Why do I owe taxes as a non-resident?
A plain and simple explanation (though a long one) of why you might end up owing taxes as a non-resident
The very short version: your employer did not deduct enough tax from your paycheque.
First of all, let's clarify the term "tax credits" in simple words
As a worker in Canada, you may be eligible for tax credits. These credits reduce the amount of income tax you have to pay. Your employer applies these credits automatically on your paycheques.
One common example is the federal Basic Personal Amount, which is $16,452 in 2026. Each province also has its own personal amount that can reduce your taxes even more.
Many people call this a “tax-free threshold.” In general it means, if your income is below this amount, you won’t have to pay any federal income tax. If your employer deducted taxes from your pay, you will get it back as a refund.
However, this does not apply to everyone in the same way.
Temporary or seasonal workers who spend only part of the year in Canada may not be eligible for the full tax credit.
This includes temporary workers such as IEC participants who come to Canada for a short period. For example they come to Canada to work a summer job, a ski season, or for seasonal farm work (seeding or harvest) and then return home.
The employers require forms, so they know how much tax to deduct from your pay.
When you start a new job, you need to fill out the forms >> TD1 Personal Tax Credits Return. There are two forms: one federal and one provincial, depending on where you work.
These forms tell your employer how much income tax to deduct from your pay. Then the employers send those taxes to the Canada Revenue Agency (CRA) as a prepayment for your annual taxes.
When you file your tax return the next year, the CRA checks whether you’ve paid the right amount. If you paid too much, you’ll get a refund. If you paid too little, you’ll need to pay the remaining balance.
Reasons why you might not be paying enough tax
No help with tax forms
Employers often don’t ask for tax forms or explain how to fill them out.
You guess your status
Many temporary workers fill out the forms and assume they are tax residents (even if they’re not).
Every worker gets treated the same
- Some employers apply the same tax rules to all workers, whether they are Canadian citizens or temporary workers.
- Not all employers know how taxes work for non-residents.
- Payroll systems are not set up for non-residents and calculate tax as if everyone lives in Canada full-time.
In all of the above situations, employers apply the full amount of the tax credits. As a result, they don’t deduct enough tax from your wages. This can cause problems when you file your tax return, and you may end up owing money.
In fact, this is a common issue for many IEC participants who stay in Canada only for a short period of time.
But why am I owing? Are non-residents taxed more?
There is only one tax system in Canada and the tax brackets are the same for every worker in Canada, whether you are a Canadian citizen, temporary foreign worker, international student, or non-resident.
However, the main differences come from the tax credits. Which credits you can claim depends on your personal tax situation, particularly the 90% rule, which affects eligibility for certain credits.
The 90% rule says:
To be eligible for the tax credits, you must have earned more than 90% of your total income in Canada.
Total income = Income in Canada + Foreign income for the tax year
Foreign income includes all types of income, i.e. regular wage income, self-employment income, unemployment benefits, (in many countries it’s called job seekers benefit).
How the 90% rule affects your tax credits
Federal basic personal amount 2026 = $16,452
You meet the 90% rule
Tax credits: $16,452
You may get a tax refund
You do not meet the 90% rule
Tax credits: $0
You may owe taxes
Unfortunately, there isn’t much you can do about this impact. It’s just how the Canadian tax system works for non-residents.
Which tax forms calculate the 90% rule?
At tax time, the tax software calculates your eligibility for tax credits based on the information you enter in the forms:
- Fist, income from Canadian sources as well as income from foreign sources is reported on
- Then, your eligibility for the tax credits, including the 90% rule, is calculated using
How Canada taxes non-residents
As a tax non-resident, you only pay tax on Canadian income.
This means you are only taxed on the money you earn while working in Canada.
Any income earned before arriving in Canada or after leaving Canada is not taxed in Canada. However, you must still report it so the CRA can determine your eligibility for tax credits.
Why you might owe tax (simple example)
If employers apply the correct tax credits and deduct the right amount of tax (meaning more tax from each paycheque), you are less likely to end up owing money at tax time.
For example, if your employer takes an extra $100 from each bi-weekly paycheque, this adds up to $1,200 over 6 months. You probably wouldn’t notice $100 being deducted each time.
But if your employer doesn’t deduct that amount during the year, it can show up later as $1,200 owing when you file your tax return. This is a much larger and more noticeable amount that can come as a shock.
The total tax you owe in your situation does not change.
The difference is simply how you pay it: spreading it out over the year is easier than paying it all at once at tax time.
There’s a positive side to this situation if you look at it differently
Owing money isn’t necessarily a bad thing. If you owe taxes, it means that your employer deducted less tax from your pay throughout the year.
Because you paid less tax, you had more take-home income while you were in Canada. That extra money helped cover everyday expenses like rent, groceries, and transportation, or even allowed you to save for things like a road trip.
