If you dread tax season, you’re not alone. Whether you’re expecting a refund or a tax bill, just getting started can be the hardest part.
2019 personal tax return filing deadline has been extended now (due to COVID-19) to June 1st, 2020 (or June 15 if you’re self-employed).
Here’s what you could be doing to make doing your taxes easier:
1. Don’t put it off
Waiting until the last minute will just stress you out (and could lead to costly mistakes.) Plus, filing late can result in hefty penalties and interest charges, and could mean possible delays or interruptions in your benefit and credit payments.
Even if you’re a low or zero-income earner, it’s still worth filing a return. You may be eligible for tax credits like the GST/HST credit and other education credits. Filing also allows you to build Registered Retirement Savings Plan (RRSP) contribution room, which can benefit you in the future even if you can’t afford to contribute now.
2. Start preparing early
Make things easier for yourself with a checklist of the documents you’ll need to prepare your return (this one from the Canada Revenue Agency (CRA) is a good start).
As you receive important statements and receipts, whether digital or hard copy, print and file them into a designated tax folder – and check them off your list.
Crossing items off will also help you see what’s missing, and what you might need to track down. If you need a duplicate receipt, it’s better to ask sooner rather than later.
3. Gather your documents
To make sure you’re calculating your income and deductions correctly, you’ll need to review the various tax information forms that your employer and financial institutions provide.
Here’s a list of the most common statements, who issues, them and when you should expect them:
|Statements||Who issues it||What it is||Date to expect it|
|RRSP Contribution receipt||Your credit union or financial institution||Statement of all RRSP contributions you made between March and December 2019||January 31|
|Personal and business receipts||Your credit union or financial institution||Depending on the investments you hold, you’ll receive statements of income for your personal, joint or business account(s)||February 28|
|T4 slip||Your employer||This slip shows how much income you earned, and how much in tax you’ve already paid for the year||February 28|
|RIF, Spousal RIF, LIF||Your credit union or financial institution||This statement confirms the amounts that have been withdrawn from these accounts and have been reported to the CRA.||February 28|
|RRSP contribution receipt, first 60 days of 2020||Your credit union or financial institution||A statement of all RRSP contributions made during the first 60 days of this year||March 27|
Don’t have a key piece of information before the tax deadline? Use your best guess and file anyway. You can always submit an amended return once you have all your information.
4. Report all your income
As a Canadian resident, you’re required to report all income from all sources, both in and outside of Canada. If you’re working for an employer, that’s relatively simple – your income is reported on your T4.
But if you have a side hustle (whether that’s freelance work, running your own small business or collecting tips at a second job), you’ll also need to report this income – or risk additional tax assessments and penalties.
5. Check out tax breaks and deductions
Want to lower your tax bill or increase your tax refund? It’s in your best interest to take advantage of every claim and deduction that’s applicable to you. If you’re not sure what you might be eligible for, the CRA website has a list of government benefits, credits and special allowances that could help you save money.
Here are some important tax deductions/credits you may want to consider:
- Medical expenses
- Moving expenses
- Student loan interest
- Childcare expenses
- Employment expenses like union or professional dues, or professional certification courses
And if you’re self-employed, you may be able to claim a home office deduction.
6. Max out your RRSP contributions, if you can
Keep in mind that every dollar you contribute to an RRSP comes off your taxable income. So, for example, if you make $60,000 and contribute $5,000 of it to an RRSP, you’ll only be taxed on $55,000 – saving you $1,410 off your tax bill for 2019.
For 2019 your annual RRSP contribution limit is 18% of the earned income you reported in the previous year, up to a maximum of $26,500. You can find your exact RRSP contribution limit on your latest notice of assessment or reassessment, by logging into your Canada Revenue Agency (CRA) account online or by calling the CRA at 1-800-267-6999.
Consider using the SecureKey Concierge service, which allows you to access your personal CRA account (along with 80 other Government of Canada websites) without having to keep track of yet another user ID and password.
March 2, 2020 is the final date for your RRSP contributions to be eligible for the 2019 tax year.
7. Go DIY or hire a pro
You’ve got three choices when you’re ready to file your return: file a paper return, do it yourself by using tax preparation software and filing online (Vancity members get a 25% discount when they use TurboTax) or hiring a tax preparer.
No matter how you file, it pays to be as organized as possible with everything you’ll need to prepare your return.
Here’s a look at what filing method might be right for you:
|Filing method||Pros||Cons||Who’s it best for?|
|Paper return: *Download an income tax package from the CRA website |
*Visit a Service Canada office
|It’s free||You could make a mistake, or miss out on credits or deductions you’re not aware of||Ideal if your tax situation is simple and you enjoy numbers|
|Tax software program or online tax service like TurboTax||It’s free or very inexpensive (Vancity members get a 20% discount when they use TurboTax), and the software makes it easy to see how each figure you enter affects your return.||You could miss out on credits or deductions that a tax professional would be aware of||Ideal if your tax situation is simple, (i.e. you don’t have multiple sources of income or own property), and you’d prefer to do it yourself|
|Professional help from an accountant or tax preparer||You’ll get expert advice and help finding tax deductions and credits that could make a real difference to your bottom line.||It’s more expensive, and you’ll also need to provide all your documents and receipts.||Ideal if your financial situation is complex, or if you’re just not a numbers person.|
8. Get prepped for next year
Think you’re done? Not so fast! Be sure to save and file all related receipts and documentation. The CRA advises that you keep receipts and supporting documents for six years to support your claim if your return is selected for review. This means six years from the end of the tax year for which the return and supporting documentation applies.
And get into the habit of keeping and categorizing all your receipts throughout the year. You’ll stay organized – and get a head start on next year’s tax return.
This post was updated on April 21st 2020 to reflect the change in tax deadlines for individuals due to COVID-19.