Are you dreaming up ways to spend your tax refund or already stressing about the amount you may owe to CRA? Either way, it is important to get organized sooner rather than later. As a Licensed Insolvency Trustee we often hear that the most overwhelming part of filing the taxes is getting organized. Here are a few simple steps you can make tax time less stressful.
1 - Collect all tax information in one spot
Create a file folder or envelope labelled “2019 income tax return”. Write on the front all the income tax slips you expect to receive such as T4’s, childcare receipts and investment slips. Once received, check it off the list. When you get an eligible tax deduction receipt or slip you think you might be able to claim, put it in this spot. You will always know where it is and you won’t risk losing an important document. Having the information in one spot makes everything easy to find and you’ll know exactly when you have everything to start your return.
2 - Be familiar with recent 2019 income tax changes that may affect your return.
You don’t need to be an accountant to understand what may or may not apply to you. Check the Canada Revenue Agency website for a list of this year’s changes. Remember your personal circumstances may have changed in 2019 making you eligible for credits you never considered in the past. These may include business deductions, childcare or medical expenses.
3 - When in doubt, seek advice from a professional
With the invention of tax software programs and the CRA Netfile program on their website, filing your taxes has never been easier. Returns get processed much faster than sending by snail mail. But there are still many people who prefer to leave the heaving lifting to a tax professional and would rather pay someone to prepare and file their return than do it themselves. Hiring a professional tax preparer might be your best tax decision if your return is complicated. But remember it comes at a cost which can be anywhere from $100 to $1500 depending on how complicated. Getting educated helps increases your likelihood of a refund or reduces the amount you may owe and will greatly decrease your stress.
4 - Low income options
If you are low income and have a simple return to file, there are many volunteer organizations that can prepare your taxes for those that need assistance. Check out the CRA website and community boards at the library for free tax help.
5 - File a return - no matter what. Even if you are certain that there will no balance owing or no income refund coming, file a tax return for that year by the income tax deadline. Filing reduces the ability of CRA to make arbitrary adjustments/assessment (basically a guess) on your income and taxes owing for that tax year. The filing of the return reports earned income, which could increase your future RRSP contribution room. The filing also determines your eligibility for government programs such as GST credit rebates or the Canada Child Benefit.
6 - It’s Never Too Late to File
If you have avoided filing returns for past years because you thought the deadline passed so you can’t file, think again. It’s never too late to file delinquent returns (2017,2016,2015 for examples). However, filing late will cause CRA to add on a late filing penalty to your assessment. Not filing these returns could also hold up tax credits that you may be eligible to receive such as GST or a refund that you could use to pay debts.
7 - If you owe, do not avoid repayment
Avoiding debt will not make it go away. In fact, when it comes to taxes, CRA has many tools at their disposal to enforce repayment such as offsetting credits such as GST, seizing bank accounts, judgements and garnishing wages. If you do owe CRA, be proactive and make arrangements to pay off the debt in a timely fashion to avoid accumulating interest and late filing penalties. If the matter is more serious, consult a Licensed Insolvency Trustee who can educate you on your legal debt options to deal with the matter such as consumer proposal or bankruptcy.