During your IEC stay, having more money available was more useful than waiting months to receive a tax refund later.
Questions from many IEC* participants
*IEC = International Experience Canada (temporary workers)
How does the CRA know about my foreign income?
What could happen if I don’t report it in my tax return?
Income reported to a tax authority in another country (for example, through an employer’s payroll system) may be shared with Canada, and vice versa. This is because Canada and many other countries have tax treaties and information-sharing agreements that allow them to exchange financial and tax data.
To put it bluntly, intentionally omitting income from a tax return is a criminal offense in Canada under the Income Tax Act—this is considered tax evasion which could lead to >> fines or imprisonment.
Do I have to file a Canadian tax return?
What happens if I owe taxes but don’t file a return?
In Canada, you are required to file a tax return if you owe taxes. As a tax preparation service, we cannot advise you not to file a return.
If you do not file a tax return, the CRA will not know whether you are entitled to a refund or whether you owe money.
However, in some cases (explained below), you may receive a “Notice to File” from the CRA. If this happens, you must file your tax return. You may also have to pay a late-filing penalty if you owe taxes.
What is the late filing-penalty?
The late-filing penalty is 5% of your balance owing, plus an additional 1% for each full month that you file after the due date, to a maximum of 12 months.
When will I need to file or receive a “Notice to File”?
There are a few situations that may apply to you
1. If you have never filed in Canada = very unlikely
If you have never filed a Canadian tax return, there is no tax filing history for you yet. In this situation, the likelihood of receiving a filing request is generally low.
2. If you have filed a Canadian tax return before = very likely
The CRA can contact you at any time within six years to request that you file another return. Especially if you filed as a non-resident in the previous year, receiving a filing request the following year is very likely.
3. If you will file taxes in your home country = very likely
You may need to report your Canadian income, depending on your home country’s tax rules. Your local tax office may ask for proof of your foreign income and taxes paid. This means you’ll likely need to file a Canadian tax return to provide this proof.
4. If you plan to immigrate to Canada in the future = highly recommended to file
It is important to keep your tax filings up to date. In this scenario you should definitely file your taxes to avoid issues later when applying for permanent residency.
Will I have problems entering Canada later if I don't file a tax return?
Generally, no. As mentioned above, if you don’t file a tax return, the CRA will not know whether you are entitled to a refund or whether you owe money. In this case, the CRA will not communicate with the border or immigration agencies about your taxes.
However, issues can arise if you do file a tax return, owe taxes and then do not pay them.
This could eventually lead to legal action. Depending on the severity of the situation or the amount of tax debt involved, this could be reported to the immigration agency and border agency (and might affect future visas or entries to Canada).
How will the CRA contact me if I need to file?
Officially, you’re required to update your address with the CRA every time you move. More information here.
However, many IEC participants who have never filed a Canadian tax return do not update their address and simply leave it unchanged.
If you have filed a Canadian tax return in previous years, you must update your address in your CRA Account. You can also register for a CRA Account if you don’t have one yet, though registering from outside Canada can be complicated and may require a phone call to the CRA.
> Here is a helpful guide how to register for the online CRA Account <<
Please note that you can only register for the CRA account after you filed a tax return in Canada.
To change the address:
- Online: in your CRA account if you have one
- Call:
- Within Canada: 1-800-959-8281
- Outside Canada: +1-613-940-8495
- By mail: Using Form RC325 to the address mentioned in the form.
- Social Insurance Number
- Full name and date of birth
- Complete address
- Assessed return, notice of assessment or reassessment, other notices or tax documents.
I didn't change my address; how will I get the 'Notice to File' letter?
The CRA will send it to the last address they have on file. This could be the address you used on your last tax return or the one you gave when applying for your Social Insurance Number (SIN) at Service Canada. They’ll use that address to contact you about your taxes.
If I decide to file a tax return, how do I make the payment of the taxes owing?
Your first step is to file the tax return to find out exactly how much you owe.
The CRA does not accept cash sent by mail.
- If you still have a Canadian bank account, you can make a payment via online banking. > instructions here <
- If you no longer have a Canadian account, you can pay using a credit card via a third-party provider.
- PaySimply is recommended by the CRA for tax payments. Please note that the provider charges a small processing fee.
- If you use the Canadataxback service to file your tax return, payment instructions will be included as a PDF along with your tax return documents.
What if I cannot pay the total amount because it is very high?
In this case you can call the debt collection department to arrange a monthly repayment plan after you received the notice of assessment or notice of debt with the repayment amount.
- Within Canada or the U.S.: 1-888-863-8657
- Outside Canada: +1-613-221-3002
When you call, you will need to have your:
- Social Insurance Number
- Full name and date of birth
- Complete address
- Assessed return, notice of assessment or reassessment, other notices or tax documents.
> Here are all other phone numbers if you have to repay other benefits to the CRA.