Things You Need To Know Before Doing Your Taxes

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There’s less than a week left to file your tax returns if you’re a Canadian resident. This is when we all panic and rush to get it done since we like to leave things to the last minute. I’m not going to lie, I just did mine last weekend.

With that in mind here are a few things that you should keep in mind or know if you haven’t done your taxes already, or if you want to learn a little bit more.

Sign Up For A CRA Account

If you’re a Canadian resident and you are doing your taxes in Canada then there is no reason why you should sign up for an account with the Canadian Revenue Agency (they’re the ones that review your taxes). You can do so by going to their site http://www.cra-arc.gc.ca/esrvc-srvce/tx/psssrvcs/menu-eng.html

Why should you sign up? There are tons of reasons why, but here’s a few:

  1. Set up direct deposit to your account. No more waiting for a cheque for your return.
  2. See all your tax slips for the year (T4, T3, T5, etc..) No more worrying where you put your mail.
  3. See your RRSP contribution limit for the year. We always forget don’t we?
  4. See previous year’s tax assessments or adjustments that were made. Very helpful to know what you did or claimed last year.

The process is painless. All you need is your social insurance number and your own personal information and you’re set. After that you can even use your sign on from your financial institution you bank with to make things simpler.

You shouldn’t have any excuses. Get one now!

What’s My Deadline? 

Honestly unless you know you owe money to the government, the May 1st, 2017 deadline doesn’t really apply to you. Doing your taxes early for someone who is going to get a refund means you get money in your pocket now. Who doesn’t want extra money now?

So how do you know if you owe money? Well if you’ve been a prudent saver and you’ve been investing your money in equities, GICs, or any other asset then there is a possibility that you will owe money to the government. You should probably do your taxes.

If you have a full time job, your employer pays your taxes, CPP and EI for you during the course of the year. If, however, you have a side gig, like money coming in from a website, or selling a book then that income has yet to be taxed. You should also be doing your taxes before the deadline to ensure you don’t owe any money.

If you’re self employed and you haven’t been paying taxes all year, then yes do your taxes now. I sure hope you saved up some cash to pay for all the taxes and CPP that you’ve been neglecting up to now.

One thing to note is that even if you’ve been purchasing RRSPs throughout the year, there is no guarantee that you don’t owe taxes because it’s entirely possible that your passive income could surpass your contributions. It’s safer to just punch the numbers into the tax software and let it tell you whether you owe anything or not. Better safe than sorry.

Look For Free Software

There is a ton of software around that is free to use to complete your tax return and it’s completely painless to use. Two popular software packages to use by many Canadians is:

  • Studio Tax (Windows, Mac)
  • SimpleTax (online software)

Both versions are free and support many different returns. If you have few deductions or you have a very simple return that just requires you to enter in the amounts from your tax slips then these two software packages are all you need. Just complete your return by filling in numbered box on your tax slip to the same numbered box in the software and you’re done. The software will do all the calculations for you. If you want to use something else check out the certified programs on the CRA website.

So why use paid software? Paid tax software offers a little more guidance when you’re doing your tax return. if you have more deductions that are not as straight forward then those little popups might help you more than being annoying for others. Things like charity contributions, credits for dependents and tuition deductions are not as simple and straightforward where you might want a little more assistance.

If you are comfortable with reading a bit through the CRA website, there is enough resources there where you don’t need to pay for tax software. The two free software packages mentioned above are more than enough to do all types of returns.

Review Last Year’s Assessment

Hey remember that piece of mail the CRA sent you after you finished your tax return last year called your Tax Assessment for 2015? Well you should review that when doing your taxes for 2016. Not only will it provide you information from 2015, but it will list out any tax deductions or credits that you can carry forward and use from previous years.

That’s why I like having a CRA account. I can review it and ensure I’m not forgetting to use any tax credits that I may have saved up. There are many things that can carry forward including:

  • Tuition credits
  • Unused RRSP credits
  • Capital losses from poor investments

These amounts are things that you need to keep track of. The CRA will not send you new mail that tells you that you have unused tax credits. This just means you will end up paying more taxes than you need to for the year. Hey the government has no problems with that!

 

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