Personal tax season is upon us. Now is the perfect time to offer ways to simplify the process and save money when it comes to your personal tax return.
Below are five tips to help ensure your tax package is accurate and complete.
Create an annual document checklist
This checklist is a simple document that lists slips received, the source of the slip, and any additional important notes, such as the date the slip was received. Some examples of these types of slips include T4s, T5s, T4OAS, RRSP, T4A, T3s, and T2201s. A list can ensure that you have all the documents needed for filing your tax return while reducing the risk of missing a slip because some slips are not issued until the end of March. As well, a checklist should reduce any follow-ups needed by the tax preparer.
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Summarization of various income streams
Farming, business and/or rental income should be organized and detailed for each operation separately. Each synopsis should detail the income received and the relevant expenses incurred for the year. This approach allows you to easily see cash flows from the operation, which can improve the decision-making process and ensure that income and expenses are not inadvertently missed. Discuss these expenses with your tax preparer. For example, you can claim a percentage of your household expenses for reimbursement of a home office based rent expense. A summary will also simplify the tax preparer’s compilation process, thereby reducing associated costs.
Tracking medical receipts
Proper tracking of medical expenses throughout the year can provide valuable tax credits that would be otherwise lost. Travel expenses for medical services that are more than 40 kilometres (one way) from your home for services not available locally can be claimed. A tracking document with a column for the date, the doctor, a description of the medical service/appointment, and the total kilometres travelled is all that is needed. Finally, if you must travel at least 80 km (one way), you may be able to claim accommodation, meal, and parking expenses in addition to transportation costs.
Keep a copy of all original files
Returns are filed electronically, but the Canada Revenue Agency may request the original documentation. For your tax preparer, providing the summary of annual transactions is beneficial because it expedites the preparation process and reduces associated costs. But you will also need to ensure that you have the proper receipts for items listed on the summaries provided and these receipts should be saved for seven years in the event CRA requests them.
COVID-19 benefit payments and repayments
Lastly, with the tumultuous year, many individuals received (and some repaid) COVID benefits. It will be important to make note of each of these types of transactions for the tax preparer so proper treatment can be assured.
By organizing your records and understanding the types of documents required by your tax preparer, you can simplify your personal tax return process and reduce the related fees associated with it.
Colin Miller is a chartered accountant and partner with KPMG’s tax practice in Lethbridge. Contact: colinmiller@kpmg.ca. He would like to thank Shaylene Koester and Karrie Geremia of KPMG for their assistance with writing this article.
