Should I File a Tax Return for My Children?

It’s important for you to file a tax return for children who have any earnings from active employment or self-employment.

It really doesn’t matter how old they are. If you have a 12 year old, for example, who earns babysitting money, or a 16 year old who works at the local hamburger joint, do file a tax return for that child. There are several reasons:

• Create RRSP Contribution Room. This notional account records 18% of earned income, which is the amount eligible for RRSP contribution purposes. Your software will take note and carry the RRSP contribution room forward for future use. RRSP contribution room is accumulated by CRA and shown on the notice of assessment each year. The records in your software should be compared with this.

• GST/HST Credits Require Filing by 18 year olds. When your child turns 18 it’s important to file for the purposes of making Canada Pension Plan contributions on qualifying earnings (there is a $3,500 exemption, so that means earnings above this are subject to CPP contributions the month after the child turns 18.) In addition, 18 year olds should file so they can start receiving their quarterly GST/HST refundable tax credit the month after they turn 19.

Be sure to ask your tax pro what deductions, refundable credits, and non-refundable credits may qualify.

Excerpted from Jacks on Tax. © Knowledge Bureau, Inc. All rights reserved.