Transcript - International Students and Income Tax, Segment 7: International students working in Canada

Host: Welcome to the segment called International students working in Canada, part of the International Students and Income Tax video.

This segment mentions links where you can get more information. You can find all these links in the Related links for this segment.

Joining us today is Peter Cheng. Welcome Peter.

Subject matter expert: Thanks Sarah.

Host: Let's say I'm an international student who is in Canada on a study permit, am I allowed to work in Canada? 

Subject matter expert: If you're in Canada as an international student, you can only work off-campus in Canada if you get a valid work permit from Citizenship and Immigration Canada.

For more information on work permits, visit www.cic.gc.ca.

You will also need a social insurance number, or SIN, from Service Canada.

You can find more information on SINs in another segment of this video, or by visiting www.servicecanada.gc.ca.

Host: As an international student, will I have to fill out any tax forms when I start working?  

Subject matter expert: Yes, you will have to complete Form TD1, Personal Tax Credits Return. The employer uses this form to figure out how much tax to deduct from your employment income or other income, such as pension income.

The TD1 also outlines the non-refundable tax credits that you can claim on your income tax and benefit return.

Host: Does my residency status affect how I fill out the TD1?

Subject matter expert: Yes, it does. The basic personal amount is already filled out on Form TD1, but your residency status affects how much of it, if any, that you can claim in the year.

If you are a non-resident of Canada, you can only claim the basic personal amount if 90% or more of your world-wide income for the year is from Canadian sources.

If less than 90% of your income is from Canadian sources, put a zero for the total claim amount on line 13 of Form TD1. You also have to check the box for non-residents on page 2.

Host: Let's say I'm an international student and this is my first tax year, can I claim the full basic personal amount? 

Subject matter expert: That depends on the percentage of Canadian income you earned during the part of the year you were not a resident of Canada.

You can claim the full basic amount if one of the following two situations applies: the Canadian-source income you are reporting for the part of the year that you were not a resident of Canada represents 90% or more of your net world income for that part of the year, or you had no income from sources inside and outside Canada for that part of the year. Keep in mind you are entitled to a portion of the basic personal amount if less than 90% of your income is from Canadian sources.

Generally, part-year residents, who are not entitled to the full basic personal amount, put a zero on line 13.

Host: Why would they put zero dollars as their total claim amount on line 13?

Most people would rather have more tax withheld on each paycheque than owe that money at the end of the year.

Host: Where can I get more information about Form TD1?

Subject matter expert: For more information on how residents of Canada fill out Form TD1, visit www.cra.gc.ca/videogallery and look for the CRA video series called Canadian Students and Income Tax.

Host: What happens if I start a new job and the employer doesn't get me to fill out Form TD1?

Subject matter expert: If you don't give your employer a completed Form TD1, both you and your employer could face penalties.

You should print a copy of the form from the CRA website.

If your employer doesn't give you Form TD1, they might be participating in the underground economy.

Host: What is the underground economy? 

Subject matter expert: The underground economy is commercial activity that is not reported for tax purposes.

The underground economy is often found in industry sectors where cash transactions are common. Students are most often involved in the underground economy when they work in the hospitality industry, which includes working in bars and restaurants, and the construction industry, such as landscaping, painting, and renovations.

Host: What is the impact of the underground economy? 

Subject matter expert: The underground economy hurts all Canadians. Those who participate in the underground economy avoid their tax responsibilities and place an unfair burden on all law-abiding taxpayers. Unpaid taxes mean less money for programs such as health care, education, employment insurance, and childcare.

Host: How can I tell if the job I am being offered is part of the underground economy?

Subject matter expert: Generally, you can tell because you are paid in cash, you don't have any deductions from your pay, and your employer doesn't give you a pay stub or an information slip for income tax purposes.

You can learn more about the underground economy by going to www.cra.gc.ca/undergroundeconomy.

Host: So, what exactly is a pay stub? 

Subject matter expert: Employers and payers must deduct federal and provincial or territorial taxes, Canada Pension Plan or Quebec Pension Plan contributions, employment insurance premiums, and other contributions from your pay. They then send these deductions to the government on your behalf. The employee is paid the balance.

Employers give employees a pay stub that shows the amounts that have been deducted from pay.

You can learn more about what your employer can and cannot withhold from you on the CRA webpage called Information for employees.

Host: How do I know how much has been deducted from my pay throughout the year?

Subject matter expert: Employers have to issue information slips, such as T4s, to you and the CRA by the last day of February for the previous calendar year. The slips show the amounts earned and the details of deductions, such as income tax, employment insurance premiums, Canada Pension Plan, or Quebec Pension Plan contributions.

Host: What do I use these information slips for?

Subject matter expert: You use the information on these slips to help you fill out your income tax and benefit return.

The front of the T4 slip shows the income that you earned and any deductions from your gross income.

The back of the T4 slip gives a description of each numbered box that is on the front of the slip and tells you what line the box corresponds to on the income tax and benefit return.

Host: What type of employment income can a student expect to find on a T4 slip? 

Subject matter expert: Employment income can be amounts you receive as salary, wages, commissions, bonuses, honorariums, and research grants. Employment income is usually shown in box 14 of your T4 slips.

Add together the amounts in box 14 of all your T4 slips and put the total on line 101 of your income tax and benefit return.

Host: In a previous segment, I learned that tips and gratuities and occasional earnings are taxable. Where do I report these?

Subject matter expert: Income such as tips, gratuities, or occasional earnings may or may not be shown on your T4 slips. If they're not included on box 14 of your T4 slips, report them on line 104 of your income tax and benefit return. It is your responsibility to keep track of the earnings you receive from your employment.

For more information, go to the CRA webpage called Employment income not reported on a T4 slip.

Host: Thank you, Peter.

This concludes the segment called International students working in Canada, part of the CRA's International Students and Income Tax video.

Thank you for watching.

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