The April 30 tax deadline is approaching and it is our Canadian duty to get our annual tax return prepared and submitted before the deadline or face the financial penalty.
You can choose to file early. If you are expecting a return, consider filing as early as possible.
If you choose to file early, you will typically get your tax return faster because you have beat the deadline rush of last minute tax filers. If you are employed and receive a large refund, make sure to ask your employer to reduce tax on your payroll by completing CRA form T1213-Request to Reduce Tax Deductions at Source.
With most investment tax slips arriving in the mail during February and March, it makes sense to review all of your tax information before you submit your return, this saves you filing an amended return before April 30.
If you owe money to the government you can choose to wait until the April 30 deadline to send in your cheque.
If you happen to file late, you will be subject to five per cent penalty on the unpaid taxes, plus an additional one per cent per month penalty.
If an individual ends up owing more than $2,000 in taxes, Canada Revenue Agency will do a calculation to see if you need to start making quarterly installment payments. There are many tax preparation software packages available to purchase.
Most are user friendly and affordable. If your return is complex, and you want to ensure all your expenses and income are accounted for, an accountant is the person you should be sitting down with to prepare your annual tax return. Remember to review all available expenses and deductions so you only pay your fair share of taxes.
Here are some key tax reminders for the upcoming tax filing season.
Spouses can benefit from pension splitting by using Form T1032-Joint Election to Split Pension Income. Up to 50 per cent of income can be allocated to a spouse or common-law partner, producing a lower overall tax bill and either avoiding or reducing the claw back of Old Age Security (OAS) benefits for one or both spouses. Both spouses may be able to claim the pension tax credit. Splitting your Canada Pension Plan can reduce your household tax bill.
Tax credits for children include the non-refundable tax credit for children under age 18, the children’s fitness tax credit for children enrolled in eligible physical activity programs and the children’s arts tax credit.
Deductions are available for child care expenses such as daycare and after-school care costs.
Costs for boarding school and camp fees may also qualify.
Students are eligible for non-refundable tax credits for tuition, education and textbook costs.
Certain types of examination fees will also be considered as part of tuition expenses when claiming the credit.
Students can take advantage of the moving expense deduction if they earn income and can qualify under the CRA guidelines. The moving expense deduction is one of the most missed deductions for all Canadians.
Medical expenses incurred during the year can be claimed with the $10,000 threshold being eliminated last year.
If you are incorporated, take advantage of the Private Health Services Plan to allow you to claim 100 per cent of your medical expenses.
In regards to charitable donations, if a couple has donated more than $200 in the tax year, the receipts should be combined and claimed by the partner with the highest income, maximizing the allowable credit. Up to five years worth of donation receipts can be claimed on the same tax return.
Canadians with little or no income should file an annual tax return.
Earned income determines eligibility for government programs such as the Canada Child Tax Benefit (CCTB) or the GST/HST credit.
Any amount of reported income will add to future registered retirement savings plan contribution room.
The April 30 deadline has exceptions, including individuals or their spouses who are self-employed, ran a business or if a spouse died during the tax year. In these examples the individual has until June 15 to file returns.
Tax time is often a stressful and confusing time for Canadians.
Check out the CRA website at www.cra-arc.gc.ca for tax filing tips.