If you haven’t filed your tax return yet, this Easter weekend might be the time to cross it off your to-do list.
Canadians have until May 2 to file taxes, thanks to the traditional April 30 deadline that falls on a Saturday. For self-employed workers, this deadline is June 15th.
But before you rush to your preferred tax return platform, here are some answers to questions you may have about filing your tax return this year and how to best prepare for the next one.
When do I have to submit my taxes?
The tax deadline is especially important in the case of Canadians who owe money in taxes because late submission can come with sanctions. If you are expecting a positive net tax return, late submission can delay the money you are receiving.
Andrew Bauer, an associate professor of accounting at the University of Waterloo, says the financially savvy thing to do is get the tax credit as soon as possible.
“Our repayment is an interest-free loan you gave to the government,” Bauer said. “The longer you wait to get your money back, the more opportunity cost is wasted.”
However, submitting too early can also have its drawbacks. Sometimes it can lead to missing information, such as an income receipt or deductible that you can request, said Bruce Ball, vice president of taxation at the Chartered Professional Accountants of Canada.
“If you later realize there was other income that you didn’t put on your tax return, you should go back and edit your tax return or report it,” Ball said.
What do I need to know about this tax season?
There aren’t many changes in the tax system this year, both tax experts said. The Canadian Revenue Agency outlines theirs website some of the changes to the incentives available.
If you received a support payment related to COVID in 2021, you should have received a T4A at this point.
Anyone refunded a COVID benefit is eligible to request the 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 to receive 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’ve been working at home for at least 50% of the time for a period of four weeks or more.
Residents of Ontario, Manitoba, Saskatchewan and Alberta are eligible this year to receive the climate action incentive payment, a credit intended to offset the cost of federal pollution pricing. This year, however, the payment will be made in quarterly installments and the amount will depend on the province of residence, the marital status and the number of children in the family.
Which Saves Me the Most in Taxes: An RRSP or TFSA?
Part of maximizing your tax return is figuring out which tax-free savings account is right for you in a given year.
A Registered Retirement Savings Plan (RRSP) allows you to make tax deductible contributions. For example, if you contributed $ 5,000 to an RRSP in 2021, that amount is deducted from your total taxable income. When you decide to withdraw from the account, that money is then taxed as income.
Contributions to a tax-free savings account (TFSA) are not tax deductible. However, the money invested in the account can grow tax-free.
Bauer says there are several considerations to make when deciding to invest in one account over the other, including the time horizon for when you expect to need the money. TFSAs allow you to replenish the contribution room after withdrawing money, which is not the case with an RRSP.
But an important deciding factor is how much you expect to pay in taxes now versus when you can withdraw money from the account.
“In general, RRSPs probably make sense for people in higher tax brackets because you get tax deductions up front when you put in the money,” Ball said.
If you are saving money for retirement and expect your income to be lower at that time, for example, you will save on taxes by taking the tax deduction this year and paying a lower tax rate upon retirement.
WATCH | Should you get a TFSA or an RRSP?
Why can’t the government just send me a bill?
Some countries, such as the UK, have no-refunds returns which avoid the process of having to make sure you have paid your taxes by a certain date.
“I would expect that in the next few years we will probably get to that point,” Bauer said, adding that the tax return process could become streamlined for those whose income and tax deductions are reported on official receipts.
While tax filing has been greatly simplified over the years with the digitization of tax returns, Ball says the challenge in going one step further and eliminating the filing system is that there are many different tax credits and deductions. that a registrant can request.
“The credits and deductions, the CRA doesn’t know about. So it’s hard for them to pre-fill a return,” he said.
How can I plan ahead?
You can anticipate each tax season by keeping records of expenses that may be eligible for a tax deduction or credit.
And if you forget to keep track of those expenses, Ball recommends that you go back to the place where you made your tax deductible payment and ask for a new receipt for your shopping.
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 paycheck.
“This is definitely a place where planning can really make a difference,” said Bauer.
It’s also helpful to familiarize yourself with the tax credits and deductions available, Ball said, adding that the Canadian Revenue Agency makes that information available on its website.
For Canadians whose taxes aren’t complicated to calculate, knowing the tax system allows you to jump from $ 100 to $ 200 that you might pay for an accountant to file your tax return.
“Sorry all my accounting friends, but if you have a simple return, with a little time and attention, you don’t need anyone else’s help,” Bauer said.