Tax Tip Thursday

This week we will discuss the importance of your documentation and keeping track of the important stuff.

We are in the middle of about half a dozen files right now and every single one of them has the same two problems:

1. Getting access to their CRA accounts, or
2. Getting information/documentation from the them.

We work very hard to save people as much money as possible on their taxes, but we cannot do that if you don’t have your papers or if you fight us!

Why is this a problem?

This applies much more to businesses (both sole proprietors and corporations), but many times also for personal tax returns.

If you are a new client, we always ask for the previous year’s tax return. Surprisingly, about half the people we see cannot provide them. There’s a few things we get from them, but the most important is the carry-forward balances that affect future tax years. It’s so bad that someone told us this week that they were “losing their mind at the thought of having to try to find their 2021 tax return.” This is an important document, make sure you have it!

Not surprisingly, they asked why I needed it. The person is self-employed and claims a home office and vehicle. One of the biggest deductions a small business can have is their vehicle, but if we do not know whether it was depreciated previously and if we do not know what the ending balance is, we have no way of knowing how to calculate the depreciation. This could be thousands of dollars in deductions!! Same issue with the home office. If you do not know the home office as a % of your house, you could easily use something different from the previous year and trigger a review.

There is only so much that we can do, especially if you won’t help us help you.

This applies not only to your tax filings, but also to your receipts, bank statements, articles of incorporation, and so on.

We have at least five clients right now who do not have their articles of incorporation, do not have a CRA MyBusiness account, no correspondence with the CRA what-so-ever, and do not seem to know the proper name of their business or even under whose name it was registered with the CRA. To top it off, some of them are frustrated with us because we cannot do their taxes without this information!

In some cases it is literally impossible to file their taxes because people have so little information about themselves available to us.

Now what?

If you cannot provide the information we need in order to access your CRA account, you will have to contact either corporations Canada, Service Ontario, or Service Canada to see if they can help straighten you out. I promise, this is not an easy process and will take many hours of your life!

Just Keep Your Files!

This will all be a non-issue and things will all go very smoothly if you just keep track of all your documents. Especially with digital filing and MyCRA, you can just keep PDF copies of most of this stuff. Keep it organized and handy for when you need it, and all the physical papers you accumulate throughout the year should go in folders.

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.