Years of doing corporate and small business accounting for clients and preparing income tax returns for them has taught me two things about most Canadians.
First, we are a nation of procrastinators when it comes to taxes.
Second, we live largely in the present. What that means in accounting terms is that our memories about what happened from one year to the next can be very hazy indeed.
That has prompted me to remind my clients and others that as this last quarter of the year 2017 moves into full swing of colorful autumn glory, it is good to set aside a quiet time to go over your receipts for the year, file them in logical categories, and get the worst of your tax preparation over before the year draws to a close.
All you have to do then is plug in the receipts for the last few weeks of the year. By the end of February, when you have any T-4s or last minute receipts in, you can begin your tax preparation without any of the panic and angst that so often accompanies the season.
There is no benefit whatsoever to waiting to the last minute to address your tax issues. In fact, if you are using a tax preparer and you wait until the last minute rush and you don’t have all your receipts, you may not get filed on time.
Even if your tax preparer manages to make the deadline, you will wait much longer for any refund owed because all the other procrastinators across the nation are filing at the same time, and Canada Revenue Agency is just swamped.
Clip all your receipts into logical categories, such as medical receipts, car receipts, household receipts, income, claimable expenses, etc. Establish a system where once you have filed your taxes, you still have easy access to all your receipts.
Every year, when people are suddenly re-assessed on taxes from two to three years earlier, they go into panic mode again when they cannot even locate the receipts that they filed in “a good, safe place.”
Take the time right now to designate some corner shelf of your house or closet for tax receipts and keep everything for each year in one box. That way, if you re re-assessed and you want to appeal the decision, you have proof at your fingertips.
Remember that if you cannot produce proof, you will have to pay, even if you know you don’t owe the money. Keep your receipts for at least six years after you file your return.
Every year I see people face this dilemma and it is disheartening to pay money you don’t really owe just because you cannot put your hands on the receipt that proves your case.
If you are self-employed, even though you have until June 15 to pay your taxes, now is also a good time to get your receipts in order. By next June, will you really remember all the things you are entitled to claim? Remember that everything lost or forgotten that you could have claimed is just more money out of your pocket.
If you have done something different in 2017 that you haven’t done in a long time and aren’t sure of the tax implications, now is the time to book an appointment with your tax preparer and secure advice on how to handle it. If you wait to the last minute, you may not have time to gather all the documents you will need to claim the tax relief that should be coming your way.
One prime example we see often is a person who sells their principal residence after living in it for 20 or 30 years.
Since 2016, you have to be able to provide the Canada Revenue Agency with such key information as the date of acquisition, proceeds of sale, address, etc. to claim the full exemption for principal residence sales. However, what you cannot claim is a loss on your home sale, an item that many people are surprised to learn.
You have a better chance of getting all the tax breaks you deserve if you keep your affairs in excellent order and don’t try to pull everything into place at the last minute.
Certified professional bookkeeper and certified tax specialist Elena Ivanova is managing director of Piligrim Accounting Inc., a national accounting and tax preparation service based in Richmond Hill, Ont. You can reach her at email@example.com.