Ensure you have the proper documentation to prove your claims
With tax season approaching, many of us are either excited about possibly getting a refund or worried about owing money.
To have all the necessary information you need, start preparing as early as possible. This means good recordkeeping throughout the year. If you are unprepared, you may miss out on a refund or owe taxes.
The deadline for filing taxes for individuals and most businesses (if the business fiscal year and calendar year are the same) is April 30. Self-employed individuals have until June 15, but interest on any tax due starts accumulating on April 30. Visit www.cra.gc.ca for more information. There is a late filing penalty if you owe money to Canada Revenue Agency (CRA). Sometimes the penalty can be waived with a reasonable and satisfactory explanation. Business owners also need to file payroll and GST returns prior to the deadline.
Knowing how to earn tax credits is important because it reduces the tax paid on taxable income. Non-refundable credits reduce the tax payable while refundable credits can be paid out as a refund. It’s also useful to know about opportunities frequently overlooked.
If you own a registered business, you can claim several expenses associated with the daily operations of the business incurred to generate income. Home-based business owners often fail to claim all their expenses because they don’t realize that their utilities, phone bill, property taxes, interest paid on a mortgage, fuel, office supplies, or meal expenses while meeting with clients can be fully or partially written off. Self-employed individuals can also deduct premiums paid for medical or dental insurance plans.
Likewise, you can claim costs for relocating for a new job or to establish a business, such as transportation costs, temporary living expenses up to 15 days, or any other expenses associated with the move.
Paying legal fees to earn an income, such as drafting business contracts, filing tax returns, appealing or responding to a CRA decision, or satisfying tax reporting requirements are all tax deductible. Making a salary claim or retirement allowance can also be entered as an expense. However, the retirement claim must be successful for it to be an eligible tax deduction. It is also possible to claim fees paid to collect or increase support payments resulting from a divorce or separation.
Remember to request receipts for daycare fees, charitable donations, medical expenses, prescription drugs, dental visits, and renovations.
Students, of course, can claim tuition, books, and other educational expenses. It is also possible to claim tuition paid to approved international institutions. The list of approved schools is listed on the CRA website. While the T2202A (tuition and enrolment certificate for Canada) is being issued by Canadian schools, additional forms are used by international schools. These include the TL11A (for universities outside Canada), TL11C (for commuters to the United States), and TL11D (for educational institutions outside Canada for Canadian residents). You may need to follow up with the school’s international office to get these forms. Students can transfer tuition amounts or carry forward for future years. The transfer can be made to a parent, grandparent, or spouse, but the school must complete the transfer section. Include interest repayment made towards student loans (a non-refundable tax credit) because it can lower your tax bill.
If an online platform is your chosen option for filing taxes, keep all receipts for six years because CRA could request that documentation within that time frame. Since there are criminal convictions and fines for tax evasion or false reporting, you may want to consult a tax accountant or income tax professional when in doubt.
Featured Image: Start preparing early for taxes and keep good records throughout the year. | Pixabay