The day after April 30 is a calm one. People are relaxed but worn out after filing their income tax returns, and are probably speculating how next tax season will find them more prepared than they were this time.
But it doesn’t take long before that filing deadline comes knocking at their door the following year, and before they know it, they’re caught up in the same last-minute rush they swore they would avoid.
Worst case scenario: they’ll file late and end up paying interest and penalties for any outstanding tax balance. Even self-employed individuals, whose filing deadline is usually June 15, are required to pay any tax owing by April 30 to avoid interest charges.
This time of the year, during which you report your eligible expenses and income to the government, is by no account a fun period, but stalling until the last minute or not gathering the necessary documents in advance only makes the process harder.
The Canada Revenue Agency (CRA) accepts returns as early as February. Filing your return early gives the CRA enough time to assess it before the April deadline. If you don’t owe any taxes, your refund is disbursed to your bank account sooner. Now, isn’t that a win?
Below, we’ve put together the steps to prepare for tax time so that paying taxes and filing returns doesn’t have to be such a strenuous exercise.
1. Collect all your information and supporting documents in one place.
Gather all tax information slips that display your income, such as your T3, T5013, and T4 slips, and arrange them in order of use. Canadians registered for the CRA’s “My Account” can fill out their tax information online but should keep all their documents in case the government asks to see them.
Also put together any records or receipts you will need to validate any credits, deductions, expenses, or other amounts you’ll be claiming.
2. Update your personal information.
Notify the CRA of any changes to your personal information to secure your entitlement to benefits and credits. These changes can range from your address and banking information to your marital status and the number of children you’re currently taking care of.
3. Report your income.
When reporting your income, be sure to include the annual amount you received both locally and internationally.
4. Find out which tax credits, benefits, and deductions you can claim.
You may not have to pay the full amount of tax levied on your income. There may be tax credits and deductions you can apply for on your return to reduce the total tax payable.
5. Make regular RRSP contributions.
Make contributions to your Registered Retirement Savings Plan (RRSP) during the year that suit your cash flow and budget. Waiting until the last minute to unravel your allowable contributions can end in frustration. Contributing only at the last minutes does not give you the time you need to think through the contribution amounts and investments that are best for your financial situation.
6. Consider seeing a tax preparer.
Not everybody who goes into the tax season unprepared does so on purpose. Maybe they are just too busy to deal with the hassle that comes with filing their return. If this is you, consider finding a tax preparer to assist you with the whole process.
While you should make it a priority to pay your taxes, outsourcing this task has its benefits: you’ll be working with a professional in the field. An excellent way to find a trusted preparer is to ask for a referral from friends and advisors.