It’s well known that tax time is not anyone’s favorite time of the year. In fact, most people dread it. Here are 6 simple things that you can do to get ready for tax filing season. They’ll make filing taxes so easy, you might actually start liking filing your taxes.
Be Conscious of the Tax Deadline
The first way to make this tax season awesome is to be completely aware of when to file. In Canada, the Federal tax deadline for personal and calendar year filers is always April 30th, unless it happens to fall on a weekend in which case it is the following Monday or business day if Monday is a holiday. For the USA, that date is usually April 15th.
The Alberta Tax Deadline is always the same as the Federal tax deadline, meaning it is also on April 30th of each year. Again, if April 30th falls on a weekend or holiday, the taxes will be due the following business day.
Your Alberta tax return is sent as a part of your T1 General Canadian Federal Tax Return. Unlike in the United States, you do not have to pay two separate tax agencies when you file a Canadian Tax Return from Alberta. It all goes in one payment to the Canada Revenue Agency (CRA).
There are cases where the tax deadline is extended, as was the situation a few years back because of the pandemic, so always look up the tax deadline a few months before just to be sure. The tax deadline will be posted and a simple search will let you know when it is.
Federal tax deadline for personal and calendar year filers is always April 30th, unless it happens to fall on a weekend
Know What You Can Claim on Your Taxes Before You Break the Bank
Best to ask your tax person if your purchase is deductible before you invest. Medical deductions are allowable deductions that can be claimed on your income tax, but there are rules for Canadian medical deductions. Sometimes it depends. For example, a hot tub is a common item people think they can deduct, but it isn’t.
Many medical expenses require a doctor’s note, so be sure to ask your tax person and get a note from the doctor before you buy things to claim against your taxes. The best thing to do if you don’t know and want to find out quickly is to search the Medical Expenses page on the Government of Canada Website.
While we’re on the topic of allowable Federal Income Tax Medical Deductions, mileage to drive to medical treatment can be deductible if the treatment is deductible. Be careful on this as well. If you drive a long ways, you will have to prove that there was no comparable treatment available closer.
Medical deductions and mileage are typically after tax deductions you claim on your tax return. Pretax medical deductions would be medical deductions your employer that reduce your income from your job.
Medical expenses are always held up for scrutiny, so be careful claiming medical expenses on your Canadian tax return. Talk with your tax preparer.
Neatly Organize Your Receipts for Easy Access
You know that big pile of stuff you have in your pockets or wallet? Or maybe in your glovebox? You need to get a tray, accordion file folder, ammo can, or a large envelope to store your receipts in.
The IRS and CRA still require you to keep your tax deduction receipts for 6 years in case of an audit, so you’ll want to have them neatly organized and easy to find. After the 6 years are over, you can compost your receipts in the garden, recycle them, or dispose of them in a responsible way.
If you’re looking for a receipts definition in accounting, receipts are proof on purchase and can look very different from one another. A justpark receipt or parking receipt can be a ticket or admission, while a retail receipt is usually a thin piece of paper. Airline tickets can also be used as receipts. Property tax bill receipts are usually just the bill (sometimes stamped PIAD). Invoices and statements can also be used as receipts.
Always ask for a receipt. It is important to keep receipts, and cash receipts are especially important to hold onto, because there is no other way of tracking the purchase. If you’ve bought something that is claimed on your business or personal deductions from Kijiji, ask the seller for a business receipt or print out the seller’s listing and write down what you paid for the item you bought.
Isn’t it interesting how ink easily fades from receipts? While receipts have no expiration date, there are things you can do to make them last longer. When someone asks me how long do receipts last, I let them know it depends on how they are treated.
If they go through the laundry, there’s a chance they will be unreadable. If they stay crumpled up in your jacket pocket, they ink can rub off so you can’t read receipts. You need to make sure you can actually read receipts.
If you can’t read receipts, you might be out of luck in case of an audit. Once organized into expense categories, try keeping your receipts in sandwich bags to prevent receipt deterioration. At the very least, put your receipts directly into a receipt folder that will keep them out of the elements.
Pro Tip: If you’re computer savvy, you can scan your receipts onto your computer or use an app for receipts to take pictures of receipts. Scanning multiple receipts into one file can be great if the file is a searchable PDF. Make sure you label your files. I prefer to label them according to the tax year/quarter if they are searchable, or by expense account.
