How to get ready for tax season without stressing out
Tax season is almost here and if you’re like many other people, you’re probably freaking out. The process can be intimidating since it’s a lot of paperwork, but everyone needs to file their taxes so there’s no reason to stress out. To help you through the process, we’ve come up with a list of things you need to do to prepare for tax season.
Know your deadlines

June 1, 2020 is the extended deadline for filing taxes and paying owed taxes. If you’re self-employed, however, you have until June 15, 2020. For both individuals and those that are self-employed, you’ll have until September 1, 2020 this year to pay any balances due from your individual income tax and benefit return for 2019. Some people are afraid to file their taxes because they owe money, but avoiding them would be a mistake as you could end up with higher fees and penalties as a result.

Get your paperwork in order

Filing your taxes is easy as long as you have your paperwork in order. Of course, depending on the individual, you may have a lot of slips to collect. The following are the most common slips that you’ll need.

  • T4 – This is issued to employees who are employed.
  • T4A – You receive this slip if you’ve earned income from a pension, self-employed commissions, lump-sum payments and annuity income.
  • T3 – This slip only applies to people who have income from a trust.
  • T5 – You get this if you have any interest income.
  • RRSP contribution receipt - This only applies if you’ve made any RRSP contributions.
  • Expense receipts - If you’re self-employed, you claim some expenses.

    Once you’ve collected all of your paperwork, you can file your taxes right away.

     
     
     
    Make a Registered Retirement Savings Plan contribution

    For people who want to reduce their taxes, you can make a Registered Retirement Savings Plan (RRSP) contribution. Every dollar you contribute reduces your taxable income by the same amount. This is beneficial to you since it’ll lower your taxable income, which in turn, could mean a bigger tax return.

    Although this benefit may seem appealing, contributing to your RRSP isn’t always the best choice. Some people may benefit more by contributing to their Tax-Free Savings Account (TFSA) instead. Don’t worry if you don’t make a contribution this year to your RRSP, as your space carries over indefinitely.

    Know your deductions

    Business owners and self-employed individuals are allowed to claim some expenses, but it’s up to you to know what you can or can’t claim. Fortunately, the Government of Canada website explains exactly what you can claim and how much you can claim. Some of the most common expenses include advertising, gas, office supplies, rent, utilities, and travel.

    Remember, not every expense that you can claim is taxed the same way, so you really need to do your research before you file. You’ll also need to a record of all of these expenses if you’re ever audited, so keep everything for at least seven years.

    Decide how you want to file your taxes

    Once you have everything in order, filing your taxes is easy but you still have a few options. Most people will file online using free software. Which software you use really is a personal preference; they all give you step by step directions so you shouldn’t have any issues getting your taxes done.

    If you prefer someone to do your taxes for you, there are many companies that offer a tax-filing service within malls and shopping centres. They typically charge a small fee for this service, but you could also look into free tax clinics.

    Hiring a professional accountant is another option, but this is usually only really beneficial if your taxes are complicated, you’re a small business owner, or if you’re looking for tax guidance in the future. As you can imagine, professionals are the most expensive option, but they may be able to provide advice that’s worth their fee.

    Getting your taxes done is easy - it’s really a matter of organization. Once you’ve got everything ready, you might as well file right away.


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    Barry Choi is a paid spokesperson of Sonnet Insurance.


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