Canada:
8 Tips To Get You Ahead This Tax Season
27 January 2021
Crowe MacKay LLP
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Filing your personal taxes properly is vital to avoid extra fees
and to ensure you receive all deductions available for your tax
return. Jennifer Mendes, Senior Manager in Kelowna, provides useful
insight to filing your taxes. Here are 8 areas to focus on when
preparing to file your taxes:
1. Review your prior year’s tax return
Reviewing your prior years’ tax return will help you to see
what slips (T4, T5, T3, etc.) you require, ensuring you don’t
miss any in the upcoming tax season. Beware, the CRA will charge
penalties on any income slips missed and the penalty gets more
severe with each subsequent year this occurs.
Keep in mind that all slips must be issued by February 28, with
the exception for T3 and T5013 slips, which need to be issued by
March 31.
2. Tax credits and tax deductions: What are they and what’s
applicable to you?
A tax credit can be nonrefundable or refundable. A nonrefundable
tax credit can only reduce the amount of taxes owing. In the case
of a refundable tax credit, you will receive any amount leftover of
the balance of the credit back. With a deduction, however, you
can’t get money back but it will reduce your taxable income
dollar-for-dollar.
There are many tax credits and deductions available based on
individual situations. To find out what tax credits and deductions
may be available to you please go to the CRA website.
3. Change in address, marital status, or dependents? Let your
accountant know
If you have had a change of address, marital status, and/or had
or adopted a child please inform your accountant so that the
appropriate updates can be made. Some of these changes will cause
the adjustment of benefits and credits you will receive as well as
ensure payments are received without delays.
4. Prepare summaries and organize your receipts
The more organized things come into your tax preparer the more
efficiently it can be prepared, which can save you money in tax
preparation fees. Use the Crowe MacKay Tax Organizer to help
organize your taxes in the most effective and efficient manner.
5. The principal residence exemption: What is it and how does
it apply to you?
A principal residence is a housing unit and can be any
of the following: house, cottage, condominium, apartment in an
apartment building or duplex, trailer, mobile home, or
houseboat.
Generally, reporting the sale of your principal residence for
individuals is a non-taxable event. In most cases, however,
after the sale of your principal residence, the CRA requires you to
disclose basic information on your income tax and benefit return
such as year of the sale, year of purchase, address of residence,
and proceeds on the sale. Disclosing this information will allow
you to claim the full principal residence exemption and avoid
paying tax on any gain from the sale.
6. File your tax return on time
There are two major personal tax deadlines that are dependent on
being an individual or a self-employed sole proprietor.
Tax deadlines for individuals
Canadians employed by an employer will receive a T4 form from
the business of which they work. In these cases, individuals have
the deadline of April 30 to file their taxes.
Tax deadline for self-employed sole proprietors
Canadians who are self-employed sole proprietors have until June
15 to file their taxes. This deadline is also applicable to the
individual’s spouse or common-law partner. However, any
payments due must be paid by April 30. If the balance remains
unpaid after this date, the CRA will start to charge interest on
any owing amounts.
7. Claiming medical expense on your taxes
When it comes to claiming medical expenses on your taxes, keep
good records and receipts throughout the year. However, a time
saving tip is to ask your pharmacy or chiropractor for an annual
statement, this way you don’t have to save the receipts during
the year. For more details on what can be claimed, see the
CRA’s eligible medical expense you can claim on your tax
return.
8. How long do I need to keep receipts and supporting
documentation from my taxes?
It is recommended to keep your receipts and supporting tax
documentation for at least 6 years. The reason being is the CRA may
ask for documents as proof of any deductions or credits you
claimed. Documents can include:
- Annual Mortgage Statements
- Receipts and statements for tax
returns including donations, RRSP contributions, child care
receipts, mortgage interest, medical expenses, property tax
payments, alimony/child support paid or received, etc.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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