Everyone dreads tax time. It starts brewing right after Christmas and continues to build for 4 months. For most, it’s a stressful time of the year that doesn’t really need to be all that bad. Yes, I know it’s only September, but it’s never to early to start thinking and planning for your taxes. Last year alone, there were just under 29 million people who filed taxes. Of those 29 million, 16 million received a refund and only 6.5 million had a balance owing (the remaining 5.5 million had a nil return). So which group do you fall in? If you did not get a tax refund, why not? These are some good questions to ask when getting your taxes done or if you do them yourself. There are lots of ways to lower your taxes owing and increasing your potential refund.
1. Get Organized and Stay Organized
It’s never to early to start getting organized. For individuals, this would mean starting a file folder and putting any relevant tax papers in there as you get them. If you have children, you may be able to claim their childcare costs; if you donate, you can get a tax receipt and claim that as an expense; some jobs may allow you to claim employment expenses – all of these would go into that folder. For businesses, it all comes down to how your books are done/presented. For most, hiring a bookkeeper or accountant to handle your books is a very smart business investment (and tax deduction!). Start early so your costs are kept low as some firms charge more for last minute jobs.
2. Know What Can be Included on Your Tax Return
Knowing what you can claim and what you can’t, will speed up your tax return process. If you hand your tax preparer/filer a stack of papers that have irrelevant receipts mixed in, it will take them longer to sort through what is eligible and what isn’t. A quick email or phone call to a tax professional will solve this problem (AVFS is a great place to get some free basic tax advise such as what can be claimed and what can’t).
3. Getting Your Finances Sorted Out
Everyone has a rough idea of what they earn in a year (or at least they should). There are 4 main tax brackets that everyone should be aware of. The first happens at around $46,000, the next at $93,000, then $145,000, and finally $206,000 (there is a level for $206,000+, but majority of households will fall into one of these four). If you are a double income household (you and your spouse both work), your employers may not be taking off enough tax. If your total household income gets bumped into another tax bracket, then you could be faced with a tax bill. This is where some tax saving tips come into play. The most common is an RRSP. RRSP’s are a great way to lower your tax (or increase your refund) and allow you to save for your future. I will go into more details in another post about RRSP’s and Tax Free Savings Accounts, but for now, we will stick to the basics. Some other minor tax deductions for personal taxes are medical expenses (if you have any, although the criteria is very specific), childcare costs (again, if you have any), and employment costs (if you are in an industry that allows them). Meeting with a financial planner or a tax planner would be your best bet. There are some financial planners who will meet for free and some tax planners who will meet and discuss your finances to lower your taxes free of charge (AVFS will be happy to meet with anyone and offer 1 hour free to discuss how you can lower your taxes and maximize your refund). Doing this before January 1 is your best bet since the deadline for RRSP contributions is February 28.
4. File Early
Don’t leave filing your taxes to the last minute. This puts unneeded stress on you and the person filing your taxes. As soon as you receive all your slips, you should start working on getting your taxes filed or prepared. By law, all your T-Slips need to be sent to you no later than February 28th. If you do not receive them by mid-March, you should contact the issuer and find out where they are. Remember, the sooner you file your taxes, the sooner you can get your refund.
5. Programs and Assistance
There are lots of government and non-government programs out there to help low income, people with disabilities, families, students, etc. Take 5 minutes to do a quick Google search to find out of you qualify for one of these programs. The Disability Tax Credit doesn’t just apply to people with a physical/visual disability. If someone in your family has a learning disability or chronic physical ailment (such as COPD), you may qualify for this tax credit which can knock off up to $12,000 on your taxable income (there are certain assistance programs that may be affected by this, you should consult with various parties before applying). In Alberta, there are senior assistance programs available for low-income seniors. They are easy to apply for and can help pay for your expenses (such as prescriptions, dental and optometry). Other provinces have similar programs.
These are just suggestions to help simplify your year, especially when it comes to taxes and personal finances. One of the top stressors in a persons life is finances. Post in the comments if you have any questions!
Accountable Value Financial Services is happy to help you with your taxes, finances, and any other related area. Give us a call or send us an email to set up an appointment to discuss how you can save money and help eliminate stress!