We all do it. We create this list of “improvements” we want to make to our lives, that for some reason can only start on January 1st (and usually only lasts until January 31st). I’m as guilty as the next person in this, so in a twist on the usual (we’re not talking about weight loss or true love) let’s consider some resolutions that we can make now, and hold onto all year, around our money.
Let’s resolve to…
- Keep better track of our finances: Many of us struggle with living pay cheque to pay cheque and sometimes it is just a matter of monitoring our spending. Instead of a food journal, think money journal. A spreadsheet to watch the money in and the money out will keep you aware of what you have to work with with each pay period and help with future planning and any debt repayment.
- Submit our taxes on time: Many people fear the “tax-man”, a.k.a., the CRA, but don’t. If you follow the rules laid out for you as a taxpayer, there isn’t much to fear. Even if you can’t pay your tax bill on time, you need to file it on time. It is the late filing that can result in heftier penalties. File your return and talk to the CRA about a payment plan if that bill is bigger than you can manage by the deadline of April 30. Talk to them upfront, don’t just ignore it and wait for them to come to you.
- Take advantage of tax credits: Are you maximizing the tax credits and deductions you qualify for based on your personal situation? Things like child care credits, moving, or medical travel expenses, and simply applying for the GST/HST rebate or Trillium Benefit (if you’re in Ontario). Everyone’s situation is different and depending on yours there might be something you don’t realize that you’re missing out on. Life changes do impact our taxes and can make things feel a bit overwhelming; perhaps now is the time to consider TurboTax Live Assist & Review and get unlimited help and advice as you do your taxes, plus a final review before you file. Or, choose TurboTax Live Full Service and have one of our tax experts do you return from start to finish.
- Buy a new house: This is a huge, exciting step, but how do you get there? Are you saving money or hoping for a windfall? If cash is holding you back you can consider the Home Buyer’s Plan that will allow you to withdraw up to $35,000 of your RRSPs to build or buy a qualifying home. If this isn’t an option for you, perhaps you don’t have the RRSP funds, then you need to work on that budget and create a plan to set money aside each pay to go towards that down payment. Know what you can afford to pay, not just what the bank is willing to lend you. If you do buy, don’t forget too the Home Buyer’s Tax Credit of up to $5,000, if you qualify.
- Head back to school: Have you been holding off starting school, going back to school, or doing some re-training? Perhaps this is the year. We have tuition tax credits available to us federally for both post secondary education fees and skills training, that you may qualify for. Also, the CRA now has the Lifelong Learning Plan that allows you to withdraw from your RRSPs to pay for full-time education, if you qualify. The new Canada Training Benefit provides a refundable tax credit, $250 per year (which can accumulate to a mix of $5,000), EI support, and even leave provisions to allow workers to take time off for training while maintaining job security.
- Start a business: Is this your year to take that great idea and branch out on your own? Once you know what you want to sell, make sure you understand what running a business means for you, financially. You need startup money and you need to plan what you are using it for. As a sole-proprietor there is no difference between you and your business when it comes to your taxes; it is filed as a part of the same T1 General tax return. All income earned is yours to report on your return, however, there are many deductions that you can make to reduce that tax burden. Knowing this in the start-up phase will help so much at tax time. Keep track all year, perhaps using QuickBooks Self-Employed, and come tax time, you’ll be ready to pop everything into TurboTax Self-Employed and complete it with ease.
- Live within our means: This is a tough love resolution, and we all need it. It is easy to get caught up with spending and overextending, especially around the holidays. If your bills are piling up come the New Year or at tax time, that means you need to plan better throughout the year so the holidays don’t become a dreaded, stressful time. Sock a little bit away each month and the cash will be ready when you need it or perhaps it is a year where you need to scale back and work on debt repayment. Plan and be prepared.
- Deal with our health matters: Hopefully you’ll stay healthy this coming year, but for many, they won’t, or they’ll have a close family member that becomes disabled or seriously ill. This is a scary thought, but a reality as our population is aging. There is help for you financially by way of some non-refundable tax credits that you might become entitled to depending upon who is impacted (you or a dependant) and the disability or infirmity.
- Get ahead of our taxes: I have to emphasize two core points here.
- Most importantly, stop ignoring the brown envelopes. Yes, we all know who they are from, but most often, it is just a statement or notice of assessment. However, in the off chance there is an issue, this is how you will be notified and ignoring it does not make the problem go away, in fact, it can make it worse. Get in front of the situation before it takes over.
- If you find you owe taxes every year, or you have a side gig where you earn some extra cash that you’re not being taxed on yet, then consider going to your employer and asking for a bit extra to come off your pay. You need to fill in a new TD1 and tell them how much, but it will ease the pain to have it not even come into the bank vs having to dish it out later.
- Keep these resolutions for more than the month of January: They say that about 80% of us only keep our resolutions for 6 weeks. Make this year different for yourself, especially if you have these long-term goals. You can do it, and honestly, sometimes it is easier than losing those last 10lbs.
Good luck to everyone with your resolutions, and have a very safe, healthy and happy New Year!
Accounting educator, business strategist, and advisor.
Turbo Tax Canada blog editor and writer.
Susan has been an accounting professional for over 20 years, and has been working with businesses and individuals and their taxes for the past 12. Education is a passion for Susan, and when not writing or talking about tax for TurboTax Canada, she can be found speaking at events, teaching at Mohawk College, and working with many businesses and entrepreneurs through her own accounting advisory practice. Susan is known to be approachable but pulls no punches when it comes to the reality of business finance and taxes.