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What you need to know this tax season and how to plan for the next one

If you haven’t filed your taxes yet, this Easter weekend might be the time to cross that off your to-do list.

Canadians have until May 2 to file their taxes, thanks to the traditional April 30 deadline that falls on a Saturday. For those who are self-employed, that deadline is June 15.

But before you rush to your tax filing platform of choice, here are some answers to questions you may have about filing your taxes this year and how to better prepare for the next one.

When should I file my taxes?

The tax deadline is especially important for Canadians who owe money in taxes because filing late can carry penalties. If you’re expecting a net positive tax return, filing late can delay the money you’re getting back.

Andrew Bauer, an associate professor of accounting at the University of Waterloo, says the financially smart thing to do is to get your tax credit as soon as possible.

“Our refund is an interest-free loan that he gave to the government,” Bauer said. “The longer you wait to get your money back, the more opportunity cost is wasted.”

However, filing too early can also have its drawbacks. It can sometimes lead to information being lost, such as proof of income or a deductible you can claim, said Bruce Ball, vice president of tax for Chartered Professional Accountants of Canada.

“If you later realize there was other income that you didn’t put on your tax return, you need to go back and amend your tax return or report it,” Ball said.

What do I need to know about this tax season?

There aren’t many changes this year in the tax system, both tax experts said. The Canadian Revenue Agency describes in its website some of the changes in available incentives.

If you received a COVID-related support payment in 2021, you should have already received a T4A.

Anyone who paid a COVID benefit is eligible to claim a tax deduction in the same year the payment was made or the year the benefit was received.

Canadians continue to be eligible to receive a tax credit for home office expenses incurred while working from home. Under the simplified method, you can claim up to $500 this year if you worked at home for at least 50 percent of the time during a period of four weeks or more.

Residents of Ontario, Manitoba, Saskatchewan and Alberta are eligible this year to receive the Climate Action Incentive Payment, a credit intended to help offset the cost of federal pollution prices. However, the payment will be disbursed this year in quarterly installments and the amount will depend on the province of residence, marital status and the number of children in the household.

What saves me more on taxes: an RRSP or TFSA?

Part of maximizing your tax return is figuring out which tax-advantaged savings account is right for you in any given year.

A Registered Retirement Savings Plan (RRSP) allows you to make contributions that are tax deductible. If you contributed $5,000 to an RRSP in 2021, for example, that amount is deducted from your total taxable income. When you decide to withdraw money from the account, that money is taxed as income.

Contributions to a Tax Free Savings Account (TFSA) are not tax deductible. However, the money invested in the account can grow tax-free.

Bauer says there are several considerations to take into account when deciding to invest in one account over the other, including the time horizon in which you expect to need the money. TFSAs allow your contribution space to be replenished after you withdraw money, whereas that is not the case with an RRSP.

But an important deciding factor is how much you expect to pay in taxes now compared to when you can withdraw money from the account.

“Generally speaking, RRSPs probably make sense for people in higher tax brackets because they get upfront tax deductions when they deposit the money,” Ball said.

If you’re saving money for retirement and expect your income to be lower then, for example, you’d be saving on taxes by taking the tax deduction this year and paying a lower tax rate at retirement.

CLOCK | Should you get a TFSA or an RRSP?

How to choose between a TFSA and an RRSP

Andrew Bauer, an associate professor of accounting at the University of Waterloo, says the choice between contributing to a TFSA or an RRSP depends on your income now versus your expected income during the year you choose to withdraw funds. (Photo Credit: rangizzz/Shutterstock) 2:46

Why can’t the government just send me a bill?

Some countries, like the UK, have non-refundable filings that avoid the process of having to make sure you’ve paid your taxes by a certain date.

“I expect that in the next few years we will probably get to that point,” Bauer said, adding that the tax filing process can be streamlined for those whose income and tax deductions are reported on official receipts.

While filing taxes has been greatly simplified over the years with the digitization of tax returns, Ball says the challenge in going one step further and eliminating the refund system is that there are so many tax credits and deductions. different that a filer can claim.

“Credits and deductions, the CRA doesn’t know about them. So it’s hard for them to pre-fill a return,” he said.

How can I plan ahead?

You can get ahead of each tax season by keeping track of expenses that may be eligible for a tax deduction or credit.

And if you forget to keep track of those expenses, Ball recommends going back to where you made the tax-deductible payment and requesting a new receipt for the expense.

The Canada Revenue Agency provides information on available tax credits and deductions on its website. (Justin Tang / The Canadian Press)

Another way to plan ahead, according to Bauer, is to fill out a TD1 form if you plan to make contributions to your RRSP so your employer can deduct less income tax from your paycheck.

“That’s definitely one place where planning can really make a difference,” Bauer said.

It’s also helpful to familiarize yourself with available tax credits and deductions, Ball said, adding that the Canada Revenue Agency makes that information available on its website.

For Canadians whose taxes are not complicated to calculate, knowing the tax system allows you to skip the $100 to $200 you may be paying an accountant to file your tax return.

“Sorry to all my accountant friends, but if you have a simple return, with a little time and care, you don’t need anyone else’s help,” Bauer said.

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