Students who are doing an internship or are on a Co-operative Education (co-op) work term may have a harder time filling out their tax return, according to tax experts, because the nature of their work is different compared to other jobs.

As the deadline for tax filing approaches, which is April 30 this year, students, especially those who are doing an internship or a co-op work term might be wondering how they should fill out their tax return, considering they have a different work status than part-time or full-time employees.

In order to make the process of reporting income tax easier, the Canadian Federation of Students and UFile Online, a consumer tax program located in Montreal, Quebec have joined forces to offer a free online tax filing service for all Canadian university students.  

Typically, earnings from an internship are regarded the same as employment income. In this case, the student’s employer would provide them with a Statement of Remuneration Paid slip (T4) that displays their earnings for the last fiscal year.

However, there are cases where the employer could pay the student in amounts that exclude withholdings, such as the Canadian Pension Plan, Employment Insurance, and income tax, according to Gerry Vittoratos, head trainer at Thomson Reuters and tax specialist at UFile. “In that case, they paid [the student] like an independent contractor. As a contractor, you are considered self-employed,” said Vittoratos.

In order to assess if the student’s internship falls into the self-employed category or not, they must look into how much control their employer has over their pay, and whether the student has a say in how much they should get paid for their services or not, explained Vittoratos. In addition, where the intern gets their supplies from to provide the service could have an effect on whether they qualify for the self-employed status or not as well, he added.

Vittoratos also noted that interns are often compensated unconventionally. For example, their remuneration could be in the form of gift cards or cash, which makes it difficult for them to know how to report these earnings. “An honorarium is considered [an] employment income. This income is taxable, and must be reported on your [tax] return,” he said.

Moreover, if a student completed their internship overseas, as long as they have their Canadian citizenship or Canadian permanent resident status, they are required to file a Canadian tax return like any other resident of Canada. “Any income you gain outside of the country is taxable in Canada, and should always [be] reported on your return,” emphasized Vittoratos.

It is important to note that if a Canadian intern completed a paid internship overseas, like in the US, they are required to pay income taxes for that country. However, pon filling out their Canadian income tax, they should still report their full earnings, as they may be able to claim a foreign tax credit, according to Vittoratos.

Vittoratos also emphasized that if a student owes tax to the government, files late, or does not file, they will be subjected to penalties from Canada Revenue Agency (CRA). Interest will be applied to any amount owing that has not been paid by the deadline date.

In terms of the credits that interns can claim, they are eligible for the same deductions as a regular employee, noted Vittoratos. “This includes tax credits that are automatically included on T4 slips, such as Canadian Pension Plan and Employment Income as non-refundable credits and withholding taxes as refundable credits,” he added.

If interns are unclear as to whether they are considered a contractor instead of as a standard employee, the general rule of thumb to remember is that interns are considered employees due to the nature of their work, stated Vittoratos.

There are many resources out there that students can access to learn more about filing taxes in Canada. “The CRA website offers a wealth of tax-related information, as does the UFile site. On [the UFile site], students can find the support they need, whether through our blogs or our virtual tax clinic Tax & U, where resident tax experts are on hand to offer easy answers to their tough questions about tax,” concluded Vittoratos.

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