Ah, tax season. If you’ll owe money, you hate it. If you’re bound to get a refund, you look forward to it. Who are we kidding? No one looks forward to tax season!
Jokes aside, everyone has to get their taxes done—there’s no escaping it. And it can be a daunting task when you attempt to do it yourself.
As someone who is self-employed, I have an accountant that handles my tax filings each year. But even so, I still do all of the bookkeeping, including keeping a detailed spreadsheet of my expenses and income, as well as items that will be essential for personal taxes, like school or daycare costs for my son, medical prescriptions not covered by insurance, and so on.
Getting ready to tackle your taxes? Here are some tips to ease the pain, first of which is to grab yourself a tall glass of wine, or a strong coffee!
Keep tax related things organized
The most important tip for preparing your taxes is that you keep things organized ahead of time, throughout the year. I buy a basic accordion file folder each year where I store receipts, bills, vehicle details, mortgage papers, banking and credit card statements, etc. in a nice, organized fashion. If you’re a bit more progressive than this old “shoebox” method, you might want to consider investing in software for keeping all of your finances organized, including credit card bills, receipts, major purchases, and invoices, particularly if you run a home-based business.
If you’ve done this already, you’re well on your way to a much easier, painless process.
Find out what tax credits are available to you
Second is to research what tax credits are available to you. These may vary depending on your household income and province. But there are a lot of purchases that you can get a credit on, and could help reduce the amount you owe, or what you get back on an income tax return. For example, did you know that a full-time student can claim up to $400/mo., and part-time students can claim up to $120/mo., in addition to the tuition amount? Students can also transfer this amount to a parent if their income isn’t high enough to realize the benefits of it. Additionally, students can claim up to $65 per month toward textbook purchases ($20/mo. for part-timers.) In some provinces, like Ontario, college or university students can claim a portion of their rent.
Tax credits aren’t just for students, though. If you recently bought your first home, for example, there are a number of expenses you can claim, like moving expenses and the Home Buyers’ Amount credit. And don’t forget those important RRSP contributions, which can significantly impact how much tax you owe for a calendar year.
It’s advisable, however, to research online, or check with others on any changes within your province. For example, residents of Ontario where I live can claim the Children’s Fitness Tax credit, up to $500 for eligible registration or membership fees in a prescribed program or physical activity for 2016. But this credit will be eliminated for the 2017 calendar year and beyond.
Don’t forget medical expenses
According to Turbo Tax, the most commonly-missed tax deduction is medical expenses. While you might have insurance through an employer or parent, many of us still have to pay at least a portion out of pocket for certain procedures or prescriptions, like eyeglasses or medication. Maybe your dental plan, for example, covers 80% of the cost, but you need to pay the remaining 20% yourself. For major dental work, that could equate to hundreds of dollars.
The amount you can claim is based on your income, but it’s up to a maximum of $2,208 or 3%. So if you make $30,000 per year, anything more than $900 in medical expenses can count toward a credit. The Canada Revenue Agency website has a dedicated page that lists all eligible medical expenses.
Work with your spouse to determine the best approach
Sometimes it’s best to do your taxes together with a spouse and pool expenses, and other times, it might make more sense to do them on your own, such as in my situation where I’m self-employed. But really, no matter your marital status, every person must file his taxes individually.
That said, if you are married or in a common-law relationship, make sure to divide up the expenses appropriately. For example, deductions like child care and medical expenses should go on the lower income earner’s taxes, while donations should be claimed by the person who makes more money.
If you’re both retired, look into options like pension splitting to maximize your returns.
Enlist tax help
Don’t attempt to do the taxes yourself using the forms you’re sent by the government or printed online. It’s way too complicated for anyone who isn’t a trained tax accountant, or who has a propensity towards numbers and accounting. And you’re liable to miss something, or input an error. It is a stressful time, after all.
The help you enlist can come in the form of software. There are lots of comprehensive tax software programs that will guide you through each page of the return with step-by-step instructions and help for each line item and amount that needs to be entered. With TurboTax Standard, you can file up to eight returns – that might be for a family of four plus two sets of grandparents, or two families. If you just need something for your family, or you and your spouse or roommate, there’s TurboTax Basic or UFile, both of which are designed for the Windows operating system. UFile also offers UFile Single Family Return that works with both the Windows and Mac operating systems, and can even run on tablets (iOS, Android) as well as desktop computers.
These types of software programs can help ensure you’re claiming everything you should, and will help fix any errors you might have otherwise made by doing it on paper. If you run your own business, perhaps from your home, you can consider upgrading to TurboTax Home & Business, which allows for up to 12 returns. Other options are available from brands like Intuit Quickbooks and Sage, accommodating both individuals and businesses, and for up to 50 people per software CD. If you run your own business, for example, you might want to consider grabbing Intuit Quickbooks Desktop Pro 2017, which is software for managing your business’ finances overall, but will also help you keep track of all of the details you’ll need to file your taxes when the time comes, and includes direct filing of GST/HST to Canada Revenue Agency.
But keep in mind that, if your taxes are relatively complicated, you might want to enlist the help of a professional, even if it’s to look over what you’ve inputted in such software to ensure that there’s nothing missing. In most cases, however, the software is fairly detailed in posing questions and providing examples and explanations for each section such that you won’t miss anything. So pour that big glass of java and get going!
See lots of software options to help with your taxes at Best Buy Online.