You’ll have to pay fines if you don’t file your taxes on time. That alone is a compelling excuse to file your taxes as soon as possible. If you have not done your taxes contact your accounting firm in Toronto. There’s also the fact that doing the job now saves you time and aggravation later. With that in mind, here are three tax-filing tips straight from the website of the Canada Revenue Agency.
Tip #1: Electronically file your taxes
In general, filing your taxes electronically is preferable to mailing them in. The explanation for this is that electronic filing makes the process go faster. A letter may take up to a week to arrive by mail. It’s instantaneous with electronic filing. This influences how long it takes for the taxes to be assessed. This, in essence, decides the length of time it takes for you to receive your refund. So, if at all necessary, register electronically. You’ll get your money back sooner!
Tip #2: Make a claim for credits and deductions.
Quite likely, you’ll use your tax return to demand a few deductions and credits, such as RRSP contributions and charitable donations. All of this is good and dandy. However, you might be able to make a stronger case. There are numerous tax deductions available, including home office space, tuition, student loan interest, and so on. The more claims you make, the less you will have to pay. If you’re unsure, consult an accountant, who will help you determine which deductions and credits you’re eligible for.
Tip #3: Don’t forget your investments!
Last but not least, don’t forget to claim your investment gain when filing your taxes with the Canada Revenue Agency. The CRA receives this information from banks and brokers, but it is also your responsibility to include it on your tax return. You could face penalties or fines if you don’t report it.
By filing your investment taxes meticulously, you can save a lot of money. Stocks come with a number of credits that can save you a lot of money. Both of these credits are available if you correctly file your taxes.
Assume you had $100,000 invested in the iShares S&P/TSX 60 Index Fund (TSX:XIU). That’s a 2.5 percent dividend yielding large-cap TSX portfolio. On a $100,000 investment, the yield translates to $2,500 in annual dividends. That’s a substantial sum of money. You might believe you’d have to pay a lot of taxes on it. But reconsider. Dividends are eligible for a large tax credit. The dividends are increased by 38 percent, taking the total to $3,450. The grossed-up sum is then subjected to a 15% tax credit. What’s the end result? A tax credit of $517! And you can get it with a regular brokerage account — no RRSP or TFSA needed!
Capital gains tax status is potentially also more lenient. If you made a 10% ($10,000) profit on your XIU stock, you would only have to pay taxes on half of it. When opposed to work revenue, this essentially cuts the tax rate in half. That’s a significant amount of tax savings, but only if you file your taxes on time. If you don’t, fines will eat away at your savings.
