Filing your personal taxes properly is vital to avoid extra fees and to ensure you receive all deductions available for your tax return. Jennifer Mendes, Senior Manager in Kelowna, provides useful insight to filing your taxes. Here are 8 areas to focus on when preparing to file your taxes:
1. Review your prior year's tax return
Reviewing your prior years' tax return will help you to see what slips (T4, T5, T3, etc.) you require, ensuring you don't miss any in the upcoming tax season. Beware, the CRA will charge penalties on any income slips missed and the penalty gets more severe with each subsequent year this occurs.
Keep in mind that all slips must be issued by February 28, with the exception for T3 and T5013 slips, which need to be issued by March 31.
2. Tax credits and tax deductions: What are they and what's applicable to you?
A tax credit can be nonrefundable or refundable. A nonrefundable tax credit can only reduce the amount of taxes owing. In the case of a refundable tax credit, you will receive any amount leftover of the balance of the credit back. With a deduction, however, you can't get money back but it will reduce your taxable income dollar-for-dollar.
There are many tax credits and deductions available based on individual situations. To find out what tax credits and deductions may be available to you please go to the CRA website.
3. Change in address, marital status, or dependents? Let your accountant know
If you have had a change of address, marital status, and/or had or adopted a child please inform your accountant so that the appropriate updates can be made. Some of these changes will cause the adjustment of benefits and credits you will receive as well as ensure payments are received without delays.
4. Prepare summaries and organize your receipts
The more organized things come into your tax preparer the more efficiently it can be prepared, which can save you money in tax preparation fees. Use the Crowe MacKay Tax Organizer to help organize your taxes in the most effective and efficient manner.
5. The principal residence exemption: What is it and how does it apply to you?
A principal residence is a housing unit and can be any of the following: house, cottage, condominium, apartment in an apartment building or duplex, trailer, mobile home, or houseboat.
Generally, reporting the sale of your principal residence for individuals is a non-taxable event. In most cases, however, after the sale of your principal residence, the CRA requires you to disclose basic information on your income tax and benefit return such as year of the sale, year of purchase, address of residence, and proceeds on the sale. Disclosing this information will allow you to claim the full principal residence exemption and avoid paying tax on any gain from the sale.
6. File your tax return on time
There are two major personal tax deadlines that are dependent on being an individual or a self-employed sole proprietor.
Tax deadlines for individuals
Canadians employed by an employer will receive a T4 form from the business of which they work. In these cases, individuals have the deadline of April 30 to file their taxes.
Tax deadline for self-employed sole proprietors
Canadians who are self-employed sole proprietors have until June 15 to file their taxes. This deadline is also applicable to the individual's spouse or common-law partner. However, any payments due must be paid by April 30. If the balance remains unpaid after this date, the CRA will start to charge interest on any owing amounts.
7. Claiming medical expense on your taxes
When it comes to claiming medical expenses on your taxes, keep good records and receipts throughout the year. However, a time saving tip is to ask your pharmacy or chiropractor for an annual statement, this way you don't have to save the receipts during the year. For more details on what can be claimed, see the CRA's eligible medical expense you can claim on your tax return.
8. How long do I need to keep receipts and supporting documentation from my taxes?
It is recommended to keep your receipts and supporting tax documentation for at least 6 years. The reason being is the CRA may ask for documents as proof of any deductions or credits you claimed. Documents can include:
- Tax Returns
- T4 Forms
- Annual Mortgage Statements
- Receipts and statements for tax returns including donations, RRSP contributions, child care receipts, mortgage interest, medical expenses, property tax payments, alimony/child support paid or received, etc.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.