#MakeItMakeSense is a series from the Star that breaks down personal finance questions to help young Canadians gain more confidence and understanding around financial literacy.
Our question this week from 20-year-old Alex is sure to be top of mind for many Canadians this month.
“What are some tips or things we can keep in mind when that time comes to file our taxes?” she asks.
To #MakeItMakeSense, we brought in money expert Jessica Moorhouse for advice ahead of the 2022 tax season.
When are tax returns due?
The deadline is usually on April 30, but because it falls on a Saturday this year, Canadians now have until May 2 to submit their taxes to the Canada Revenue Agency (CRA), giving people a little more wiggle room if needed.
“Whether you’re submitting through your accountant or tax software or if you’re doing it the paper-based way, that means having it submitted or postmarked in the mail by May 2 at the latest,” Moorhouse said.
For those who are self-employed, the deadline to file taxes is June 15.
For all workers, Moorhouse advises that people aim to complete their taxes prior to the deadline instead of scrambling — and potentially forgetting — to file certain expenses.
What are some tips on preparing for tax season?
To get organized, Moorhouse advises scheduling part of a day to set up a meeting for yourself to get your taxes done.
If you wait until the weekend before the deadline, she says you may encounter problems like being unable to find a document or realizing you’ve misplaced an important piece of information.
“You want to give yourself some time to make sure that you can do it all on time,” Moorhouse said.
She explains while people are often flustered by all the details, depending on your situation, gathering your documents can be less complicated than you think.
“For most people who are just an employee, your tax situation is simple. All you need is a few T4s from employers and tax documents from financial institutions,” she said.
You can find slips you need under your CRA account or even find lists online from companies like TurboTax of all the possible documents you may or may not need, she says.
She adds it’s important to ensure all of your CRA information is up to date, from your marital status, to your direct deposit information and contact information.
Throughout the year in preparation for tax season, Moorhouse says people can either keep all necessary receipts and documents in a box or folder, or even take photos of them to store in a secure Google Drive or Dropbox.
“The best thing is always to kind of slowly get this stuff organized throughout the year. And if this is too late for your 2021 taxes, then you can start doing that for your 2022 taxes,” she said
How will the pandemic impact my taxes?
Many may see changes on their tax returns due to the pandemic. This could mean owing more money if they weren’t taxed enough for previous COVID benefits or if you got a raise or changed job, which could mean paying a higher tax rate than expected.
“Just also be aware that depending on your situation, you may owe taxes but it may be irregular because you wouldn’t normally get these benefits,” she said.
When it comes to filing home office expenses, Moorhouse says Canadians can either choose from the CRA’s temporary flat rate or detailed method.
Anyone who worked from home during the pandemic is allowed to claim up to $500 per person for in home office expenses under the temporary flat rate method. The government defines working from home as spending half the time working remotely at a residence for a minimum of four consecutive weeks.
The revenue agency will reimburse Canadians who worked from home at a rate of $2 per day for up to a maximum number of days.
If your expenses are more than $500, you can use the detailed method — which means claiming the actual amounts you paid, supported by documents like receipts.
“The biggest benefit of the temporary flat rate method is you are not required to keep documents to support your claim and your employer is not required to complete and sign a T2200 ,” explained Moorhouse, adding under the detailed method, people would need supporting documents and a signed T2200 from their employer.
Moorhouse says that for most people, it may make the most sense to complete the temporary flat rate method because it’s a straightforward process without having to collect extra documents.
What else can I claim?
There are numerous potential credits people can use, Moorhouse says. You can find a full list on the CRA site or easily receive suggestions using tax filing softwares based on their information.
One credit that Moorhouse highlights is moving expenses — which you may be eligible for if you fit the specific criteria.
“If you moved to work, or to run a business at a new location, or to study courses as a full-time student enrolled in post secondary education, your new home must be at least 40 kilometers closer to your new work location,” Moorhouse explained, adding there’s also the first time home buyers’ amount where Canadians can claim up to $5,000 for the purchase of a qualifying home.
Moorhouse also points to medical expenses as a potential credit, noting while an employer may cover some, people can still save their medical and dental receipts as claims.
Additionally, if you’ve donated to charities, there are tax receipts that can be noted on your forms, Moorhouse says.
“I think lots of people donate and then forget to get their (charitable tax receipts) but that can lower your amount.”
Additional tips on tax season
“Remember what a tax refund is. It means you overpaid your taxes. The government is literally giving you back the money that you’ve repaid. You paid too much and they’re like ‘Here’s your money back,’” said Moorhouse.
“A lot of people forget this fact and just think that it’s free money from the government but it’s literally your money they were holding on to throughout the year.”
With that being said, Moorhouse emphasizes if people are lucky enough to receive a refund, it is best to do something smart with it.
“If you have debt, put it towards your debt. If you want to put it towards low interest debt like your mortgage, do whatever feels good. Or maybe you don’t have a fully funded emergency fund and want to put it there first,” she said.
“You can also put it into your RRSP or TFSA. Invest it so it can grow because you didn’t’ need that money throughout the year, so you don’t really need that money now. Tuck it into a place where it can grow into a bigger amount in the future.”
Got a question or scenario that you’d like to see tackled? Reach out to Madi via email [email protected] and we’ll #MakeItMakeSense.
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