Tax Tip Thursday

WOW! What a grueling tax season! Toughest one yet! (I’ve been saying that for a couple years now though)

This week I will go through some of the big problems/situations I encountered in the hopes that people can learn from them for the upcoming year. We are already 1/3 of the way through, BUT there are still two thirds left!

1. A lot of people owed a lot of taxes (and were not happy about it)

I would not be happy either! But WHY did this happen? There were a few common culprits:

• RRSP Withdrawals
  • I did not keep track of the number or amount, but I did notice a LOT of people withdrawing money.
• CERB, EI, and CRB
  • This is a new phenomenon as you know, and no matter how many times I told people to put money aside for taxes, most did not.
• RESP Withdrawals
  • I was surprised by this one, but it seemed a much higher number of people withdrew larger amounts from their RESPs for students this year.
• Part-time Jobs
  • People were becoming industrious and taking on additional or part-time work
• Self-Employed

SO WHAT CAN YOU DO?

In all of the above cases, there is not enough tax deducted at the source. If you withdraw/receive additional funds/income, you should ensure that you either put aside or send it in directly to the CRA! You should do this with AT LEAST 20%, and in many cases it should be 30%.

The other thing you can do is to have a review and estimate done of your tax payable during the summer. We offer a mid-year review and have been very successful at predicting peoples’ tax liability and providing them with solutions to address the outcome!

2. Lack of slips and/or lack of knowledge about your T-Slips

There were a few things going on here:

• CRA slips sometimes available but incomplete
• Companies sometimes reported incomplete T4s
• CERB T4As could be incorrect
• CERB repayments were not always recognized by the CRA

SO WHAT CAN YOU DO?

You should always know what you are being paid through the year! Keeping records — such as pay slips — that you can check at the end of the year will help a lot. Photocopies of cheques, bank statements, pay stubs, etc. are also good ways!

When tax time comes, you can review these records to compare with your tax return before you sign it for submission to ensure the correct income is on there.

3. Leaving tax preparation until mid-April or later

This year was particularly busy for accountants because of all the extra work with T4s and T5s, just as there would have been a lot of extra work for home office expense tracking! With all the extra work, it would be wise to get started on it early. But there were a ton of people in the last 2 weeks!

SO WHAT CAN YOU DO?

If you are self-employed or incorporated, get your books done in January. You will feel so much better about it and so will your accountant! You should also make an appointment with your accountant for the first or second week of March. This can often be the catalyst to get your butt in gear!

If you are not sure what to gather up, call the office and we will provide you with a comprehensive list.

4. Supplying incomplete information to your accountant

You are not doing yourself any favours by NOT providing what is asked of you the first time through. We will provide you a complete list of all the information they need so that we can help you pay the least amount of tax possible! We cannot do this effectively or quickly if you do not provide everything we ask for as soon as possible. If you are unsure of something, just ask!

We can also provide spreadsheets to help you.

SO WHAT CAN YOU DO?

The biggest missed items across the board were:

• Bills of sale/lease agreements for vehicles
• Mileage logs
• House expenses
• Vehicle expenses

If you incur these expenses, make sure you provide documentation for them!

Looking to get a head start on next year?

The best way to have no surprises next spring is to get ahead of your taxes. The best way to do that is to book a mid-year review! Give us a call and we will be happy to get you on the right path.

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.