For many, tax season is a stressful time. Despite personal apprehensions about tax season, there are a number of preparations and tools you can use to make the process smoother, less time-consuming, and error-free. We have curated some important information to increase your tax knowledge and help you prepare for filing, so you can step into this tax season with confidence.
What Are Taxes and Why Do We File Them?
Depending on your stage of life and where you have received income or spent money, there are a number of types of taxes you can pay in Canada. The most common types of taxes Canadians pay include income tax, sales tax, and property tax.
To put it simply, the purpose of filing taxes is to report how much income you received in a year. Through the filing process, a calculation is made to determine if you owe more income tax, or if you are entitled to a refund on taxes you have already paid.
What Are the Benefits of Filing?
Filing your taxes may take time, but there are many benefits to filing. We have broken down a list of the benefits that make filing worth the effort.
- Getting a Refund
- Deductible RRSP Contributions
- Tax Credit for Tuition Fees
- Benefit Payments
Before You File
To save you time and effort once you begin filing, whether on your own or with professional assistance, make sure you collect the following information:
- Income slips. The most common of these are a T4 or T5, or RL slips. These should be sent directly from your employer.
- Social Insurance Number. This is used to confirm your identity.
- Data from the past tax years. This includes your Registered Retirement Savings Plan (RRSP) contribution limit, repayments required under the Home Buyers Plan or Lifelong Learning Plan.
- Receipts. Collect receipts from any donations you made to charitable organizations, medical expenses, caregiver expenses, etc.
- Records of additional income. Collect any information regarding additional income you received throughout the tax year.
As an additional tip, set any data from previous tax years, receipts, and records of additional income aside as you receive them. This will save you a whole lot of hassle and stress when the time comes to file.
For a full checklist of what to prepare, see here.
Where to File
File Online:
There are a number of ways to file your taxes with the CRA. For simple filing, you can utilize a service called NETFILE. NETFILE lets you do your personal taxes online and sends your income tax and benefit return directly to the CRA.
When filing online, make sure that the provider you are using is certified by the CRA. Many of these providers are free, and allow you to file multiple returns at a time. For a list of certified providers, see here.
Utilize Your Tax Advisor:
Do you have a more complex tax situation? If so, utilizing a tax advisor is the best way to address complicated returns to avoid errors, get a second opinion, and reduce tax-related stress. If you have already utilized the services of a tax advisor, you may already be paying for tax related assistance. If this is the case, your tax advisor will provide expert tax advice in line with your financial goals.
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