It’s almost that dreaded time of year when taxes are due and you’re getting your T4’s and other tax slips in the mail.
First things first, your income tax return is due on April 30th, however, if you own a business, it’s due June 15th. Keep in mind that if you owe taxes, regardless of when your file date is, your payment is due on or before April 30th or you will be penalized and charged interest.
This is a good time to mark these critical dates in your calendar because you’ll be automatically charged a penalty of 5 percent of your balance owing and then one percent each month that your return remains unpaid for a maximum of 12 months. Oh, and that doesn’t include the interest, which is compounded daily on outstanding balances and penalties.
Now that you know when you have to file, here are some key tips to make sure you keep as much money as possible for you and not give it to the government:
Save in tax-efficient accounts
The government has a couple of savings plans that you can benefit from now and in the future. To be honest, if you’re not already using them, it’s too late for this year’s return but it’s definitely something to start implementing this year for your 2019 taxes. What you always want to do is invest in a way that allows you to pay the least amount of tax possible. That’s where the Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA) come into play. Contribute to your RRSP every year since you get a tax deduction for the contribution made – an added bonus is having it automatically deducted from your pay BEFORE it’s taxed. All investment income earned is free from tax and you don’t pay tax until withdrawals are made. If you are over the age of 18, set up a TFSA immediately to your maximum ability. You pay no tax on investment earnings and all the withdrawals are tax-free. Why pay tax on investment earnings if you don’t have to?
Income split for family tax savings
Sharing is caring and income splitting can help your family with their tax savings. For seniors who are receiving a pension or Registered Retirement Income Fund (RRIF) payments, pension income splitting between spouses means you can now cut your tax bill and potentially reduce the impact of the Old Age Security (OAS) clawback! Not only that, you can also share your Canada Pension Plan (CPP) benefits for more tax savings. There are many strategies that you can put in place for your investments and family members who are taxed at lower rates. It’s best to talk to your accountant or financial advisor about what works best for your household as it can be tricky.
Take advantage of tax-free perks at work
You work hard and so why shouldn’t you take advantage of all the tax-free perks that your employer may offer. As mentioned earlier, have your RRSP deducted pre-tax from your pay cheque. Make sure you make pension contributions that your employer will match wholly or partially. Other perks: moving costs paid if it’s for work, personal counselling, up to $10,000 of death benefits and education costs could all be available to you – at no additional tax cost. So, make sure you read and understand your employee benefits package.
Know all your deductions and credits
You should always enlist some form of expert help for your taxes, whether it’s a tax-filing company, accountant or financial advisor. Many libraries offer free clinics around this time of year. This is important because you don’t want to miss out on any deductions. Governments change the rules all the time, especially when a new party comes into power. For example:
- For Ontario renters, get a receipt from your landlord for rent paid in 2018. This will help determine whether you qualify for the Ontario Trillium Benefit, which is a refundable tax credit for low-income families.
- If you’ve made donations to a charity, you can claim them up to five years after they occurred.
- For new homeowners, you qualify for the $5,000 first-time home buyer’s tax credit – keep in mind that you or your partner cannot have owned a home either of you lived in four years before the purchase.
- And even though the textbook tax credit was eliminated, student loan interest is deductible and if you paid tuition at a recognized post-secondary institution, you may be eligible to claim your tuition or carry it forward to higher earning years.
One last piece of advice: every person 18 or older should file a tax return as they could be eligible for the GST/HST credit, which is a non-taxable quarterly payment. A single person who is making up to $44,000 is eligible for the credit. Now is the time to get all your receipts, documents and tax forms together so that you are ready to meet that April 30th deadline.
If you have questions about the Canada Revenue Agency, here is the contact information you need: www.canada.ca • Have an income tax question? Call 1-800-959-8281. • Wondering where your refund is? Call 1-800-959-1956. • Waiting for your GST credit? Call 1-800-959-1953. • Waiting for your Canada Child Tax Benefit or Universal Child Care Benefit? Call 1-800- 387-1193.