I tell all my friends that January is the perfect time to start thinking about taxes. I usually get a very unimpressed look and hear the common reply “Oh, I have until April to get those done!”
While that may be true, I often find the first part of the year flies by, especially when we all get back into our own routines after the December holidays. If there’s anything that preparing tax returns has taught me, people will wait and wait, and the next thing they notice — it’s April and there are stories in the paper, on the radio, and online reminding them it’s time to get that tax return done. At that point, I get a lot of questions from friends, especially those with business activity to report on their personal taxes. I always wish my friends had started with their preparation sooner. If they asked me earlier in the year, this is what I would tell them.
1) Don’t start too late.
Tax returns can require a lot of information, and there’s usually one piece of information that ends up being particularly hard to track down. Leaving things to the last minute can mean penalties and interest, and no matter when you file your tax return, taxes are owing on April 30 each year. Another benefit to getting it done early — processing is usually faster earlier in the tax season, generally March to Early April, so you will get your refund faster. Even if you are waiting on various T-Slips getting your information together now will ensure you can file quickly when that last slip comes in.
2) But don’t start too early
This may seem to go totally against what I’ve just said, but it’s always more of a hassle to amend a return you’ve already filed. Generally, information slips don’t have to be filed with CRA until February 28 of each year. But, if you receive a T3 slip, those are usually not filed until March 31, so it could be well into April before you have all your information. And, if you do have a slip that comes in the mail after you’ve filed, make sure you start the process of amending the return as soon as possible – if CRA catches your mistake they may assess a penalty.
3) Know what you can claim
You don’t need to be an expert on all the tax credits and deductions available to you — the CRA website actually does a pretty good job of providing background information. But, tax credits tend to change frequently, and there are usually new credits every year. Head over to CRA’s website to see what you’re missing – they even have information for specific groups, such as students, seniors, self-employed people, and more!
4) Skip the paper returns
As an accountant, I get a lot of half serious requests from friends and family that go something like “Oh, well can’t you just do my taxes for me?”
As much as I would like to help out, I just don’t have that kind of time. I can’t say enough about how far tax software has come — CRA even “vets” software you can download, and a lot of it is free. It saves time and reduces errors, and many of them have questionnaires that will help you know what you can claim. Check the CRA website here.
5) But don’t skip the professional advice
If you have a truly complicated tax situation, take it to an accountant. Again, it’s a lot easier to prepare a return correctly rather than to fix a mistake. I have a fair number of horror stories of people who stuck their head in the sand or didn’t want to pay an accountant. Some years and botched returns later, they end up at an accountant, and it ends up costing them more in just fees (never mind CRA’s interest, penalties, and their personal stress). Your local CPA has your best interests at heart, and accountants aren’t scary — we definitely don’t bite!
As a last word, if you have specific questions about your tax situation, you should always seek professional advice. The above information presents a general overview and there are many other changes that have not been mentioned in this article. Contact your accountant or trusted advisor for more information.