Thursday, June 4, 2015

20 Musts for Tax Prep - Get prepared before you go

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Taking your tax information to a tax prep service is a no brainer, right? However, to avoid longer wait times for your tax return to be completed, it is good to follow these important tips when bringing your documents Into a tax prep service in Calgary.

1.  When to bring your taxes in

The Canadian income tax deadline for filing is April 30th of each year. If April 30th falls on a holiday or a weekend, it is the next business day that the taxes are due by. It makes perfect sense to bring your tax documents and information in as soon as you possibly can, as soon as those documents are available to you. Of course, we know that some people have a tendency to procrastinate until the last minute when it comes to filing taxes. It is best to give the tax prep service a few days before the deadline just in case there is extra information needed.

If you are self employed in Canada, or your spouse ran a business in the year, you have until June 15th of the year to file your taxes. This does not mean that you have an extension on the taxes due, you still have to pay taxes due on April 30th. Self employment usually means more paperwork and more bookkeeping, which in turn leads to more work for the tax prep service. We highly encourage small business owners to get themselves set up on a quarterly or monthly bookkeeping package. this drastically reduces the workload when preparing taxes.

2. Don't be late

Filing taxes late means automatically being charged a penalty of 5% of the balance of the taxes you owe. there is also a 1% penalty for each month you fail to file with a maximum of 12 months. Do not confuse this with interest. The CRA also charges interest which is compounded on a daily basis on any outstanding balances and penalties. Ouch! This is why it is so important to go see a tax prep service well in advance so that you do not have to pay any penalties or interest if there is a balance owed.

3. Notify your Tax Prep about Amended returns

If you made a mathematical mistake or forgot to include income or expenses in a previous income tax return, you can file a T1-ADJ to request an adjustment . The CRA also has available on their websites an area that you can request to make changes to a previous income tax return online. Please check the CRA website.

4. Provide identifying information

When visiting a tax prep service for the first time, you will need to give them your identification information and the identifying information of anyone who is claimed as a dependent on your tax return. this means personal information such as:
  • Your date of birth
  • Your spouse's date of birth
  • Your Social Insurance Number
  • Your spouse's social insurance number
  • Your dependents date of birth
  • Your dependents name
  • Your spouse's name
  • Your dependents income if there is any
  • Your dependents social insurance number

There may be more identifying information that the tax preparer will need depending on your situation.

5. Bring last year's tax return

If you are visiting a tax prep service for the first time, it is vital that you bring with you your last year's tax return so that the tax preparer can review and understand how your income taxes have been filed in the past. this is important to do, so make sure you have it ready in with you when you visit the tax office.

6.  bring your tax slips

If you have employment income, pensions and annuities, Eli benefits, Old Age Security benefits, CPP benefits, RRSP income, workers compensation benefits, partnership income, dividends or interest, or self employment income and have received a T slip for your income you will need to bring that T slip in to the office. This includes:
  • T3 (Mutual funds, REITS, ETFs)
  • T4 (Employment income)
  • T4A (Certain scholarships)
  • T4A (Other pensions & annuities)
  • T4E (EI Benefits)
  • T4A-OAS (Old Age Security benefits)
  • T4AP (CPP benefits)
  • T4 RSP (RRSP income)
  • T4 RIF (RRIF income)
  • T5 (Investment income (interest, dividends, certain capital gains)
  • T5007 (Worker’s compensation benefits and/or social assistance payment)
  • T5013 (Partnership income)
  • T2200 (Conditions of employment/allowable employment expenses)
  • T2202A (Tuition)
  • RC62 (UCCB benefits)
  • T101 (Exploration and development expenses)

7. Bring notice of assessment or notice of reassessment with RRSP contribution slips

If you've contributed to an RRSP during the tax year, you will need to bring in the information regarding the amount and the RRSP fund. On the notice of assessment or notice of reassessment from the CRA it will tell you what your RRSP limit is for the tax year and how much can be contributed to the RRSP fund. These notice of assessment or notice of reassessments are mailed out to you in the beginning of the year by the CRA.

8. Bring medical expense receipts

If you have a doctors note that requires you to purchase anything due to a medical reason, there's a very good chance that it can be used as a tax-deductible medical expense. The CRA Canadian Revenue Agency will allow tax deductions for medical expenses for anything from air conditioners to wigs so long as there is a medical prescription by a doctor. please visit the CRA website for more information on eligible medical expenses.

9. Bring Transit pass receipts

Transit pass receipts can be entered to claim a tax deduction for transit pass expenses in Canada. Keep these receipts and bring them to your tax preparer when it is time to prepare your taxes. the transit pass receipts can be from metros, buses, light rail transit, subways, or any public transportation system. This encourages Canadians to use public transportation as a means to getting to and from work, and it's a great idea to make traveling tax deductible by making transit pass expenses eligible as a tax deductible expense.

