Tax Terms You Need to Know: Explained – T4, T5, RRSP, TFSA, CRA for Newcomers to Canada

1. Why You Should Understand Canadian Tax Terms

Canada’s tax system is complex and ever-changing. For newcomers, international students, freelancers, and employees, understanding key tax terms like T4, T5, RRSP, TFSA, CRA is crucial to:

• Avoid mistakes in tax filing

• Maximize deductions and tax credits

• Protect your legal financial rights

• Gain confidence when dealing with tax professionals or receiving letters from CRA

Let’s explore these important tax terms with TikiTax.ca.

2. CRA – What Is the Canada Revenue Agency?

CRA is the federal agency responsible for tax administration in Canada. It handles:

• Collecting personal and business taxes

• Distributing tax credits (e.g., GST/HST Credit, Canada Child Benefit)

• Managing your online tax account

• Sending notices, reviewing files, and handling tax violations

📌 Note: CRA never asks for payment via gift cards, Bitcoin, or threatens arrest. Be cautious of scams!

3. T4 – Statement of Employment Income

A T4 is a summary of your employment income issued by your employer each year (usually before Feb 28). It shows:

• Your total earnings

• Deductions for CPP, EI, income tax

• Your employer’s business number and your employee details

You’ll need this slip to file your personal income tax return (T1). If you had multiple employers, you’ll get a T4 from each one.

4. T5 – Investment and Dividend Income

You’ll receive a T5 slip if you have:

• Interest-earning savings accounts

• Dividend income from stocks

• Returns from GICs or investment funds

T5 reports passive income and must be included in your personal tax return.

5. RRSP – Registered Retirement Savings Plan

RRSP is a tax-deferred retirement savings account:

• Contributions are deductible from taxable income

• Investment growth within RRSP is tax-free until withdrawal (usually after age 60)

• Can be used for the Home Buyers' Plan or Lifelong Learning Plan

RRSP is ideal for higher-income individuals aiming to reduce annual taxes.

6. TFSA – Tax-Free Savings Account

TFSA is a tax-free savings/investment account:

• All earnings (interest, dividends, capital gains) are tax-free

• Contributions are not tax-deductible like RRSP

• Withdrawals are not considered taxable income

TFSA suits everyone—from low-income earners and retirees to long-term investors.

7. RESP – Registered Education Savings Plan

RESP helps parents save for their child’s future education:

• The government contributes up to $7,200 through the Canada Education Savings Grant

• Growth inside the plan is tax-deferred

• When withdrawn, funds are taxed in the student’s name (typically low tax rate)

RESP is a smart financial strategy if your child plans to attend college or university in Canada.

8. T1 – Personal Tax Return

Every year, Canadian residents must file a T1 tax return with CRA. This includes:

• All sources of income: employment, investments, self-employment

• Deductions you claim

• Tax credits you're eligible for (age, dependents, tuition, transit, etc.)

Deadlines:

• April 30 for most individuals

• June 15 if self-employed (but any tax owed is still due by April 30)

9. GST/HST Credit – Quarterly Tax-Free Payment

CRA provides this tax-free quarterly benefit to low-to-moderate income individuals and families:

• For singles, couples, and those with children

• No need to apply—just file your tax return on time each year

• You may also qualify for related provincial credits like the Ontario Trillium Benefit or BC Climate Action Credit

10. Other Terms to Know

• Notice of Assessment (NOA): CRA’s confirmation that your return was processed. It shows any refund or balance owing.

• NETFILE: CRA’s online filing system for fast, secure tax return submission.

• SIN (Social Insurance Number): Required for working and filing taxes in Canada.

• Contribution Room: The annual limit you can contribute to your TFSA or RRSP.

Final Thoughts: Build Your Vocabulary – Take Control of Your Finances

Understanding tax terms like T4, T5, TFSA, RRSP, CRA helps you file confidently, avoid penalties, and maximize your entitlements.

At TikiTax.ca, we’re here to support you—from basic tax filing to long-term personal and business financial planning. Questions? Reach out to our team of experienced tax advisors for tailored assistance.