by Ron Clarke
Do you have taxes due?
Or is a refund coming?
Either way, it’s time for tax prep.
Some people feel overwhelmed when it comes to the preparation of their tax return. If Canada Revenue Agency (CRA) tax rules and its perennial changes aren’t intimidating enough, there are the confusing tax slips, convoluted tax forms and complex tax schedules.
Here’s a simple plan for tackling tax return preparation if you choose to do it yourself.
Step 1. Find a copy of last year’s tax return and review it. In general, it may be a useful road map. Not that every year is the same, but it may draw your attention to items you may have forgotten about.
Step 2. Make notes and a list of questions that must be investigated, or information found. It could be costly if something is missed so don’t trust your memory.
Step 3. Enter all your personal information. Be accurate and complete. It appears CRA is asking for more and more personal detail each year.
Step 4. Fully open and lay flat all your slips, setting aside information clearly not needed for input. For tax slips, check the name and set the slips in piles gathering like items such as T4 income, T5 interest, etc. If there is a spouse or dependant also being prepared, complete this for each person. In fact, preparing them at the same time, or “coupling,” is best so that full advantage of the transfer of incomes, expenses and credits can take place. Typical of this reporting are medical expenses and donations. Also, joint slips with two names can be input on either person’s tax return but all information on that slip must be put on that one person’s tax return. Or the joint slip can be apportioned 50/50 between the two people. Notably, it needs to be reported consistently year to year.
Step 5. Enter the information onto the tax return, ticking each item as it’s input. Once input, take a second look at the detail and then check what you have input. Correct figures? Numbers transposed? Right box or line? Enter what you can easily identify. Surprisingly, those items you aren’t sure about or aren’t sure where to enter, often become apparent moving through the input of familiar items, just like doing a test in high school. And when math is required, use a calculator… your cell phone has one.
Step 6. For those items still without a home, read carefully because there may be instructions, including directions not to enter on the tax return. Another option is to visit the CRA website or even Google it.
Step 7. When you think you’re done, double check to make sure everything has been answered and input. If using do-it-yourself software, this is the time to use the optimization option, if it has such a feature. This may do a pension split, or move the medical claim from one person to the other, or do the same for donations. Then check the diagnostics and investigate. On this point, some software programs accept overrides and then permit e-filing, only to be rejected by CRA or end up as a CRA review. Further, personal changes and reporting of certain assets, incomes and expenses may require separate e-filing of schedules or even paper filing of your tax return. The diagnostic check should identify these requirements.
A note for proprietors, while it’s true that your tax return doesn’t have to be filed until June 15, if taxes are payable, the tax balance must be paid by April 30.
There you go.
Tax prep done.
Ron Clarke, owner of JBS Business Services in Trail, provides accounting and tax services.