Time To Claim All Those Tax Deductions And Credits
David Christianson, CFP, R.F.P., TEP
For your 2007 return, there are a number of new tax measures - especially for students and pensioners - so make sure you catch all your available deductions and credits.
The big new provision for older folks is the opportunity to split eligible pension income with a spouse, for tax purposes. This can save a lot of tax, so be sure to learn about how this works and some ways you can generate pension income, even if you are not a member of a pension plan.
As you know, the deadline for filing is April 30, extended to June 15 if you have income from self-employment. However, you still have to pay any tax that is due by April 30.
You will still be waiting for your T3 slips and T5013s slips, as they have a March 31 deadline. These are issued to provide your details on trust investments (including mutual funds and income trusts) and limited partnerships, respectively.
If you have an accountant preparing your return, check with him or her to see if they want to get a head start on your return with the information you have, or if they want you to wait until you have all slips. In all cases, get a checklist of the information you need and check it off as you get it.
Good advice is imperative if you have a complicated return or decisions to make about how to claim expenses. If you do it yourself, tax software is a must, especially if you will be splitting pension income or doing any other discretionary planning.
The list includes QuickTax, QuickTaxWeb, TaxWiz, TaxTron, Taxman, StudioTax, GenuTax, TaxFreeWay and Ufile.ca, the consumer version of the professional DrTax.
Some of these packages provide free single use for people with family incomes of $25,000 or less, and other prices range from free (with limitations) to $10 for single use with netfile ability, to as much as $70 for a more advanced business package.
Most professionals use Tax Prep, DrTax or CANTAX, which cost considerably more.
You can use the government’s netfile facility to avoid paper filing and to speed up your refund. Go to the CRA website (www.netfile.gc.ca) to determine if your return is eligible. You will need the access code from your personalized label sheet that CRA has mailed to you.
If you don’t have access to a computer you may be able to TELEFILE, if your return is fairly simple. Call 1-800-959-1110 to see if you qualify. If so, it will prompt you to enter your information using your keypad.
When it comes to minimizing your taxes, there’s no substitute for some good knowledge and advice. If you have business income, multiple residences, an investment holding company or professional corporation, lots of investment income or other complexities, I strongly encourage the use of a good accountant. For future planning, set up a meeting for strategic advice after tax season is over.
For do-it-yourselfers, read a book like Evelyn Jacks’ latest, Essential Tax Facts, or one of the annual guides put out by the major accounting firms.
If you are expecting a refund, then file early, but remember, you get a refund because you paid too much during the year. See if you can arrange your tax withholdings or installments to keep more of your money throughout the year.
On the other hand, if this is your primary savings vehicle, then keep those withholdings high. It’s inefficient, but a lot better than nothing. Next month, we will give you some ideas on how to best use your refund.
In the meantime, try to remember that spring is right around the corner!
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The preceding article is provided as an introduction to this topic and should not in any way be construed as a replacement for proper professional advice.
This article originally appeared in the Winnipeg Free Press on Friday, March 7, 2008.
David Christianson is a fee-only financial planner and investment counsel with Wellington West Total Wealth Management Inc. His column, ‘Dollars & Sense’ appears Fridays in the Winnipeg Free Press.