Something I hear all the time from students…”Oh, told me I don’t have to file a tax return”.
And, you know what? In many situations, that advisor is correct, you probably don’t HAVE TO file a tax return.
But, here’s the catch! If you don’t file a tax return, you miss out on all kinds of great opportunities, such as:
Receiving a refund of taxes paid – if you are a low-income earner, or have many tax credits, in many cases you will receive a refund of part or all of the income tax your employer withheld from your pay cheques during the year
Transferring tuition credits to your parents or grandparents (is there really any better way to show Mom you care?)
Creating tuition credit carryforwards, which can result in significant income tax refunds when you start working full-time
Applying for the GST/HST credit – when you file a tax return, you are automatically applying for this quarterly payment (to check your eligibility, go here: http://www.cra-arc.gc.ca/bnfts/gsthst/fq_qlfyng-eng.html)
Applying for the Ontario Trillium Benefit – when you file a tax return, you can apply for this monthly payment (to check your eligibility, go here: http://www.fin.gov.on.ca/en/taxcredits/CalculatorQuestions.asp)
Building RRSP contribution room – this may not seem like a big deal at your current stage in life, but, it is HUGE down the road when you want to start saving for retirement. If you are working student, the income you earn from employment (and some other sources) helps build contribution room in your RRSPs, which means that you will have the opportunity to start saving more, faster.
Most tax preparers, our firm included, offer significantly discounted rates to prepare student tax returns. Often the refunds/tax credits you are entitled to far outweigh the fee you will pay for having your return professionally prepared.
Not much to lose, and a whole lot to gain!