Tax season is coming. Like it or not, you have to get your tax done. Follow these five steps in your income tax preparation will make your life easier.
1. Plan ahead to save your tax.
Tax is a fact of life. To minimize your tax burden and maximize your tax refund, you should not wait until the last day to start thinking about your taxes. By planning earlier, you can
- Optimize your RRSP contribution before the RRSP March 1 deadline. Use our RRSP Tax Saving Calculator to estimate your saving.
- Pay yourself an appropriate amount of dividends to minimize your tax, if you are a business owner. To do that, you have to file a T5 tax slip to CRA before the end of February.
- Check year-end tax planning tips to save your tax.
2. Make sure you have all tax slips.
To make sure your income tax preparation will be done correctly, you should gather all your tax slips. If you miss one of them, CRA will find it out sooner or later. Then you have to pay your tax refund back plus interest. Some of these tax slips includes:
- T4 if you are employed
- T4A if you are subcontractor, earning self-employed commission
- T4A(P) for Canada Pension Plan Benefits (CPP) income
- T4A(OAS) tax slips for old age security income
- T5 for investment income
- T4RSP if you withdraw money from your RRSP
You can call Canada Revenue Agency (CRA) toll-free phone number to ask CRA to send your tax information, or you can use CRA my account service to access your account information online.
3. Gather all receipts for your tax credits and tax deduction.
While doing your income tax preparation, you don’t want to miss any tax credits and tax deductions you are eligible for. You can use our Income Tax Preparation Checklist to help your organize your tax receipts.
4. Make a summary sheet for your tax receipts.
If you have less than 5 tax receipts, you may not need a summary sheet. However, if you have many receipts, especially if you have a business, rental property, or moving expense, you should sort those receipts into categories and make a summary. No matter you hire a tax professional or do it yourself, not being organized is always a guaranteed way to screw up your income tax preparation.
5. Decide if you need tax preparation help.
If your tax return is fairly simple and you know how to do it, you can prepare it yourself using one of the many software programs available. You will need a certified tax program, which is listed on CRA website.
If your tax is complicated or you just don’t like to do it, you can pay a tax professional to do your income tax preparation. Here are a few points to keep in mind when you hire someone to prepare your return:
- Check the person’s qualifications. All qualified tax Efile providers have to register with CRA. You can use To CRA “postal code search” to verify the tax professional qualification.
- Find out about the service fees. Avoid tax preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.
- Make sure the tax preparer is accessible. Make sure you will be able to contact the tax preparer after the return has been filed. Also make sure you will get year-round tax support if you wind up being reviewed by the CRA.
- Find a tax preparer you like to work with. If you prefer to work with a human rather than a machine, you should find a tax preparer, who will listen to you, talk with you and help you. A good tax preparer makes your tax season a breeze.
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