For many of us, tax season can sneak up and catch us off guard. This often causes anxiety and stress as we try to prepare to file our income tax returns. To avoid this additional stress, start organizing your taxes now by following a few easy steps:
Gather Pertinent Documents Based on how you Earned Your Income
If you’re an employee, you will require a T4, Statement of Remuneration Form, to show how much your employer paid you in 2017. As an employee, if you have employment expenses, you must receive a T2200 from your employer which is a declaration of the conditions of your employment. This is especially critical if you work from home and have home office expenses, or mileage for business travel. It’s important to keep a log book as the CRA does not consider a bank statement or interact receipt a sufficient record.
Self-employed individuals and/or contractors will require a T2125, Statement of Business Activities. If you’re retired, you will need a T4A, Statement of Pension. Investment-made income requires a T5, and if you receive Employment Insurance (EI), then a T4E must be obtained. If you received worker’s compensation or social assistance, a T5007, Statement of Benefits, will be required.
For those with rental properties, a T777 is required to declare rental income and related expenses, and any foreign investments greater than CAD100k must be declared on a separate foreign report. For clarification on any of these forms, please visit www.canada.ca or call a professional accountant.
Create a File of Receipts for Tax Deductions
You will require receipts in order to claim expenses such as public transit, child care, moving and medical expenses. For RRSPs, you will need your receipts for contributions made from March to December, and another receipt for January and February. If you are a caregiver or are caring for a parent, ensure you provide medical receipts, a disability tax certificate, or a letter from a doctor providing details of the condition or illness. Other documents for tax deductions include federal political contributions, and charitable donations.
Be Aware of Changes
There are four child tax credits that are no longer available to be claimed for the 2017 tax year: Arts, fitness, education and textbooks. The Arts and Fitness tax credits were reduced for the 2016 filing season, and have been eliminated entirely for 2017. The education and textbook credit amount can be carried forward from years prior to 2017 and can still be claimed, but new credits are no longer available.
Income tax splitting can still be claimed if your spouse or common law partner earned a lower income, however, the credit has now been capped at $2,000.
Other changes at the federal level affect life insurance, business owners selling their companies, and some mutual funds.
Make note of these dates when preparing to file your 2017 tax return:
- April 30, 2018
- June 15, 2018 (self-employed and their spouses or common-law partners)
- June 30, 2018 (TFSA return)
RRSP contribution deadline:
- February 28, 2018
If you’re unsure what documents you require, or have questions about your tax return, seek the assistance of a qualified professional. We are here to help ensure you maximize your return and avoid costly mistakes.
Most importantly, always keep your receipts (electronic or paper) for at least seven years. CRA can go back and ask about prior years.