You’ve probably heard the expression “Two things in life are certain: Death and Taxes.” And yes, it’s true – mortality and the Canada Revenue Agency (CRA) are unavoidable realities for Canadians. In this two-part post we’ll give you a bit of a rundown on how to prepare for these inevitabilities, starting with the “lighter” subject of the two – TAXES!
For most people, annual income tax returns are either a cause to grimace or grin depending on the outcome of the balance when filing. To help ease the sting or increase the win, read along for some tips and tricks:
Start Early: To avoid a last-minute paperwork crunch (or crash and burn), organize your T4s and applicable slips as they are received. If you’re really wanting to keep organized, keeping a list of slips that are expected and checking it as they arrive helps – as does filing any credit-type receipts (ie. prescriptions, child care, transit passes) each month. We realize that may be a lot to expect, but if you’re able to, then once the last of the paperwork is in hand it’ll be a simple step to combine it all for some tax return magic. If you don’t currently have a system in place, creating one as soon as this year’s return is finished is a great time to start!
Know What You Need: Now here’s where a little bit of information can really go a long way! Changes and additions to tax credits and benefits can work wonders for you – but only if you know about them. If you have an accountant prepare your return, check with them on any revisions that may apply to you. Filing for yourself? Take a few moments to peek around CRA’s website – there’s an entire section (that’s actually understandable) devoted to topics that apply to individual filers, and even an online course. After all, there’s no sense in hanging onto a year’s worth of receipts if, in the end, they won’t do you any good. Conversely, you don’t want to wind up wishing you’d kept something that’s now long gone.
Spend your refund wisely: If you find yourself on the receiving end of a refund, carefully consider how to use it. If you consistently have a refund and have both a monthly and annual budget, the extra funds can be incorporated into your household to help with expenses that are more of an irregular/annual or one-time cost. If your budget doesn’t factor in your expected refund you may want to look at bulking up your savings account or RRSP if you have room, before using it to splurge.
Pay the Piper: Should your return leave you with a balance owing (ready for this?) – pay it! (A note if you’re unsure: your balance owing is due no later than April 30, 2012.) Getting into “ostrich mode” at the sight of your tax assessment is definitely not advisable, and the interest and penalty charges may be extra incentive. If you owe most years, there are method to help ease the sting. You can start by discussing a strategy with your accountant, or perhaps even making installments with them or CRA directly. If you don’t have an accountant, a very simple way to prepare for that fiscal year-end payout is to revise your budget to make an allowance to set aside the cash each month instead of taking one large hit in April.
As all manners of tax slips hit your mailbox and your returns are processed, we wish you much success during this fateful time of the tax year. As always, if you find you’re unsuccessfully juggling your tax or consumer debt obligations, we invite you to contact our office for a free consultation to discuss your debt resolution options. And in case you were wondering – YES – income tax debts CAN be dealt with in a bankruptcy or a Consumer Proposal done by a licensed Proposal Administrator!