It’s that wonderful time of year again. When we dig deep into our shoeboxes full of receipts and wait eagerly for official tax documents to arrive in the mail. All to file our tax refund before the end of April. Are you ready for it this year? Did you keep a good record of all the charitable contributions you made, the receipts you can write off and are you aware of all the incentives you might qualify for?
Don’t worry most of us aren’t and the good part is you still have time to get it all in order. Here are the six steps to get ready for tax season.
1. Get organized: BIG TIME
You need to set aside at least one weekend to get your tax receipts and documents in order. If you’re filing on your own you may need an extra day to sit down and input the numbers. Find the obvious stuff first: T4 slips or if you’re self employed all your invoice advice documents. Print out the official RRSP tax receipts and track down all your official charitable contribution documents.
2. Inquire about All Incentives
Visit the Canada Revenue Agency (CRA) website to investigate the incentives you and your family qualify for. Check out things like the child fitness credit, moving credit and education credit. There are numerous tax incentives that you may be able to take advantage of. Live agents are also on hand to answer tax questions and you can call in anonymously. Talk to colleagues doing a similar job and cross-reference how you both file your refunds to make sure you’re not missing anything.
3. Using a Professional vs. Going it Alone
If you have a particularly complicated tax return it might a good move to seek the advice of a professional. If your tax refund is fairly simple you can use one of the reputable online tax filing programs to complete you refund (Check out this blog for a quick review of the most popular do-it-yourself tax software). Remember to file online, sending your refund through snail mail delays your process by up to six weeks.
4. Have a Plan if you Owe Money
If you’re calculations show you owe money to the CRA start putting that money away now. This will help you save enough to pay the balance off before it costs you more in the form of interest and penalties. The faster you pay off your tax bill the better.
Also investigate what changes you need to make this year to avoid paying next year. One of the easiest ways to lessen your tax impact is by contributing to your RRSP. By checking your last year Notice of Assessment you can calculate how much room you have. If you’re in the highest income level, generally making more than $132,406, contributing can be very beneficial.
5. Income Splitting
You can reduce your tax bill significantly by implementing income-splitting strategies if your spouse is in a lower income bracket. When you retire and withdraw money from your RRSP you will be taxed. By setting up a Spousal RRSP, you can transfer a portion of that income into your spouse’s RRSP to be taxed at lower rates when it’s withdrawn by your spouse and after age 65. The contributor to the Spousal RRSP is able to bring their room down and still enjoy the tax benefit of getting a larger refund.
6. Learn from your Mistakes
Start planning now for the 2012 tax season. Create a filing system to keep all your important document organized. Have a permanent place for your employment records, charitable receipts and RRSP contributions documents. Also have one place, like a big shoebox, to put all your 2012 receipts. You never know what could be considered a tax-deductible expense and keeping all your receipts will save you money.
Important Deadlines:
- Your RRSP deadline for contributing to the 2011 tax year is February 29, 2012.
- Generally the deadline for the 2011 tax return is April 30th, 2012.
- If you carried on a business in 2011 your return has to be filed by June 15, 2012.
- If you have a balance owing for 2011, you have to pay it by April 30, 2012.
Video – Hear More from the Expert
RateSupermarket’s Rubina Ahmed-Haq speaks to H&R Block, Senior tax pro and national spokesperson Cleo Hamel about how to best prepare for tax season.