The great thing about scanning your receipts is they never get faded, or destroyed in a flood. Businesses are beginning to ask if you’d like an email receipt so that the receipt goes straight to your email for easy digital receipt storage. Home Depot has done this for a while, and small businesses on can use QuickBooks Email Receipts if their store is using QuickBooks.
Always ask for a receipt. It is important to keep receipts, and cash receipts are especially important to hold onto
Be Aware: Filing Extensions Don’t Apply to Taxes Owing
No, you can’t avoid late fees and penalties by simply filing for an extension. Filing for an extension CAN avoid failure to file penalties, so it’s better than doing nothing, but you still need to pay your taxes owed as soon as possible to avoid late fees and penalties.
The benefits of filing a tax extension are that the Government sees you are being responsible and have reason to request more time to get your taxes in order. The best way to file a tax extension is to e-file an extension online through your tax preparer.
Is filing a tax extension free? As far as the Government, yes. Your preparer may charge a small fee for processing the extension. In the case that you do not know what your tax balance will be for the year, apply for a tax extension and send in a realistic estimate of what your tax should be.
If you’re a little under, you’ll only owe penalties and interest on the amount you are under. If you’re over, you’ll get the difference back. Extensions are not automatic unless the Government declares an automatic extension for the year for some reason. Want to know how to check if your tax extension was accepted? You will usually get mail or some sort of confirmation of the tax extension acceptance.
apply for a tax extension and send in a realistic estimate of what your tax should be
Prevent Forgotten T-Slips
Log into your CRA account to make sure you have all your T4, T4A, T5 , T5008 tax documents. What are T-Slips? Tax documents that are sent to you each year are called T-slips. Thankfully, your tax person can log in for you to retrieve any T-Slips you have been issued for the tax year. This can take the weight off your shoulders of trying to remember every T-Slip you might have gotten during the year.
Want to know how to get T-Slips from CRA? If you log in yourself, you’ll be able to retrieve Canada pension T-Slips for CPP and OAS and bank interest T-slips, or any T-slips that have been filed on your behalf. The due date for filing T-Slips is usually end of February, so you may want to wait until March to file your tax return to make sure you haven’t missed any T-Slips.
T-Slips from the government are typically on there right away, it’s banks and private businesses that can take a long time in issuing T-Slips. T-slips for Contractors are different.
Subcontractors for construction are required to issue a T5018 T-Slip, and sometimes they forget or miss the deadline, so if you expect a T5018 because you worked as a subcontractor for construction, communicate with that business before filing.
Self-Employed? Instalments Make Your Life Easier
One of the worst things about tax time is owing a huge sum of money. If you have a bookkeeper, you’ll know exactly what your income is each month or each quarter.
You can make advance instalments for income tax each quarter to ease the tax bill. This is one of the most important tips on the list!
Because there is no separation in the money that you send in for taxes between Federal and Provincial, all tax instalments will be sent to the CRA. There is no Alberta tax instalment, it’s paid to the CRA. Tax instalments for individuals in Canada can easily be made through your bank.
Usually there will be somewhere on the bank website that says “Pay Bills”. Find the CRA tax instalments bill payment. Your personal tax instalment account number will always be your SIN Social Insurance Number. Tax installments can be mandatory if your net tax owing is more than $3,000 or $1,800 in Quebec.
Canada Tax instalment due dates are typically:
March 15th
June 15th
September 15th
December 15th
Tax installments are not necessary if you have a capital gain, but feel free to pay capital gains tax instalments the same way you would pay your tax instalments online. If there is a large capital gain for the year, it might be best to make an instalment right away so that you don’t spend the money and forget taxes are owed.
If you have a business and GST is due infrequently (Annually or Quarterly), you can also pay GST instalments so that you don’t have a huge GST bill to pay all at once. Paying GST in instalments is great when you know there is going to be a large bill due.
Corporation tax instalments will be made in the same way,
make sure that you use the business number for the corporate tax instalment
account number and select the correct bill pay.want more info on tax intalments in Canada? Check This page out!
Tax installments can be mandatory if your net tax owing is more than $3,000 or $1,800 in Quebec
Conclusion
Taxes can be stressful, but by implementing these 6 steps, you can avoid some pitfalls and conquer tax day when it rolls around each year, forever changing your hatred of tax filing into a sigh of relief.
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