749. The credit then gradually falls to zero for those earning $35,000 or more per year.

Those with children get more. A single person with one child receives $538 a year up to an annual net income of $27,749, with the credit falling to zero for those with annual income of $39,000 or more.

Depending on their income, individuals can also receive provincial and territorial sales or other tax credits.

Ontario, for example, pays a basic sales tax credit of up to $100 a year and also a property tax credit for those who paid rent or property taxes (with the credit depending on how much was paid). Both of these credits are available to those aged 16 and over, although they are subject to being reduced if income is over $4,000 a year and they will not be paid to someone under age 19 who lived with a parent and whose parent received a Canada Child Tax Benefit payment for him or her in 2002.

Details on the provincial and territorial tax credits are available in the relevant forms and guides issued for each jurisdiction by CCRA. Copies of these are available at CCRA offices, Canada Post outlets and on CCRA’s web site.

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©2003 Wayne Cheveldayoff