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Setting Yourself Up for Success this Tax Season

Setting Yourself Up for Success this Tax Season

Apr 6, 2021

Do you dread tax season?

Despite all the anxiety that tax season many bring, there are many things you can do to avoid the inevitable tax time crunch. In doing so, you’ll not only feel better about the process, but may actually be better off financially as a result.

Here are a few tips that you can use to be well on your way to a stress-free tax season this year.

 

Get Organized

Tax season is made a lot easier when you’re organized. Getting organized means making sure you aren’t forgetting anything when you file your taxes.

Start by reviewing your tax slips from last year to make sure you aren’t missing anything. Most people will have a T4 slip if you work for a company, a T5 slip for interest income and a tax slip for RRSP contributions.

File Early

Do you wait until the last minute to file your taxes? Pretty much everyone has been guilty of this at least once or twice in their lifetime. However, making it a habit every year can quickly lead to problems.

In most years you have until April 30th to file your tax return, but that doesn’t mean you can’t file it early. Aim to file it by the end of March if you’re not expecting any further tax slips. If you’re expecting a T3 slip for investment income, wait until it arrives and file in early April.

By filing your taxes ahead of time, you’ll have one less item to worry about on your to do list, allowing you to enjoy the spring weather without having your tax returns looming over you.

Claim the Tax Credits and Deductions You’re Entitled To

The Canadian tax system is one of self-assessment. It’s up to us to determine the tax credits we’re entitled to, meaning that if you don’t claim a tax credit you should receive, you’ll unfortunately miss out on it.
When filing your own taxes, be sure to review all the tax forms to make sure you’re not overlooking any tax credits or tax deductions – otherwise, you’re just leaving money on the table.

Since tax credits and deductions are always changing, it helps to read articles about new credits and deductions for the year. For example, this year, the home office tax credit has been simplified with so many Canadians working from home due to COVID-19.

Also, don’t forget to claim childcare expenses while your kids were being looked after. You may be entitled to even more this year as a result of the pandemic.

Sign Up for Direct Deposit

Do you want your tax refund sooner? Who doesn’t?

If you aren’t already, you should sign up for direct deposit. Direct deposit allows the government to send you your tax refund faster by depositing it directly into your bank account. If you don’t do that, they’ll mail you a cheque, which could take a lot longer.

So What Should You Do With Your Returns?

Often times, there are many things people choose to use their tax returns on. Maybe they invest it, go on a shopping spree or put it towards a vacation they’ve always been dreaming about.
One of the best things you can do with your tax return is put it towards a RESP to provide a bright financial future for your children.

RESPs are sort of like a TFSA, but its investment gains aren’t taxed in your hands. You will be taxed on them eventually, but it’ll taxed in the hands of your children, who will most likely be at a much lower tax bracket than you when they go to school. This will help you grow your money in a tax-advantaged way while ensuring that your child can focus on what’s most important when the time comes – their education.
 
 
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