Barry Choi: Simple tips to avoid tax time stress

A little preparation ahead of time can save you a lot of the hassle of tax season.

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I have a confession. I hate doing my taxes. Something about it always excites me. Ironically, I use an accountant, so I’m pretty indifferent these days. But every time tax season rolls around, I stress out way more than necessary.

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The joke is that nothing bad ever happens. I always file on time, and all the taxes I owe are due, so I pay my balance right away. The whole process only takes a few hours, but I’ll be stressing out for weeks.

Susan Watkin, tax expert at TurboTax, says I’m not alone.

“Many Canadians have a degree of uncertainty about how to do their own taxes, but it’s really about being prepared and knowing what deductions and tax credits are available to you, depending on your situation.”

Here’s what you need to know to help keep the stress of tax season to a minimum.

Know your deadlines

There are several different tax deadlines you’ll want to make sure you’re aware of:

May 2, 2022: The deadline for personal income tax returns. Note that this deadline usually falls on April 30, but since it’s a Saturday this year, it’s been moved to May 2.

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June 15, 2022: Deadline for freelancers. Note that all taxes due are due no later than April 30, 2022.

If you owe taxes and you file late, the Canada Revenue Agency (CRA) will charge you a penalty of 5% of your balance owing. There is an additional 1% charge for each full month you file after the due date, up to 12 months.

Also note that the Registered Retirement Savings Plan (RRSP) contribution deadline for the 2021 tax year was March 1. Any contributions made after this date can be applied when you do your taxes next year.

Gather your tax documents

You’ll want to make sure you have all your paperwork in order, including:

  • Notice of assessment from your previous income tax return
  • Income slips (T4, T5, etc.)
  • Records of any additional income, such as self-employment
  • Tax receipts, including charitable donations, childcare, monthly transit passes, and medical expenses
  • RRSP contribution slips
  • Home Buyers’ Plan and Lifelong Learning Plan repayment amounts
  • Record of expenses if self-employed

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All of your tax slips should be available by the end of February, so if you’re missing anything in March, be sure to check them out. Filing your taxes is much easier if you have your documents organized.

Contribute to your RRSP

If you can afford it, one of the easiest ways to reduce your tax burden is to contribute to an RRSP. For every dollar you contribute, your taxable income is reduced by an equal amount.

For example, let’s say your tax bracket has you paying 40% tax. For every dollar you contribute to your RRSP, you get 40 cents back. If you then took your tax refund and invested it in your RRSP, you could both reduce your tax burden and increase your savings each year.

Don’t forget to check your notice of assessment from the previous year to confirm your RRSP contribution limit. You don’t want to exceed this amount because there is a 1% tax per month until you withdraw the excess amount.

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More from MoneyWise:

Claim your home office expenses

When Canadians started working from home in 2020 due to the COVID-19 pandemic, the Canadian government temporarily changed how you could claim home office expenses.

A flat rate of $2 per day, up to a maximum of 200 days ($400 total) was introduced for employees who were required to work from home. For the 2021 tax year, this amount has been increased to 250 days, so you can claim up to $500.

Note that you can still use the detailed method which allows you to claim additional amounts, but you will need to complete the T777S or Form T777 and have the Form T2200S or Form T2200 signed by your employer.

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Self-employed people or those who have started a side business can also claim additional expenses, but they must keep detailed records and receipts.

Don’t Forget the Digital News Subscription Tax Credit

The digital news subscription tax credit has been around since 2019, but not many people know how it works. It is essentially a non-refundable tax credit for amounts paid by individuals to a qualifying Canadian news organization.

The qualifying expense would be the amount you paid for your digital news subscription. The maximum credit is calculated by multiplying the lowest personal income tax rate by the total amount you paid for all qualifying subscriptions in the year, up to $500.

Focus on credits and deductions available now

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Recently, the Ontario government announced plans for a temporary stay in Ontario tax credit. Ontario residents can claim 20% of their eligible accommodation costs up to $1,000 as an individual or $2,000 if they have a spouse. That would come out to $200 and $400, respectively.

Keep in mind that this tax credit is only available for the 2022 tax year and has not yet been legislated, so there is no guarantee that taxpayers will actually see it. Also, it is a tax credit, so you have to spend money to get it.

If you’re worried about your tax burden, you’d better focus on things that will help you now, like RRSP contributions.

Always file your taxes on time

“It’s important to file your tax return on time, even if you can’t afford to pay the tax bill,” says Watkin. “Not only will you be able to qualify for government programs like the GST/HST credit and the Canada Child Benefit, but you’ll also avoid late-filing penalties. »

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Don’t worry if you think you owe back taxes. Any credits or refunds owed to you by the CRA may be applied against outstanding amounts owing. Even if you can’t afford to pay the taxes you still owe, the CRA will work with you to work out a payment arrangement.

Basic tax returns can be done quickly online for free. If you have a more complex tax situation, you might want to consider purchasing a deluxe or premium tax software.

Alternatively, you can work with an accountant or tax preparer if you’re looking for a little more hands-on help.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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