There are 2 financial topics that many people avoid and procrastinate on or even refuse to discuss. The first is the B word. The second is your tax return.
A lot of taxpayers see the filing of the tax return as a dreaded chore to be done in the least amount of time, at the last possible minute(or even later), and preferably with eyes closed. I will give those people a high five for being a DIY and not getting someone else to do it. More on that later.
Some people would rather clean their Kitty’s litter box than do their taxes. But although you will not find any gold nuggets in kitty’s toilet, you must view your tax return the same as going on a treasure hunt. That is because the government saves money due to taxpayers missing opportunities to pay less tax.
I am serious. Although we have a legal duty to file a return, we also have a privilege to pay the least amount of tax possible. After all, when you get your paycheque the government gets paid even before you do, unless you are self employed.
Part of the hesitation to see doing your tax return as a joyous pastime is that a lot of the numbers have the habit of changing yearly. People also have the mindset that a tax return is like doing a puzzle. There is only one place to put that piece to get a nice picture.
Unlike a puzzle, there are certain flexible parameters that can be considered to maximise your refund or minimise your tax owing. Some of these moving targets will be a result of a changing family situation, for example unemployment, time off work for life events, medical challenges in the family, severance, postsecondary education, or moving. Certain benefits can only be received if you file a tax return.
Tax service companies charge a lot to do a tax return. I have a friend that works at a well known company every year. Her hourly wage is 10% or less of the company’s profit per hour. Therefore it is worthwhile to take the time to do your own. Also if you do not get the same professional to do it every year they will not know you or your financial situation well enough to ask the vital questions that will help you save money.
In the next blog post I will discuss how to organize your tax documents, and the areas of the tax return where taxpayers could have a second look