The royal wedding, hockey playoffs, a federal election - with all of these exciting events vying for your attention this weekend, it would be easy to put off doing taxes. You've left it to the last minute anyway, so it's no big deal if you miss the Monday May 2nd deadline by a few weeks or months.
Not so, according to the experts. For those people who owe money, dilly-dallying can be a costly mistake. Myron Knodel, director of tax and estate planning with Investors Group in Winnipeg, says some people file late thinking they don't owe anything, only to find out that they have miscalculated. In the end, they are also hit with late filing penalties.
Even though the filing deadline is just around the corner, Mr. Knodel says it is important not to rush when compiling your information and completing the forms. "Be careful about going too quickly because you might miss things. Go through your return line by line to jog your memory and make sure you are taking advantage of all the possible credits."
The most common problem he sees on tax returns done manually are math errors. "People who do it manually often don't add it up properly. Then they need to get an adjustment and reassessment," he says. Using one of the many computer tax programs available significantly reduces that likelihood.
For all you procrastinators, Mr. Knodel put together this tax-filing checklist:
1) Get everything in on time. If you are paying taxes, you will face a late filing penalty of 5 per cent plus 1 per cent for each month your return is late, up to 12 months. The penalty may actually be higher if you are a repeat offender. You will also lose the option of lowering taxes through income-splitting.
2) Have all supporting documents. Whether you e-file or send in a paper return, you must keep all supporting documentation in case the Canada Revenue Agency (CRA) asks for it, otherwise your claim can be rejected. You should hang on to them for at least six years, in case the CRA wants to see your previous annual documentation.
3) Income or no income. You should always file a tax return so you can claim the GST/HST credit, the Canada Child Tax Benefit, and other tax credits and deductions that may result in a refund. Young people should file too, even if their income is under $10,382.
4) Check your math. According to the CRA, tax return math mistakes are very common. Without the correct calculations, you could end up paying more than you owe. If you use a computer program, your chance of mathematical error is substantially reduced.
5) Find the funds. If you file on time but don't pay all owed taxes, you'll be assessed interest at a current rate of 5 per cent.
6) Keep a list of deductions. Tax deductions reduce the amount of income subject to tax, and can also reduce your marginal tax rate - so take full advantage of them. One of the most important is your Registered Savings Plan (RSP) deduction. It is generally recommended that you make your maximum RSP contribution and use up any carryforward contribution room -- you'll not only save on taxes, you'll also enhance your RSP's growth potential.
7) Make a list of credits. Tax credits directly reduce your tax bill. Ensure you have considered all credits available to you such as medical expenses, charitable donations, eligible dependants, etc., and the best way to maximize them. Certain credits - such as the medical expense credit, disability credit, tuition and education credits - can be transferred to a spouse or supporting relative when not used by a dependent.
8) Have a plan. Don't confuse your last-minute tax prep dash with real tax planning. Tax planning reduces the taxes you pay. Tax planning means taking the right financial steps throughout the year to reduce the taxes you pay.Report Typo/Error