Preparing your taxes can be an intimidating process. With the ever-changing Canadian tax laws and regulations, it is no wonder many Canadians are overwhelmed when they file their taxes. Having a good understanding of what is required from tax preparation services in Canada will make the process easier and less stressful.
Here are ten things you should know before you file your Canadian tax return.
1. Understand All Available Deductions
Canadians are able to claim deductions on their income tax which can save them a significant amount of money. These deductions vary based on personal circumstances, such as whether an individual is a student, whether they have children or dependents, or if they’re making charitable donations.
2. Know Your Residency Status
Your residency status will determine what types of income you need to report on your tax return, as well as the type of credits and deductions you may be eligible for. It is important to understand whether you are a resident or non-resident of Canada for tax purposes before filing your returns.
3. Understand the Difference Between Income Earned Inside and Outside of Canada
If you have worked in multiple countries, then it’s important to understand how different income sources will affect your taxes in Canada. Different types of income from abroad may be subject to different rules than those earned within Canada itself, so it’s important to make sure that all income sources get declared accurately on your tax return.
4. Don’t Forget About Self-Employment
Self-employment means that any profits earned through freelance work, such as consulting or tutoring, must be reported on the appropriate tax forms and taxed as if they were regular employment income; failure to do so could result in fines or penalties down the line. Also, keep track of expenses related to self-employment activities, as these could potentially be deducted from taxable income on the return as well!
5. Take Advantage of Pension Splitting
Many couples find themselves in a situation where their combined incomes can place them in a higher marginal tax rate bracket. This can lead to greater overall financial deductions from their income, reducing the benefit of their hard-earned savings.
Fortunately, an innovative solution exists for spouses receiving pension incomes. They can legally split these incomes between both spouses, thus allowing them to drop into a lower marginal tax rate bracket and potentially save significantly over time.
6. Claim Family Benefits
Most people are unaware that there are numerous childcare benefits and credits available depending on if you have dependent children. For those parents that do, taking a few extra minutes when filing to submit the proper claims can mean tremendous cost savings throughout the entire tax year.
7. Consider Hiring a Professional
For those trying to take charge of their taxes, hiring professional tax preparation services can be a smart solution. Not only will they be able to check the accuracy of work and paperwork, but they may also uncover helpful deductions that might have otherwise gone unnoticed.
8. Make Sure All Dates Are Correct
Ensure that all dates listed on documents match up with what has been filed, failure to do so could delay processing time and result in additional fees being owed later down the line.
9. Remember Deadlines
The deadline for filing taxes in Canada is April 30 each year; failing to meet this date can result in hefty fines or penalties being assessed against taxpayers who fail to submit their returns by this time.
10. Double-Check Everything
Before submitting any forms or documents, double-check them for accuracy. One small mistake could mean big headaches later down the line if errors aren’t caught early enough.
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