With the festive period firmly behind us, we can officially start looking forward to the merriest season of all, tax season.
That wonderful time of year when long-forgotten calculators are resurrected, dusty filing cabinets are cracked open and the intoxicating smell of CRA documents fill the air.
Sadly, not everyone shares our particular level of enthusiasm for this magical time.
So to spread some of the joy that tax season brings us, we’ve put together 7 easy steps to help make this year’s tax filing as stress-free as possible.
Step 1 - Know the dates
Important dates have a habit of sneaking up on you when you least expect it (Mother’s Day, we’re looking at you here).
Adding all relevant tax dates and deadlines to your calendar now will help you stay on top of everything with ease. And while you’re at it, Mother’s Day is on May 8th, 2022.
Here are the most important dates to get you started:
- February 2022 – Tax packages available online and via mail
- February 21st 2022 – CRA’s Netfile service opens for online tax filing
- February 28th 2022 – Deadline for the issuing of T4 slips by employers and T5 slips by financial institutions
- March 1st 2022- RRSP contribution deadline for 2021
- March 31st 2022 – T3 and Trust Return filing deadline
- April 30th 2022 – Tax return filing deadline for most Canadians (extended to May 2nd this year as April 30th falls on a Saturday)
- June 15th 2022 – Filing deadline for self employed, or for those with a self employed spouse/partner
Step 2 - Learn what’s new this year
Taxes may be as old as civilization itself, but things do still change from year to year (especially with the ongoing global pandemic).
Keeping up to date will help you avoid any last minute surprises when it comes to filling out your tax return. The key updates to be aware of for the 2021 tax year include:
- Canadians who received COVID-19 financial benefits are again required to report them on their tax return (i.e. CRB, CRSB and CRCB). If you received any of these you will get a T4A from the government
- 2021 RRSP annual contribution limit has increased to $27,830
- Introduction of the Digital News Subscription Tax Credit
- Federal Basic Personal amount has increased to $13,808
- Continuation of the Home Office Expense Deduction to a maximum of $500 – new, simplified way to claim work at home expenses
Step 3 - Get organized
It’s never too late to get yourself organized (well, April 29th might be cutting it a bit close), but the earlier you start the easier it will be. If you don’t have a filing system in place for all your tax relevant information, now is the time to start one.
This can be as easy as throwing any receipts, tax slips, income statements, etc. into an old shoe box so that you know where everything is come tax time. But to be truly organized we suggest that you use a filing cabinet, digital filing system and/or upload your receipts to bookkeeping software.
It might seem painful now, but once you have a system in place you will be able to say goodbye to panicked last-minute document hunts and make future tax years a breeze.
Step 4 - Prepare for income reporting
Accurately reporting your income for the year is the most important step when filling out your return. T4 slips should make reporting your employment income fairly straightforward, but you will also need to document any other income streams, such as:
This is where all the hard work that you did for Step 3 will really start to pay off!
Step 5 - Maximize deductions and tax credits
The two most satisfying things in life are 1) popping bubble wrap, and 2) reducing your taxable income.
Knowing what deductions you are entitled to and utilising them effectively will help you maximise your tax refund (or at the very least reduce the balance that you owe the CRA).
For example, if your total income was $70,000 last year, but you contributed $10,000 to your RRSP, then the CRA will tax you as if you only earned $60,000. The more deductions you can apply to your tax return the smaller your taxable income will become. Time spent learning about them now will literally pay for itself in the long run. Here’s some important ones to help get you started:
- Childcare expenses
- Professional association and union dues
- Employment expenses
- Charitable donations
- Home buyer’s amount
- Vehicle expenses for self-employed
- RRSP contributions
- Medical expenses
- Home office deductions
- Deductions for rental suites (property tax, utilities, insurance etc.)
Step 6 - Choose your filing method
If you’re comfortable using a computer (and as you’re reading this digitally we’re pretty sure that you are), then you should definitely be filing your tax returns online.
“If you are worried that the machines will eventually destroy us, then don’t worry you can still file your paper return via mail.”
Love it or hate it, the CRA’s ‘My Account’ service is here to stay and for the most part it will make filing your tax return much more convenient. Your T4s and other tax documentation will be automatically uploaded to your ‘My Account’ and most online tax filing software can pull the information straight from there. This basically means that half of your return gets filled out for you. So if you are not already using this facility, now is the time to set it up (and for everyone already using it, now is the time to check your login details).
The next step is to choose an online software tool to use. There are a variety of free and paid options out there. If your tax situation is fairly straightforward, then one of the free options should be more than sufficient. Upgrading to a paid software can provide more detailed deduction analysis, and help with investments and rental properties.
If you are worried that the machines will eventually destroy us, or you are just a sucker for good old fashioned pen and paper, then don’t worry, you can still file your paper return via mail. You can request to receive your tax forms via mail from January onwards and they are also available for download on the CRA website.
If you need help filing your return, then there are a few great options out there for you. For 2022 the CRA is offering to help low income individuals complete their tax return via automated phone service for free. You will be notified by mail if you qualify for this service. There is also the Community Volunteer Income Tax Program. This service provides Canadians access to tax clinics via phone, video and document drop off arrangements.
Step 7 - File and submit
If you are filing online, then your software of choice will submit your completed return directly through the CRA’s Netfile portal. This is the fastest way to get your refund/balance owing (in as little as 8 business days). Filing via mail can take up to 8 weeks.
And that’s it, your taxes are done. And maybe, just maybe, there’s a small part of you already counting down to next year’s tax season, the merriest season of all.
