Prepping for Taxes
As anyone who reads the news (or this newsletter) knows, tax time is upon us. Anyone can file their taxes from now until May 1st (since April 30th is a Sunday) without penalty. If you owe tax and don’t file by May 1st, a penalty based on the amount of tax that you owe will be charged. Additionally, you will have to pay interest. If you do not owe taxes or are expecting a refund, there are no penalties or interest but benefits to which you might be entitled (child care, gst credit etc.) will be delayed.
I encourage everyone to file a tax return , regardless of whether they owe tax or even have any income. There are certain circumstances, covered in my blog post, where you must file tax return. But even if you don’t meet these “have to” criteria, I discuss the reasons why you should, not the least of which is that you might be entitled to some benefits or to carryforward tax credits. More importantly, it can prevent unpleasant and protracted interactions with the government.
The majority of Canadians have a fairly simple tax return. I’m a big proponent of people doing their own tax returns especially when it is straightforward. At the very least, you can use one of the many software out there to enter your information and then assess whether you feel comfortable with the results. You don’t actually pay for the software until you decide to submit your tax return, so the only real cost is time. Doing it on your own is also empowering and you don’t have to wonder if your tax preparer missed something or why your tax bill is so much higher than you thought.
When prepping for taxes, I recommend creating a physical folder as well as one on your computer, where all documents that potentially relate to your taxes are saved. This might include a T4 for salary (RL1 in Quebec), T5 (RL3) for investment income, RRSP contribution slips, medical expenses, donations receipts (these have a very specific format). Additionally, you might have a T5008 which shows gains and losses on investments during the year, childcare expenses paid to a daycare or babysitter, a receipt for professional dues or education/tuition receipts.
If you think something is tax deductible and have not received a tax receipt, it is worth reaching out to the service provider as it may have gotten lost in the mail (or your email).
CRA also has a feature called AutoFill your return, where you can download information that they already have on file such as your T4 and T5s (since these are usually submitted electronically to them). This can reduce some of the inaccuracies of manual entry.
If you are self employed or have an unincorporated small business, your tax return might be a little more complicated. However, I still encourage business owners who have an accounting system set up (whether it is a spreadsheet or accounting software) to give it a try. Essentially, you need to reflect your total sales for the year and expenses by category. In addition you can claim some home office and deduct car expenses (all to be discussed in greater detail in upcoming newsletters).
If you find diy-ing your tax return to be cumbersome, or you feel a sense of unease that you aren’t doing something correctly then it makes sense to seek out a professional tax preparer or an accountant. If you do submit your tax return and realize after the fact that there is an error, wait for the notice of assessment as often CRA (and Revenue Quebec) will discover the error and issue a notice of assessment with the correct information. If you receive the notice of assessment and the error hasn’t been corrected, you can then file an amended return.
We have a bit less than two months before taxes are due so there is still time. It isn’t too early, however, to start planning and prepping for them. And of course if you decide to do them sooner, you can cross it off your to do list and eliminate that source of stress.
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