How to Prepare for Tax Season

by Barry Choi March 1, 2016 / No Comments

I have a confession: I hate doing my taxes. Whenever the new year rolls around, most people get excited as it’s a fresh start. But for me, fear slowly creeps in as I know tax season is just around the corner. I imagine not everyone has the same phobia as me when it comes to taxes, but I doubt many people actually enjoy doing their taxes.

It’s been especially stressful for me the last year as I started to freelance more, which meant I had to keep track of all my income, receipts, and expenses while trying to figure out what tax credits I qualify for.

To make my life a little easier I decided that I’ll be using an accountant. During my first consultation, he said it really comes down to paperwork. As long as I have my paperwork in order (which I do) then there’s no reason to be stressed. Not everyone is organized so here’s a checklist of things you need to have ready when it comes time to do your taxes.

Information from last year – You’ll want to have your prior year’s notice of assessment and tax return. These items are essential since it’ll tell you what your RRSP contribution limit is and what numbers to use for your current tax return are.

If you’ve lost these documents, don’t stress out. Your notice of assessment can be downloaded directly from your CRA account and it’s not mandatory to have your tax documentation from last year.

Your current tax slips – This is where things can get a bit complicated if you’re not organized. You need to gather all the tax slips from any income you earned during the year. The most common tax slips are T4s, which cover employment income; T5s for interest, dividends, and certain foreign income; and T3s for investment income from mutual funds in non-registered accounts.

Students and former students should also make sure they have their T2202A since they’ll need it to be eligible for tuition, education, and textbook tax credits. Most of these documents are required to be delivered by the end of February. If you haven’t received them yet, contact your college or university as you may have to download the form on your own.

Receipts – Always keep receipts for anything that you think may be tax deductible. Everyone is aware that RRSP contributions can be deducted, but other expenses where you might get a tax credit include medical expenses, charitable donations, transit passes, and moving expenses. These deductions vary from province to province so it’s well advised to do some research or seek out professional help when filing your taxes.

Parents can often get additional tax breaks for childcare expenses, children’s fitness and arts programs, adoption expenses, tuition payments, and child support/alimony payments.

The final word

Keep in mind that although most of the paperwork required to file your taxes are easy to obtain, you may still need to do some additional work. Although your bank will issue you a trading summary, you still need to manually calculate your capital gains and losses. Freelancers, small business owners, and landlords will obviously have to keep detailed records of their revenue and expenses.

With this checklist, hopefully you’ll feel less stressed about doing your taxes. I know I am.

Flickr: bradhoc