A year-round approach can save tax headaches during tax season
Tis impossible to be sure of any thing but death and taxes.
While the old saying might be morbid, it is difficult to deny its accuracy. But unlike the grim reaper, we know exactly when the tax season cometh. Best of all, with some preparation and organization, it doesn’t have to be all that bad.
Tax season is here and your taxes are due at the end of this month (April 30), and if you haven’t started working on them, you better get started. If you are late, the Canadian Revenue Agency (CRA) charges a 5 per cent penalty on your 2015 balance owing, and adds on an extra 1 per cent for every month your return is late.
Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada, cringes at the thought of late fees.
“Household debt is at an all-time high, and we certainly don’t need extra bills,” says Schwartz. “Some simple preparation will help you avoid penalties, stress, and hopefully position you to actually receive a refund.”
Schwartz recommends a year-round approach to tax preparation.
“When we procrastinate on matters of personal finance, we cause stress and problems down the road,” says Schwartz. “It’s a theme we revisit a lot, whether it’s building emergency savings, putting money away for retirement, or shopping for the holiday season, the earlier the better.”
Schwartz and the team at Consolidated Credit put together a list of five tips to help Canadians prepare for tax season. Be sure to incorporate these actions on an on-going basis and things will get easier each year.
- Play the accordion. No, we are not recommending starting a Polka band. Instead, buy an accordion file folder and keep track of receipts, T-slips, Notice of Assessments, and so on. The CRA has a helpful video to help you organize your folders, as well as a checklist of the key tax documents you will need.
- Pay your tab. Find out if you owe money to a government agency. Having an outstanding amount due to overpaid benefits, balances due from previous years’ returns, or provincial fines, will cause delays in assessments.
- Go digital. Get things done quicker and easier by filing online. The CRA says more than two-thirds of Canadians file their returns electronically, which shortens the processing time from 4to 6 weeks to 10 business days. Go completely paperless by switching to direct deposit, which will eliminate the need (and the time) for the government to mail you a cheque.
- Get help if you need it. Your taxes may be more complicated than others. If you have an income property, are self-employed, or have investment income, you may wish to seek professional help from a chartered professional accountant. If an accountant sounds too expensive, you may qualify for the government’s Community Volunteer Income Tax Program (CVITP), in which community volunteers help low-income Canadians file their taxes.
- Give yourself some credit. Do your research and know which tax credits are available to you – failing to do so could cost you. Reducing your taxes can get complicated; choosing quality tax software can help you navigate the world of tax credits. For more information on maximizing your credits, check out the next installment in this tax series next week.
It can be hard to stay on top of your taxes if you are buried in credit card debt. Relieve some of that stress by speaking to a trained credit counsellor. Calling is free, confidential, and non-judgmental. You can also start the process online by trying our free debt analysis.