The Loans Canada team sits down with Gary Schwartz of the Canadian Lenders Association to talk about open banking.
Should I File My Income Tax Return Early?
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As we enter mid-January you’ve probably already started to get that familiar nagging feeling every time you hear or see the word tax. Tax season is upon us and before you know it, April will be here and you’ll have not even started to collect all the documents you need to file your return on time.
It’s the same story every year; the average taxpayer waits until the last minute to file. Not only does this mean you’re putting an excessive and unnecessary amount of stress on yourself but you’re putting yourself at risk to make mistakes and cause issues in the future. Without a doubt filing your return on time should be your number one goal, but we think that this year, filing early should be your new goal. If making tax season a little less stressful and potentially preventing yourself from making any major mistakes isn’t enough motivation to file early, here are a few reasons that should convince you.
Reason 1: To Help with Debt Repayment
If you’re expecting a return then using that money to pay off your debts is one of the best things you can do for your financial life. (Click here to learn about more great ways to spend your tax return.)While we understand that paying down debt is probably the least fun way to spend your tax return, you will benefit the most from it. We suggest that you tackle your debt with the highest interest rate first, this way you’ll actually be saving money in the long run which should help lessen some of the frustration you have with being unable to spend your return on something more exciting.
Reason 2: For More Time, if You Owe Money
If you’re expecting to owe taxes, then filing early will give you significantly more time to pay them. In Canada, income tax returns must be filed around April 30th (always make sure you check the government’s official site to verify when your taxes are due) this means that if you were to file your return by mid to late January your would have more than 3 months to earn the money you owe, or figure out where the money is going to come from. If you know you’re going to owe a significant amount then we suggest you give yourself as much time as possible.
For more information on Canadian tax return deadlines, check out the Canada Revenue Agency’s website here.
Reason 3: To Obtain Essential Information or Paperwork
If you’re expecting or are in the process of dealing with a big financial or life change then having your income taxes filed, paid for and finalized can be extremely beneficial. Purchasing a house, going back to school or applying for a loan are all events that require that you have your personal finances in order and up to date. While it’s not necessarily required that your income tax return be completed to purchase a house or apply for a loan, it will help you get a head start and make the whole process that much easier and reduce the amount of stress you’re under.
Reason 4: To Get the Appropriate Help
If filing your income taxes is a little more complicated than you’d liked and you need to seek the help of a professional, getting a head start will guarantee that you get the help you want. The start of a new year is the busiest time for accounts and other qualified tax professionals so if you don’t get in early you may not be able to get an appointment. This may, in return force you to tackle your taxes on your own and if you’re uncomfortable with this, could create complications you weren’t prepared to handle.
Reason 5: To Give Yourself a Grace Period
As we discussed before, rushing to file your return right before the deadline could lead to mistakes which can cause issues and result in penalties. If you’re worried about making a mistake or simply want to air on the safe side, filing early will allow you to provide yourself with a “grace period”, this self-imposed grace period means that you’ll be able to amend your return should you find an error after you’ve filed. Amending your return after the deadline will cost you as you’ll potentially need to pay a penalty or interest, if you owed money.
The Bottom Line
Generally speaking, filing your tax return early is a good idea and the average Canadian taxpayer should benefit from it. Just remember, always make sure you have the appropriate information and the final versions of all necessary documents before you decide to file your return early. You won’t reap any of the benefits from filing early if you don’t complete the process correctly.
As tax season is upon us, we want to make sure you are aware of any scams that might affect you. Click here to read about a new tax scam that uses the Canada Revenue Agency (CRA) as a ploy to get you to divulge personal and financial information.
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