10. Bring receipts for child care expenses

If you have a child under the age of 16 at the end of the tax year, you can claim the cost of childcare in most circumstances if the child had a net income of $11,138 dollars or less for the year. You can claim these child care expenses for you, or your spouse's child, or your common law partner's child. These expenses must be incurred in order that you or your partner could earn income from employment, carry on a business, attend school under certain conditions, or carry on research or similar work for which you receive a grant.

Be careful when choosing who you pay for child care expenses. These expenses must be paid to caregivers providing childcare services, day nursery schools or day care centers, educational institutions, day camps and sports camps , boarding schools, overnight schools, or camps in order to be tax deductible. if the child care services are provided by an individual, the individual cannot be the father or mother of the child, a person who is under 18 and is related to you, or another dependent in your household.

11. Bring receipts for child fitness and arts programs

This is an exciting tax deductible expense that you can deduct from your income on your income tax return. You can claim a maximum of $1000 per child for the fees paid relating to cost of registration or membership for your or your spouse's or common laws child in a prescribed program of physical activity. To qualify for this amounts, the program that your child is involved in must be ongoing and supervise, running at least eight consecutive weeks, or in the case of children camps, five consecutive days. These programs must be suitable for children, and requires significant physical activity, contributing to cardiorespiratory endurance + muscular strength, muscular endurance, flexibility, and balance. You can include sports programs such as hockey or soccer, golf lessons, horseback riding, sailing, bowling, and other physical activity sports.

12. Bring records of moving expenses

Is your new home at least 40 kilometres closer to the new place of work or school? Good news! You can deduct expenses related to moving to your new home. This includes Realtors commissions, transportation and storage costs, travel expenses including vehicle expenses, meals, accommodations, temporary living expenses for up to 15 days, any costs related to cancelling of a lease of your old residence, costs related to changing your address on legal documents, replacing driver's licenses or vehicle permits, as well as utility hook ups and disconnections. You can also deduct costs to maintain your old residence with a maximum of $5,000. If the property was vacant after you moved and it took you a reasonable amount of time to sell the property, you may include interest, property taxes, insurance premiums, and the cost of upkeep of your home that you moved from.

13. Bring income and expense records related to small business activity.

If you have a small business, you will need to report all financial activity including income and tax deductible expenses on your tax return. Your tax prep service will categorize expenses to work best for your situation. Bring all receipts, bank statements, invoices, bills, and financial documents in to your tax prep office.

14. Bring receipts for Commissioned employee expenses

If you earned commissions either reported on a t4a to you or income from commissions that was not reported to the CRA, you are able to deduct certain expenses from that income. Bring all receipts for expenses relating to commissioned employees income. just like owning a small business, you are able to deduct some expenses.

15. Bring receipts for charitable donations

Charitable donations are tax deductible on your Canadian income tax return. You do not have to claim all Your charitable donations in the tax year you donated them. You can carry these amounts forward and claim them on your return for any of the next five years. Your tax prep service will need to see receipts for charitable donations.

16. Bring records of income and expense for rental properties

Are you earning income for rental properties? make sure you bring all financial records of income and expenses as well as mileage reports relating to rental properties. Your tax prep service will prepare a T 776 for you based on your information.

17. Keep records of mileage in a mileage log

If you have a small business, commission income, or any source of income where vehicle mileage or vehicle costs and expenses are income tax deductible, it is very important that you keep a mileage log in your vehicle with full documentation of business trips and travel related to business. take a notebook and enter the date of the trip, the purpose of the trip, the kilometers on the odometer at the start of the trip, and the kilometers of the odometer at the end of the trip. subtract the starting kilometers from the ending kilometers to get the kilometers driven in the trip for business. Your income tax prep service will need to see this for entering vehicle expenses and mileage claims on your tax return.

18. Bring documentation for home office expenses

For small businesses that operate out of their home, you can deduct a portion of the home expenses such as heating and electricity, rent, utilities, and repairs and maintenance. These expenses can be deducted in proportion to the size of your home office. This is typically anywhere from 5 to 20 percent of the expenses. To figure the percentage, take the square footage of your office and divided by the square footage of your home.

19. Bring records of tool expenses

If you are a tradesperson who was required to purchase and use their own tools on the job, you can deduct the expenses for tools used on the job. Keep track of these receipts and bring them into your tax prep office.

20. Double check all of your information

Before you come into a tax prep service, double check that you have all your information and that all your information is correct. I make sure you have all the bank statements and all expense receipts, and make sure you have all information related to income with you. In Canada, you are taxed on worldwide income if you are considered a resident of Canada. You will need to include all of your income from all worldwide sources. Your tax prep service can advise you how to enter the information in the most beneficial way for you. Keep all your information stored safely in case of a tax audit anytime in the future. remember, it is your responsibility to provide this information if there ever is a CRA audit in the future. 

Dymas Services Limited provides income tax preparation and income tax prep for individuals and corporate tax prep. We are based out of Calgary Alberta and can prepare taxes for anyone in Canada. we hope to work with you and look forward to meeting with you soon.

See you this tax season!

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