Tips and Tricks

It’s Tax Time!

It’s Tax Time! Are You Ready?

Tax time can cause anxiety. However, if you deal with it promptly, you will minimize the grief and potential cost if you are late and owe the government. Conversely, if you are due a tax return, you will get it sooner and can use it for your benefit. The sooner the better. Essentially it’s an administrative task that just needs to get done and the process can be made much easier with a little organization.

If you gather your information over the year and put it all in one place you will be half-way there! While you’re at it, set up an envelope or file folder to hold your tax information for the next year. It makes the preparation much easier. The first step is to prepare your information by gathering it together and ensuring that you have all your tax documents and information handy.

TIP: If you plan to file your tax return electronically, this is a good time to check that you have all the access codes you require to e-file. In addition, check that Canada Revenue Agency (CRA) has your correct address and direct deposit information.

Once you’ve got your information together you can begin to complete your taxes. Two handy references to assist in preparing the forms are the Forms and Benefit Guide (available at Canada Post offices) or on-line at www.cra-grc.ca. Some people prefer to work manually through the forms; also, there are several software applications available for tax preparation. Essentially, you enter the information from your tax slips and the software completes the calculations, assessment and review. Using tax preparation software is an easy way to ensure that you take advantage of as many deductions as possible by prompting you to respond to questions such as whether you are a student, use public transit, or borrow to invest. Then it will combine your answers with the other information you’ve entered to complete your taxes. The other benefit to using software is that it will lead you through the process to upload the file to the CRA website to complete the submission.

There are advantages to filing electronically and being set up for direct deposit. It is much faster to e-file and as long as you have access to a computer and internet you won’t have to deal with envelopes, stamps and the mail. Nor will you have to provide documentation with your submission (you must still keep them in case you are audited). E-filing allows CRA to review and assess your submission very quickly and you receive your Notice of Assessment faster than filing manually. If you are due a tax refund from the CRA, you will receive it much more quickly if you are set up with the CRA for direct deposit. It also ensures that you have access to the money immediately because your bank will not ‘hold’ funds deposited by the Government of Canada.

Whether you owe money to CRA or are expecting a refund, it is important to complete your taxes by the deadline (usually April 30th). If you owe money and don’t file and pay on time you may face financial penalties and charges. If the CRA owes you money then the faster you submit your return, the faster you will receive your refund and be able to use the money.

Taking the time and effort to complete your income tax filing each year may seem like a chore. However, it is your responsibility to do it and the CRA has extensive ability and power to ensure that you pay any funds you owe them so it is important that you keep current. If you have not completed all of your tax returns then make a plan to get it done. Start by checking to see if you have all the information you require. Make a list of the documents you need by tax year and start tracking them down. If you have more than one year to complete then set yourself a reasonable objective such as one return each week – it is the only way you’ll get through it. You’ll feel very relieved once you’re up to date with filing your income tax.

What to do with the refund?? Once you have an idea of how much to expect, you can feel comfortable with making a plan. Maximize the impact of a refund by knowing what you’ll do. Consider splitting it to repaying debt (highest interest first), savings (RSPs), and something doing fun! If you have a goal that you’re saving towards such as a car, home or vacation, then you may choose to put more towards that rather than other options. Either way, make sure you carry out your plan so the money doesn’t dwindle from your account.