If you haven’t filed your tax return yet, this Easter weekend may be the time to check it off your to-do list.
Canadians have until May 2 to file their taxes, thanks to the traditional deadline of April 30, which falls on Saturday. For those who are self-employed, this deadline is June 15.
But before you rush to your chosen tax filing platform, here are some answers to questions you may have about filing your tax return this year and how best to prepare for next year.
When should I file my taxes?
The tax deadline is especially important in the case of Canadians who owe money in the form of taxes, as late filing can lead to sanctions. If you expect a net positive tax return, late filing can delay all the money you receive.
Andrew Bauer, an associate professor of accounting at the University of Waterloo, says the financially sensible thing to do is get your tax credit as soon as possible.
“Our recovery is an interest-free loan you gave to the government,” Bauer said. “The longer you wait to get your money back, the more opportunity costs are wasted.”
However, submitting too early can also have its drawbacks. Sometimes this can lead to missing information, such as an income statement or deduction that you can ask for, said Bruce Ball, vice president of taxation for chartered professional accountants.
“If you then find out that there is other income that you did not put in your tax return, you should go back and change your tax return or report it,” Ball said.
What do I need to know about this tax season?
There have not been many changes to the tax system this year, both tax experts said. The Canadian Revenue Agency outlines theirs website some of the changes in available incentives.
If you received a COVID-related maintenance payment in 2021, you should have received a T4 by now.
Anyone who has paid compensation for COVID is entitled to claim a tax deduction in the same year in which the refund was made or in the year in which the benefit was received.
Canadians continue to be eligible for a tax credit for home office expenses incurred while working from home. Using the simplified method, you can claim up to $ 500 this year if you have worked at home at least 50% of the time for four weeks or more.
Residents of Ontario, Manitoba, Saskatchewan and Alberta are eligible this year to receive the Climate Action Payment, a loan designed to help offset federal pollution pricing costs. However, the payment will be paid in quarterly installments this year and the amount will depend on the province of residence, marital status and the number of children in the household.
Which saves me more taxes: RRSP or TFSA?
Part of maximizing your tax return is finding out which tax-benefit savings account is right for you in a given year.
A registered retirement savings plan (RRSP) allows you to make tax-deductible contributions. If you contributed $ 5,000 to the RRSP in 2021, for example, that amount is deducted from your total taxable income. When you decide to withdraw from the account, this money is taxed as income.
Tax-free savings account contributions (TFSA) are not tax deductible. However, the money invested in the account can grow without taxes.
Bauer says you need to consider several considerations when deciding to invest in one account against another, including the time horizon in which you expect to need the money. TFSAs allow your contribution room to be filled after withdrawing money, while this is not the case with RRSP.
But an important deciding factor is how much you expect to pay taxes now compared to the time you can withdraw money from the account.
“Generally speaking, RRSPs probably make sense for people who are in higher tax groups because you get tax deductions in advance when you invest the money,” Ball said.
If you save money for retirement and expect your income to be lower at that time, for example, you will save on taxes by taking this year’s tax deduction and paying a lower tax rate at the time of withdrawal.
WATCH Do I need to get a TFSA or RRSP?
How to choose between TFSA and RRSP
Andrew Bauer, an associate professor of accounting at the University of Waterloo, says the choice between contributing to TFSA or RRSP depends on your income now over your expected income in the year you choose to withdraw. (Photo: rangizzz / Shutterstock) 2:46
Why can’t the government just send me a bill?
Some countries, such as the United Kingdom, have non-refundable claims that avoid the process of having to ensure that you have paid your taxes by a certain date.
“I would expect to reach this point in the next few years,” Bauer said, adding that the tax process could be simplified for those whose income and tax deductions are recorded in official records.
While filing taxes has been greatly simplified over the years with the digitalisation of tax slips, Ball says the challenge to take a step forward and abolish the return system is that there are many different tax credits and deductions a taxpayer can claim.
“CRAs and deductions, the CRA does not know about them. So it’s hard for them to fill in the returns in advance, “he said.
How can I plan ahead?
Part of maximizing your tax return comes from planning ahead by keeping records of expenses that may qualify for a tax deduction or credit.
And if you forget to keep track of these expenses, Ball recommends that you return to the place where you made the tax-deductible payment and request a new expense receipt.
The Canadian Revenue Agency provides information on available tax credits and deductions on its website. (Justin Tang / The Canadian Press)
Another way to plan ahead, according to Bauer, is to fill out a TD1 form if you plan to make contributions to your RRSP so that your employer can deduct less income tax from your salary.
“It’s certainly a place where planning can really change,” Bauer said.
Familiarity with available tax credits and deductions is also helpful, Ball said, adding that the Canadian Revenue Agency provides this information on its website.
For Canadians, whose taxes are not difficult to calculate, knowing the tax system allows you to skip $ 100 to $ 200, which you can pay an accountant to file your tax return.
“I feel sorry for all my fellow accountants, but if you have a simple return, with little time and care, you don’t need someone else’s help,” Bauer said.
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