Now that the holiday season is over, it’s time to look ahead at the next critical season. If you’re a wage-earning or self-employed adult, you’ll know that tax-filing season is upon us!
While we learn many things in school that we can use in our daily life, one key thing that most of us wish we were taught is how to do our taxes. Doing your taxes is often seen as daunting and painful. This is generally because, so little is known about how to do taxes correctly, when to do your taxes, best practices for filing your taxes, and any tips and tricks for tax filing. You may think it’s too hard or complex and hand over your tax filing to a professional such as a financial management firm, your financial and tax advisor, or your accountant. However, when it comes to your taxes and tax filing, knowledge is power. The more you know, the easier it is to file your taxes or file your tax returns. This is exactly why we’ve collated some of the best tips for filing your taxes.
Before we get into tax filing, let’s make sure you have a firm understanding in what exactly taxes and tax returns are so you can have some basics in place.
What are taxes?
In any democratic country, there are many services and amenities that the government provides to its citizens. This includes law enforcement, public transport, public parks, healthcare, and more. To fund these services and amenities, the citizens pay a portion of their earnings as taxes. In addition to this, taxes are also levied on investments, goods, and certain services.
What are tax returns or tax benefits?
Now, while you pay your taxes, you can be eligible to get a certain portion returned to you. In simple terms, these are your tax returns or tax benefits. When you file your taxes, what you’re really doing is declaring all your sources of income and expenses. Based on this information, you will be able to get some of those taxes returned to you as there are tax exemptions on some of your expenses by law.
Tip #1: File your returns every year and keep all your receipts
Just like your birthday or Christmas, filing your taxes should be an annual event. This means that you should be filing your taxes every single year. Wondering if you should file your taxes even without earning any income or paying any taxes during the year? The answer is a resounding yes! Reporting your income and expenses is a critical part of filing your taxes and you should file your taxes irrespective of your level of income or expenses. You see, when you file your taxes, you are declaring certain details about you, which enables the government to know about your financial situation. What’s more, your tax return receipts also come in handy when applying for loans and mortgages as they are often part of the documents requested within your application. Even if you file your taxes every year, a good rule of thumb is to keep all your expense receipts for a period of at least six years so you can always go back and check in case of any discrepancies, or even just for record. If keeping physical receipts is a problem, you can scan and document your receipts online.
Tip #2: Always file your returns by or before the deadline
While you should file your taxes every year, it’s important to know that you must file your taxes before a particular date. If you do not file your taxes in time, you would be liable to pay late-filing penalties, interest, or fees. You may also risk losing out on any benefits you were enjoying. If you were getting government payments, filing your taxes late could also be a reason to interrupt the payments. In 2023, most Canadians are expected to file their tax returns by April 30, 2023. However, since April 30 is a Sunday, any returns you filed on or before May 1, 2023, will also be filed in time. There is an exception: if you are self-employed, you can still file your taxes by June 15, 2023. While there is some leeway on the deadlines this year, it’s a good practice to file your taxes and returns at least a few weeks or at the most a week before the deadline. If you are not able to pay what you owe, you can work with the CRA to configure a payment option that will work for you.
Tip #3: Make sure you’re claiming all your tax deductions, tax credits, and tax benefits:
There are several deductions, credits, and benefits that you may be eligible for when it comes to your taxes. These claims help to reduce the amount you owe as taxes. It is important to know what these are so you can correctly claim all of them and avoid missing out when you file your tax returns.
Here are some of the tax benefits and credits you can claim, as listed by the Canada Revenue Agency:
- Canada child benefit
- Provincial or territorial benefits
- Goods & Services Tax/Harmonized Sales Tax Credit
- Non-refundable tax credits for medical expenses
- Non-refundable tax credits for student loan expenses
- Disability tax credit
- Home office expense deductions if you had to work from home due to COVID-19
- Certain business expense deductions if you own a business or are self-employed.
- Several benefits corresponding to COVID-19
For more help, you can book a free virtual visit with a liaison officer who can help you understand your tax obligations and deductions you can make before you file your returns.
Tip #4: Get all your tax slips in place and include all your income information:
One of the most crucial types of documents that you need to have in order are your tax slips. Tax slips are information about your income and taxes that were automatically deducted by your employer or any other kind of payer. You will usually receive these tax slips by the end of February, giving you plenty of time to file your taxes and returns. If you have lost a tax slip or cannot find it, you can easily request one as well. There are several types of tax slips including T4, T4A, T5, and T3.
While tax slips are great for providing an overview of your income, there may be certain other types of income that are not included in these slips including (as listed by the CRA):
- Tips and gratuities earned at your place of work.
- Income earned through buying and selling crypto assets.
- Income from sales of goods or services (such as side jobs) regardless of whether payments were in cryptocurrency or traditional monetary currency.
- World-wide business income earned through the platform economy: using or sharing personal assets to earn revenue, selling goods directly to another person (peer-to-peer), income earned through social media (such as subscription to your channels, advertising, sponsorships, calls to action, merchandise sales or commissions on sales, tips and donations, referral codes, barter transactions and any other perks including products, clothes, trips, etc.)
Tip #5: File your taxes yourself, file your returns online, or get free help
While it may be more convenient to designate someone else such as a firm or accountant to file your taxes, there are many easy ways to file your taxes yourself. This will save you in fees and is also important to know how to do. Luckily, here is a step-by-step guide provided by the Government of Canada that will help you to file your taxes and returns easily. If you would still like it done by someone else or need some assistance, you can also walk into a free tax clinic or approach one virtually. Volunteers at the fee tax clinic will help you file your taxes. Bear in mind, this option is suitable if your income is not overly large, and your tax filing is straightforward. Find a free tax clinic near you and if you are eligible to use a free tax clinic.
You can also easily file your returns online to avoid delays and get your refund quickly. The CRA encourages people to file returns online through:
- NETFILE-certified tax software
- An authorized service provider who can use our EFILE service
- The Community Volunteer Income Tax Program
Get the returns you deserve. Start now so you meet the deadline!