Prepping And Filing Tax Returns: A Quick Guide
Tax preparation does not have to be the daunting task it has been labelled as. Five simple steps can make preparing your taxes simple:
- Plan early
- Keep good records
- Collect all tax information slips
- Determine if you need help
- Organise and summarise
As soon as tax season begins, look through your finances and things organized. The CRA (Canada Revenue Agency) provides tips to help you prepare early to ensure you keep your tax bills to a minimum.
If you realize that your tax situation is complicated, then it may be worth hiring a professional to make sure nothing gets missed and to recommend strategies. With conditions like income investments and being self-employed, a professional can help you save money. In fact, their bill may be paid for with those saved funds. Seek out accountants that specialize in tax income and possibly lawyers in the event you need to draft documents.
Once your tax return has been filed, it is highly recommended to keep all documents for at least six years.
Keeping good records all year will save time when it comes to filing taxes. Organizing receipts as you get them as well as filing bills, credit card statements, housing or business rental agreements, any stock transactions and home office or business expenses will be an asset. It will only take a small amount of your time if you do this throughout the year rather than rushing to sort through a mess of paperwork right before your return is due.. Early organization will help ensure nothing is missed, and no mistakes get made during filing.
Verify that you have all relevant tax slips including any receipts for charitable and RRSP contributions. All slips are issued by February 28th, so you have time to make sure you have all that pertains to your situation. The T4 is required if you are an employee and the T4A if you have received any of the following; annuity income, lump-sum payments, pensions or self-employed commissions. The T3 form is for any income from a trust and is the only form released at a different time, usually 90 days after the end of the trust’s tax period. Finally, the T5 is for any income from investments.
Once you have all your forms and supporting paperwork, you will have a full picture of your taxes and determine if you will need a professional. If your situation is relatively straightforward and only has employment income and perhaps an RRSP, then you will be able to file yourself using any of the expert-approved software programs available. The CRA even offers clinics for lower income clients who have simpler tax circumstances.
Professionals are better used when tax and financial situations are more complicated and detailed. You can get help from an accountant or tax professional who will most likely charge by the hour but can make sure your return is in order and complete. You can also choose to work with a tax preparation service, such as H&R Block. The fees here can vary so its best to get an estimate the first time you go for a consultation. Be prepared before seeking out a professional. Have all paperwork organised and list all your income sources, deductions and credits. The more you have done ahead of time, the less time gets wasted for all parties.
The deadline for filing the standard T1 Tax and Benefit Return is April 30th of the year following the tax year. The returns can be filed by mail or electronically online. If you are self-employed, you must pay any amounts owing by April 30th, but your filing deadline is June 15th. If a deadline falls on a holiday or weekend, filing and any payments are considered on time so long as it is received or postmarked by the next business day.
Auto-fill is a new service offered by the CRA which allows you to request and receive all available tax information that the CRA has on you. They will most likely have information slips, and other pertinent documentation such as T4, T5 or RRSP information and these details can be automatically transferred into your current return. You need to be registered and have access to the approved software to take advantage of this time-saving system. It is advised that you still check through all forms before filing to ensure that everything was transferred accurately.
Once your tax return has been filed, it is highly recommended to keep all documents for at least six years. This includes the return as well as receipts and supporting paperwork. It is ideal to keep them organized by year for easy retrieval should they be needed or in the event if an audit or request for information from tax professionals.
Take care to ensure all documents are collected, and all information is entered, because filing too early, before you have everything can result in a CRA review. Missing information is a trigger to them and will end up costing you more time and money. Once filed, you can easily keep track of the status by setting up an account with the CRA, allowing you to make changes, track any refund as well as check RRSP deduction limits and benefit or credit payments.
Tax preparation and filing does not have to be a painful venture. By staying ahead of the game and taking advantage of the tips and help offered by the CRA and tax professionals, filing a return can be a pain-free procedure.
As a Chartered Professional Accountant in Surrey, CP Lehal & Company can provide affordable accounting and financial services to minimize tax liability, and maximize your tax savings. Our Surrey Accountant provides clients with utmost assistance in Corporate and Personal Tax, Auditing, Review Engagement Reports, Business Consulting, Bookkeeping & Payroll, T4, GST, WorkSafeBC (WCB) and Employer Health Tax (EHT).