Preparing for T1 Season

In terms of preparing for the tax season, most taxpayers don’t even give it a second thought. Generally you wait for all the t-slips that you think you are supposed to get, and then file either through an online program or through your tax preparer.  For those using a professional accountant they  expect everything to be complete. Then comes the summer or fall when the CRA start the matching process.  A few unpleasant things happen among which might be a letter from the CRA notifying you about a reassessment due to unreported income – the missing slip! The goal here is to help prevent you from dealing with unnecessary consequences and the headaches associated with it.  So here goes the list, albeit a brief one! Don’t you love a list? I will make it simple.

  • It is best to wait for all your slips and not be in a rush to file. The last set of slips you will receive here in Canada is usually the ones related to investments, i.e. T3 and T5s.  If you withdrew RRSP in the prior year, the bank is required to send you a T4RSP prior to March 31.  I you have not received one contact your branch.  If you forgot to file any T-slip, be it a T3, T5 or T4RSP, you may be in for a nasty surprise call the omissions penalty.  So even if the forgotten investment account only shows $1.50 on the T5, do yourself a big favour and report file it on your personal tax for the year it is dated.  Don’t hold on to it because it seems minor.  It will cost you down the line.
  • ALL your income must be reported even if your business have been in a loss for 5 years or that rental property you own is in Bora Bora. Sadly, there seems to be a misperception that the CRA does not require you to report very low income amounts. Canadian taxpayers are required to report ALL income from ANYWHERE in the world. Beware! Big brother is watching.
  • If you decide to file your tax separate from your spouse, be sure to report his or her’ net income on your return. It will save you the aggravation of the reassessment that will be sure to occur.  Especially in the case where dependent children are involved is this important as some Ontario benefits are based on family income.
  • If you are running a business organize your receipts. It will save you time, fees and yes, further aggravation when your accountant keep sending emails about the missing 50% of your receipt.  Don’t forget to keep your vehicle mileage log updated.
  • Give yourself time to file.  The last minute dash might be fine for those with a simple tax situation, but for those who have more complex situations, it just makes for headaches on your part.
  • Keep all your receipts.  If you are running a business you need to keep all your receipts for a period of time.  The required time for an individual and a business differs so be sure to ask your accountant what the CRA retention policy is. 

My grandmother use to tell us “Penny wise, pound foolish.” For those who are unfamiliar with this, it is basically saying get good advice from an experience professional before you make a decision that will cost you greatly later.

So get organized and get professional advice! You need it before, and not, after the fact!