Not sure where to start when it comes to tax preparation? Consolidated Credit helps get you ready to file your personal income taxes correctly to avoid financial hassle and maximize your tax refund. With a little planning and the right preparation, you can gain peace of mind and possibly a little extra cash on your refund cheque. You’ll also learn how Canadians file, what they pay, and what they do with the tax refund they get back.
Tax season is almost here. Are you ready? Tax season can be stressful, but it doesn’t have to be. By taking the time to get organized ahead of time, you can help ensure this tax season goes smoothly.
In this article, we’ll look at ways to stay organized as well as claiming tax credits and deductions coming to you.
Tax season is here!
It’s the most wonderful time of the year. No, it’s not the holiday season, it’s not back to school, it’s tax season! With the season upon us, it’s time to start thinking about tax preparation, looking professional services, and getting your forms in order.
Similar to visiting the dentist, many of us fear tax season. But it doesn’t have to be that way. By keeping your finances organized and having all the necessary receipts and paperwork in hand for your taxes, it will help make it a stress-free tax season.
To help get ready for tax season, we’ve compiled a checklist to help make your life a lot easier.
Stay organized with an accordion file folder
If you want the 2020 tax season to go smoothly, it helps to organize everything. One of the best ways to stay organized is by purchasing an accordion file folder system. If you’re anything like me, you receive a whack of tax slips come tax time.
It’s easy to misplace a tax slip or two if you’re not organized. This can have dire consequences and lead to penalties and interest with the Canada Revenue Agency (CRA).
An accordion file folder system will make your life a lot easier and help you avoid a headache to begin with. File away all your essential tax slips in it, including T-slips, donation receipts, notices of assessments, etc. The more organized you are, the easier the tax preparation process will be.
Settle your debts with the taxman
We all like getting a big fat juicy tax refund from the government, but sometimes you end up owing the government money. If that’s the case, it’s time to settle any outstanding balances from previous years with the taxman. Failure to do so could result in a delay in processing your income tax return this year. If you’re hoping for a sizable refund from the taxman, you’ll want to get even with them before you file your taxes. This is where smart tax preparation comes into play.
File your tax return online
Do you still print off your tax return and mail it in to the CRA? Do you want to receive your tax refund a lot sooner? Why wouldn’t you? Income tax returns can be processed a lot faster when they’re prepared and filed online. Companies like H&R Block offer tax software where you can file a tax return from the comfort of home.
It typically taxes the CRA four to six weeks to process a tax return received by snail mail. When you have your return prepared and filed online, it can lessen the processing time to only 10 days. Wow! That means you’ll have the refund money in your bank account that much sooner.
While you’re at it, why not sign up for direct deposit? By switching to direct deposit, you can have the refund money in your bank account even sooner. No more waiting for the refund cheque to arrive in the mail.
Hire a tax professional if your taxes are complicated
If your tax return is pretty straightforward, tax preparation is minimal and filing your taxes can simple with software. However, if your tax situation is a little more complicated – you earn rental income, you have investment income, or you’re self-employed – that’s when it can make sense to hire the services of a tax professional.
A tax professional makes the most sense when you’re not comfortable with the numbers or tax forms. In this instance, you’re probably better off hiring the services of a trusted tax professional. But you don’t want to hire just any tax professional. You want to hire a tax expert who has a good understanding of your tax situation.
Do your research and interview at least two or three tax professionals. It’s a good idea to ask them for references so you can speak to some of their current and past clients.
Ideally, you’ll want to seek out the help of a chartered professional accountant (CPA). If hiring a CPA is beyond your budget, you might be able to qualify for the government’s Community Volunteer Income Tax Program (CVITP). Under the CVITP, community volunteers help low-income Canadians file their taxes free of charge.
Familiarize yourself with tax credits
Take some time to familiarize yourself with tax credits. Research the different types of tax credits available to see if you qualify. Don’t leave researching tax credits until the eleventh hour. When you hurry to find answers, you may overlook tax credits for which you are eligible.
There are two main types of tax credits: refundable and non-refundable. A refundable tax credit is a tax credit where you’ll get a tax refund from the government, even if you don’t owe anymore. Whereas for a non-refundable tax credit, the tax credit will only reduce the amount of taxes you have owing to zero. You won’t receive any tax refunds above and beyond that.
While it helps to have a basic understanding of tax credits, having an expert level of knowledge takes time. To help make tax preparation easier, you’ll want to consider investing in some good quality income tax software that will make navigating the world of tax credits that much easier.
Canada’s fifth season, tax season
Canada is a country with four seasons. Well, maybe except Vancouver, since they don’t tend to get snow, but for everywhere else, we have to deal with four seasons.
But what if I told you there was a fifth season? It begins at the end of February and lasts for about eight weeks. Canadians dread it all across the country, even more than wintertime. And unlike wintertime, there’s no way to escape it.
You can’t head down south to Florida and lay on a hot sandy beach with an umbrella drink in your hand like you can with winter.
Have you figured out what season I’m referring to? We’re talking about none other than tax season!
Taxes are due April 30th for most Canadians (April 15th for any Americans reading this article). If you’re self-employed, you have a little more time. You have until June 15th to file your taxes, although you probably want to file early, as any amount that’s due to the taxman must be paid by April 30th or else you’ll incur penalties and interest.
For many Canadians, the tax deadline is super stressful for us as we dash towards the finish line. But what if I told you it didn’t have to be so stressful? Through proper planning and careful preparation, you won’t feel as stressed and you may receive a bigger tax refund as well.
There are plenty of honest ways to lower the amount of taxes you owe on your federal and provincial returns. It all comes down to claiming the tax deductions and credits y.
Donating to charities
Did you donate to a registered charity last year? If so, you should have received a tax slip to claim your charitable donation on this year’s tax return.
When making a charitable donation, you can claim a federal tax credit worth 15 percent on your first $200 of charitable donations and 29 percent on any amount over $200.
Are you looking to maximize your charitable donations tax credit? Instead of your spouse and you each claiming the charitable contribution, you can get an even bigger tax refund.
By keeping track of your charitable donations, you won’t have to “donate” as much to the taxman come tax time.
Did you start a new job last year? If you had to relocate for employment purposes, you might be eligible to deduct some or all of your moving expenses. Expenses you can typically deduct include moving trucks, storage facilities and breaking a lease at your apartment.
All of those things tend to be tax-deductible. To claim these deductions, you must have moved at least 40 kilometres closer to your new place of work.
Child care expenses
Having children is a rewarding experience, but it can be expensive sometimes. The government recognizes that. To help encourage more couples to have children, the government offers tax breaks. You may be able to claim everything from your kid’s daycare to their summer camp.
Some parents might be nervous about claiming these deductions or any others mentioned in this article. As long as you keep proper records and receipts and the deductions are legit, you shouldn’t have anything to worry about. If the CRA ever audits you, you’ll have the paperwork to back up your claim.