As the CEO of your own financial company here is a motivation to do your tax return in a timely manner. Most clients reading this blog post will get a refund. Take the amount of your refund and divide it by the number of hours it takes to do your tax return. For most of you it should not be more than 2 hours, if you follow the method below. If you are not motivated by that hourly rate you calculate, go buy yourself a tub of Fiasco gelato or tickets to the symphony as your reward for a job well done.
As your tax information arrives in the mail(usually), be prepared. Have a file folder in your favorite bright color or an envelope with your favorite brightly colored post it note labelled Tax Info. No I am not being silly. If you have either of these items that are the same color as everything else in your workspace, you might waste valuable time looking for it, during which time your motivation to stay organized will diminish rapidly. If you approach tax time in an organized manner you won’t have to punch pillows, yell at the cat, or eat a pile of dark chocolate.
Tax information doesn’t always arrive in its own envelope. Sometimes it comes with a year end statement. So don’t let your mail pile up for months unread. Believe me I wish I was talking fiction.
Also some companies get you to access your T slips online. CRA will not accept ‘I forgot.’ as a reason to not record income on an account. On the other side of the coin they will not help you remember a deduction or credit.
You should have all your required information by the end of the first week of March. If you are expecting a refund now is the best time to beat the rush and file quickly, so you can get your money faster and eat your gelato. Or you can contact the tardy companies for your T slips.
To start the tax return, get yourself a large workspace, and a couple of uninterrupted hours. Preferably those 2 hours are not on April 30th at 10 pm. Of course you already know that April 30th is the deadline to file if you owe taxes.
Start by making 3 piles. An income pile, a deduction pile, and a credits pile.
The income pile is all your T slips, T4 T3 T5 EI and other income.
The deductions pile are items such as pension plan contributions(on the T4), RRSP contributions, child care, union dues, moving expenses, and other specialized deductions. The whole deduction is applied to reduce your taxable income and can increase a tax refund.
The credit pile will include medical expenses,(including premiums you pay for a private health plan) child fitness or arts receipts, tuition and student loan interest forms and donations. Only a percentage of these expenses will reduce your tax owing, and they will not generate a refund.
If you are using software(which I highly recommend) you will generate the necessary pages in your program and carefully enter in your numbers.
Remember that for RRSP contributions, medical expenses, and donations you can maximise their usefulness by choosing the best time to claim or carry them forward. Please let me know if you want more details.
Why did I refer to tax return as a treasure hunt? Did you know that you can go back 10 years to adjust a tax return where you may have missed information that would have given you a more favorable outcome? The T1 Adjustment form can help you do that. Please let me know if you need more information.