Year-end is busy for everyone, but making time to get your taxes in order for the new year can pay dividends. Whether you’re filing on your own or using the services of an accountant, you’ll need to make sure you have all of the necessary paperwork ready to go so that you don’t miss out on valuable deductions and opportunities.
Avoid last minute stress by preparing early. Here are a few things you can do now to be better prepared for the spring tax season.
Review your last assessment
Start the process by reviewing your most recent assessment. Have you experienced any big changes since then? If so, it’s a good idea to bring them up with your accountant ahead of your tax preparation to ensure you capture any additional advantages.
Make your RRSP contributions
An easy thing to tick off your list is to make sure your Registered Retirement Savings Plan contributions are topped up. These are deductible from your total income, which reduces your taxes in the year they’re claimed, with a contribution cut off date of March 1, 2023 for the 2022 tax year.
Income generated through RRSP interest, dividends, and capital gains also grows tax-free until it’s withdrawn, presumably at a time when your income is lower upon retirement. Making contributions regularly is generally better than adding a lump sum right before the deadline, but if you have room in your contribution limit and funds available, now is a good time to add to your investment.
Consider your other investments
Intense market volatility this past year has meant significant losses for some investors. Selling non-registered investments at an accrued loss before the end of 2022 may enable you to use capital loss to offset your capital gains. Ask a tax accountant if this scenario applies to you.
Add up your tax deductions and credits
Organizing your affairs early will help to capture any tax deductions or credits for which you’re eligible. For instance, if you’ve relocated for work, eligible expenses may be deductible. This could include real estate commissions, mortgage penalties, legal and land transfer fees, and some other expenses. If you rent rather than own, the expense of breaking your rental agreement or lease may also be covered.
Organize education and medical expenses
If you or your child is enrolled in post-secondary education, don’t wait until spring final exams are upon you to request receipts and make sure you have documentation for all eligible expenses. Take care of this early so that you don’t miss out on valuable savings on your taxes.
Medical expenses should also be organized and ready to go so that you can make all eligible claims when filing.
Capture new opportunities
Speaking with your accountant early will give you ample time to ensure you’ve captured any new tax measures that apply to you. For example, the Government of Canada recently made new investments in labour mobility. This initiative recognizes the expense faced by tradespeople and apprentices who temporarily locate, providing up to $4000 per year in tax recognition for eligible travel and relocation expenses.
When it comes time to do your taxes, one of the biggest frustrations people have is finding out that they’re missing crucial information. Getting organized well ahead of time means that you’ll be ready to supply all necessary documentation to your accountant to reduce your tax burden. It will also give you ample time to reflect on changes you’ve experienced over the past year to determine whether or not they’ll change your tax profile. Don’t forget to mention moves, marriages, new investments, or business ventures to your accountant.
As the saying goes, nothing is certain except death and taxes. Instead of feeling the springtime crunch when accountants and tax professionals are extremely busy, take the time to organize your next assessment at year-end, and check in early with your accountant if anything in your profile has changed over the past year.
Procrastinating won’t make your taxes go away, so this year prepare early and get ready to cash in on all the savings you can.