Whether you’re stressed or relaxed, it’s time for tax prep 2024.
If you are one of the stressed and feel overwhelmed when it comes to the preparation of your tax return, you aren’t alone.
If Canada Revenue Agency (CRA) tax rules and its perennial changes aren’t intimidating enough, there are confusing tax slips, convoluted tax forms and complex tax schedules.
And if you are chillaxed about tax prep, there may be some “ah ha” tips below, so maybe read on.
Here’s a simple plan for tackling tax return preparation if you choose to do it yourself.
# 1. Find a copy of last year’s tax return and review it, after all 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. If things vary a lot for you year over year, maybe open up the past 2 or 3 years of tax returns.
# 2. As you review them and their slips, make notes and a list of questions that should be investigated and information found.
Don’t trust that you will remember things, that could prove to be costly.
# 3. When you start your prep, enter all your personal information.
Be accurate and complete. It appears CRA is asking for more personal details each year.
# 4. Fully open and fully read the slips, setting aside information clearly not needed for input.
For tax slips, check the name and set the slips in piles, gathering like items separately for each person such as T4 slips, T5 slips, etc. However, like items such as donations and medical expenses can be gathered without concern for who’s name is on the slip. If there is a spouse or dependant also being prepared, preparing them at the same time is best so that full advantage of the allowable transfer of incomes, expenses and credits can take place. Very typical of this simultaneous prep are medical expenses and donations that can be put on one person’s tax return or split.
# 5. Noteworthy are joint T slips with two or more names on the T slip.
These follow different rules from medical and donations expense reporting as outlined in #4. Joint T slips 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. BUT the reporting of any particular T slip needs to be reported the same way as it was the first year it was reported to CRA, and every year thereafter. You can’t report it 50/50 one year, and then 100/0 the next year, then 30/70 the year following. That’s considered tax evasion and is illegal.
# 6. 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? Input in the correct 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.
# 7. For those items still without a place to go, read the slips 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.
#8. Then, just 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 calculate 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 final tip, 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 ya go, you’re done 2024!
Bring on 2025.
Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous columns visit www.JBSbiz.net.
