Benjamin Franklin once said, “Nothing is certain except death and taxes.”
Whether you’re studying for your degree, working at your first job, or even about to retire, tax filing is an inevitable part of life here in Canada.
If you are filing for the first time – or just need a refresher – this tax-filing process can be a little confusing, but it remains a valuable lesson in financial planning, which will benefit you for years to come.
It is due to that uncertainty, that your tax experts at TurboTax have provided the Top 5 Tips for First Time Canadian Tax Filers.
1. Get Organized
Have all of your information available and this includes your T4 statements from your employer, and all other income statements and tax slips sent to you by anyone else. Also, make sure to have receipts, charitable donation slips, and whatever else you might think you need for reporting your income and claiming deductions.
While preparing your business records, assuming that you are not using QuickBooks which does that for you, it’s a great idea to have them all organized by category which will help you enter the information quicker onto your T2125 in TurboTax.
The Canada Revenue Agency (CRA) advises you to keep your tax records and documentation for 6-years post-filing, in case your return is selected for review.
To help, we have provided a checklist to help you identify what documents you should be gathering at tax time.
It is highly recommended that you sign up for the CRA My Account which is where you will have access to many of the slips and details of your tax history that you might need for filing your return.
- Employment Income (T4)
- Employment Insurance Benefits (T4E)
- Tuition/Education Receipts (T2202A)
- Canada Child Benefit (RC66)
- Social Assistance Payments (T5007)
- Interest Payments Received (T5)
- Dividends Received (T5)
- Mutual Funds (T3 or T5, and if sold, T5008)
- Workers’ Compensation Benefits (T5007)
- Old Age Security and CPP Benefits (T4A-OAS, T4AP)
- Other Pensions and Annuities (T4A)
- Any other information slips
- Medical Expenses
- Child Care Expenses
- Adoption Expenses
- Moving Expenses
- Interest Paid on Student Loans
- Political Contributions
- RRSP Contribution Receipts
- Charitable Donations
- Professional or Union Dues
- Employment expenses such as Tool Costs for Tradespersons and Apprentice Mechanics
- Child, Spouse, or Common-Law Partner Support Payments
- Office-in-Home Expenses
- Much more…
- Disability Tax Credit Certificate
- Notice of Assessment/Reassessment
- Canada Revenue Agency Correspondence
- Rental Income and Expense Receipts related to earning rental income
- Declaration of Conditions of Employment (T2200)
- Automobile/Travel Logbook and Expenses related to vehicle use – personal and business
- Volunteer Firefighters and Search and Rescue Certification
- Sale/Deemed Sale of Stocks, Bonds or Real Estate
- Business, Farm, or Fishing Income/Expenses
2. Create a CRA My Account
With the Canada Revenue Agency’s My Account, you can track your refund, check your benefit and credit payments, view or change your return, view your RRSP and TFSA contribution limits, and even set up direct deposits for payments. One of the most popular, and important, features of TurboTax is Auto-fill my return, which allows you to instantly import official tax information (such as T3’s, T4’s, T5’s, and RRSP investment receipts) directly from your CRA My Account.
With just a few clicks, your tax return is populated with the most accurate and up-to-date information available, so you can start filing your return much faster. Additionally, and most importantly, when you file your tax return and forget to include a tax slip, the CRA will charge a penalty and interest on the missing slip, no matter how much the slip was worth. Using My Account, TurboTax pulls in all of your slips so you never miss any slips.
Keep in mind however that not all slips are issued at the same time, and some are not released until ends of March, such as RRSP contributions slips and T3s. If you are expecting those, and have not yet received, wait so that your return is accurate.
3. File Your Return Accurately
If you’re going to submit your return using NETFILE, then you have to make sure your information is accurate. If any of your personal information such as name, date of birth, or SIN does not match what the CRA has on file, your tax filing will be rejected. Double-check everything before you submit it, and make sure your name is exactly as it appears on your Social Insurance Number document.
New Canadians will have to paper file their first tax return, and then NETFILE going forward.
Another reason to be as accurate as possible is because of penalties and interest. The penalty for omitting or misstating information on your return is either $100 or 50% of the amount of understated tax or overstated credit, whichever is greater.
It is never advisable to lie on your tax return, as you might be faced with consequences more severe than just fines and penalties.
4. Filing by the Tax Deadline
Filing your return late means that you might have to pay penalties as well as interest on any balances you owe to the CRA. It can also delay the payment of some of your tax benefits.
- For individuals, the typical personal income tax filing deadline is April 30th (unless there are special circumstances that cause a postponement).
- If you are self-employed or earn self-employed income, you must file your taxes on or before June 15; but if you have balance owning then you have to pay it on or before the April 30th deadline (unless the payment deadline has been moved due to extenuating circumstances resulting in a government change).
- If you filing your incorporated business taxes, then you should calculate your deadline based on the fiscal year-end of your business. This is usually December 31 for most businesses, so the deadline would be June 30, with your taxes due with 3 months, unless your net income is over $500K, and then your taxes are due within 2 months of your fiscal year-end.
5. Use The Most Popular Tax Preparation Software – TurboTax
If the thought of doing your taxes, and maximizing all of your deductions and credits, have you a little unsure…we’re here to help. No matter your income or complexity of your return, you have an expert in your corner with TurboTax.
Make the tax season as simple as possible with our TurboTax products. Consider TurboTax Live Assist & Review if you need further guidance, 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 your return from start to finish.
*TurboTax Live™ Full Service is not available in Quebec.