How does the tax return system work?

Getting back overpaid income tax is one of the first financial things newcomers to Calgary deal with. Even though the process is covered by federal law and is the same across provinces, in Calgary, where taxes are pretty low, waiting for a refund is often a big part of the first-year budget. This article explains in detail how overpayments are calculated, how they are refunded, how long it takes to process them, under what conditions the government charges interest, why funds are sometimes delayed, and what options are available to speed up the process.

1. Where does the overpayment come from?

Throughout the year, your employer withholds tax from each paycheck using Canada Revenue Agency (CRA) tables. The algorithm does not know your future RRSP contributions or education expenses, so at the end of the year, you often find that you have paid more than you should have. Self-employed individuals calculate advance payments based on estimates, but they often err on the side of caution. The difference between the actual tax liability and the amounts already paid becomes the basis for a refund.

2. Filing your return and the first milestone — Notice of Assessment

Step one — T1 General for the previous calendar year. After receiving the file, the CRA performs a machine check and sends a Notice of Assessment (NOA) — a digital “receipt” with the calculation summary, the amount to be refunded, and details of any changes. The NOA arrives in “My Account” or by mail; without it, the refund will not start. If the system finds errors or a selective audit is required, the CRA will request supporting documents, which will extend the payment period.

3. Processing times in 2025

The speed depends on the method of filing and the availability of direct deposit. According to the CRA's official targets:

  • two weeks for NETFILE with direct deposit enabled;
  • up to eight weeks for paper T1s;
  • up to sixteen weeks for non-resident returns sent from outside Canada.

In Calgary, the vast majority of taxpayers (≈93%) file their T1 online; therefore, the expected time for actual deposit is 8–10 business days after the NOA, if there is no additional verification.

4. Method of receipt: direct deposit or check

CRA is encouraging the transition to direct deposits: 86% of refunds in 2025 were paid this way. You can sign up in My Account, through the mobile app, by calling 1-800-959-8281, or through online banking with most financial institutions. Without direct deposit, a paper check adds another 7–10 days for delivery.

5. When the government pays interest

If the CRA delays your refund beyond the statutory deadline, it will charge compound interest daily. The formula starts with three possible dates — the 30th day after the April 30 deadline, the 30th day after the actual filing date, or the date of the overpayment — whichever is latest. The rate is equal to the “prescribed rate” for overpayments: 5% for individuals in the third quarter of 2025 (previously 6% in the second quarter; 7% in 2024).

6. Why refunds may be withheld or reduced

The CRA has the right to automatically apply the overpayment against:

  • previous tax debts;
  • outstanding student loans, EI overpayments, or social assistance;
  • court orders for child support.

If less than CAD 2 remains after the offset, the payment may not be made at all.

7. “Instant Tax Refund”: is it worth taking an advance?

Large tax preparation chains advertise “instant refunds” — short-term loans secured by a CRA-guaranteed refund check. A commission is charged for the service, and the effective annual rate often exceeds that of a credit card. Given that electronic refunds usually take 8–10 days to arrive, most financial advisors in Calgary advise avoiding such expensive advances, which should only be used in emergencies.

8. How to track your status

  • “My Account” → “Tax returns” tab
  • MyCRA app — push notifications about new NOAs
  • Tax Information Phone Service (TIPS): 1-800-267-6999

While the status shows “In review,” no further action is required; the CRA will contact you if it requires additional documents.

9. Adjustments after receiving the NOA

If you see an error, use the “Change my return” or ReFILE feature. After making changes, CRA issues a Notice of Reassessment; if the refund amount is increased, the additional payment is sent as a separate deposit with interest calculated from the date specified in the 30-day rule.

10. Volunteer clinics in Calgary

Newcomers with incomes below the estimated poverty line can file their returns for free through the Community Volunteer Income Tax Program at CCIS libraries and centers; volunteers file T1s through EFILE, so refunds arrive as quickly as with NETFILE.

11. Average cheque and statistics for 2025

According to the CRA, in the 2025 season, over 19 million refunds were issued with an average size of CAD 2,294, which is only slightly less than the Alberta average of CAD 2,350 (estimate based on provincial T1 analysis). About 57% of all returns result in a refund.

12. How to avoid a “too large” refund

Financiers emphasize that a large refund is an interest-free loan to the government. Coordinate your TD1 form and provincial TD1AB with your employer, take into account future RRSP contributions and tuition credits — this will reduce your deductions during the year and increase your monthly cash income.

13. Special cases: CUAET and temporary SIN

Ukrainians under temporary protection under the CUAET file a T1 form from the moment they become residents; the refund works without restrictions, regardless of a SIN starting with “9.” The main thing is to renew your SIN in time after your work permit is extended, otherwise the bank may reject the transfer.

Summary of the process

  • Fill out T1, submit via NETFILE

  • CRA assigns a file, performs an automatic check, generates a Notice of Assessment

  • If the overpayment is confirmed and there are no debts, the funds are transferred:

  • via direct deposit — on average within 8 business days

  • by check — 4–6 weeks

  • If there is a delay beyond the standard time frame, the government charges interest (5% per annum in Q3 2025)

  • Check the status in “My Account”; if necessary, submit a correction and receive a new amount

The tax refund system in Calgary is transparent and fairly quick. A digitized process, direct deposits, and clear deadlines mean that most taxpayers receive their money in less than half a month after filing. Knowing the ins and outs — from setting up deductions correctly to preparing supporting documents — helps you not only get your overpayment back without delay, but also optimize your cash flow throughout the year.