As kids get their first part-time or summer job, the question we get asked a lot from parents is when does their teenager need to file their first tax return.
In Canada, there’s no minimum age requirement to file a tax return. What matters is whether the person earned income in a given year. If a teenager earned money through employment, self-employment (freelance, babysitting, tutoring, lawn cutting, content creation, etc), or investments, they must file a tax return. Even if their income is below the basic personal amount, it is still beneficial to file a tax return.
Here are 3 reasons to file a return:
- Receive a Tax Refund
Even if no tax is owed, some employers deduct income tax from paycheques. If that’s the case, the teen could be entitled to a refund. Filing a return is the only way to get that money back. - Build RRSP Contribution Room
By filing a tax return reporting earned income, they begin to build contribution room for a Registered Retirement Savings Plan (RRSP). This could be a valuable head start on long-term financial planning. - Receive Government Benefits and Credits
Filing taxes can make teens eligible for certain government programs and benefits in the future, such as the GST/HST credit.
Even if a T4 is not issued, income earned still has to be declared. Teens who earned more than $500 in self-employment income may need to report it, especially if they have expenses to deduct.
When your teen starts to earn income, it is a great opportunity to teach your child about how income tax works in Canada. It doesn’t have to be intimidating – it’s a stepping stone towards financial empowerment.
