Tax Season Dos and Don’ts
Tax season can be overwhelming for everyone, even for those who start early and for seasoned pros who know all the tips and tricks for getting the most out of their tax returns. We’ve compiled a list of the do’s and don’ts for this most stressful time of the year, complete with tips that you might never have thought of and some myths that could making doing your taxes much easier this year. Here’s hoping that we can all get through tax season as smoothly as possible.
1. This may be an obvious one for some people but allow yourself enough time to complete your taxes properly. This will reduce the risk of making any mistakes that could cause you problems in the future.
2. Make sure you understand what exactly your income is, it’s not always as simple as what you make at your full time job. This is going to be different for everyone, but keeping track of any extra income throughout the year will make tax season just a bit less stressful.
3. Please make sure you double check everything, your math and deductions that you think you’re eligible for but aren’t 100% sure. Most mistakes people make while doing their taxes are easily avoidable, so take that extra 10 minutes and do yourself a favour.
4. Do make sure that if you are eligible to transfer any credits that you take advantage of it.
In particular the Child Tax Credit may be transferred to your spouse.
There are also many transferable tax credits for students including tuition and textbook credits. These credits can be transferred to your parents, your spouse or your grandparents. Always make sure that you qualify for these transfers as everyone’s situation is different.
5. Make sure you deduct any medical expenses that you had during the year. Unclaimed medical expenses are one of the most common tax breaks that people overlook. This is simply because most people do not realize that medical expenses can be claimed and are unsure of which expenses actually qualify. The government provides a long list of the medical expenses that can be deducted, double check the list so that you don’t miss out on any tax breaks that you’re eligible for.
1. Don’t wait too long to file your tax return especially if you’re worried or know that you will owe money. File right away at the beginning of the year so that you can plan out a great budget to tackle all of your expenses without becoming too overwhelmed.
2. Don’t pay a professional to do your taxes if you can do them yourself. Obviously if your taxes are complicated and you think that there are too many variables for you to handle yourself then seek the help of a professional, but if your taxes are simple then you will save a lot of money doing them yourself. You will have to buy a tax program to file your taxes from home and it will cost somewhere between $30 and $50, this is significantly less than what you will end up paying a professional.
3. You must still file a tax return even if you have a small income or even no income at all. If you don’t file a tax return then you cannot benefit from tax credits that you’re eligible for. While it is possible that you don’t qualify for many tax credits if you don’t apply you will automatically be missing out. It can depend on what province you live but there are sales tax and property tax credits that even low income families qualify for, but of course you must file a tax return first.
4. Don’t under any circumstance miss the deadline. In Canada most people should file their taxes before or on April 30th. If you are late filling your tax return there are fines and fees that must be paid. Finally, there are some exceptions to the April 30th deadline so double check to see if your situation applies to one of the exceptions.
Tax Season Myths:
Over the years many myths have developed surrounding income tax and tax season in general; broadly speaking most of these myths don’t actually exist or don’t apply anymore.
Myth 1: Filing your taxes online increases your chances of being audited.
The criteria that the Canada Revenue Agency bases who they will audit are extremely broad, complex and extensive. And it most certainly does not have anything to do with the way the tax return is filed. Sometimes the Canada Revenue Agency will ask for things like paper receipts and other documents that cannot be filed online to be sent in by mail but this is not the same as being audited.
Myth 2: If you can’t afford to pay a potential tax bill than there is no point in filing a return.
In Canada your tax return is due by April 30th at midnight and there is a 5% late fee that The Canada Revenue Agency enforces for filing your tax return late. Furthermore, the CRA imposes a 1% interest on the amount that you owe them for each month that you’re late on filing your return, for a maximum of 12 months.
Myth 3: Tips are not income.
People who work in the service industry and all those who make tips must report them on their tax returns every year.