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7 Helpful Tips for This Year’s Tax Season

7 Helpful Tips for This Year’s Tax Season

Tax season is upon us once more. Each year, individuals and businesses are tasked to review their financial transactions and file their tax forms. Last year, Canadians filed around 31 million returns to the Canada Revenue Agency.

For most Canadians, the deadline for filing tax returns this year is on April 30, 2023. Since this date falls on a Sunday, the CRA may still accept tax returns received or postmarked by May 1, 2023. On the other hand, self-employed individuals have until June 15, 2023, to file their returns.

If you haven’t filed your returns yet, here are seven tips to help you make the most of this year’s tax season.

1. Review Previous Tax Returns

Take time to review past tax returns. Make sure your previous tax returns have the correct and complete information. Overlooking these mistakes could lead to penalties and fines when the CRA notices them.

Should you notice any errors or omissions on your previous returns, applying for the CRA’s Voluntary Disclosure Program is best. This program lets you bring these issues to the CRA’s attention and avoid penalties. If unsure how to proceed, you can look for firms offering voluntary disclosure assistance.

2. Note Your Deductions

You or your business may qualify for tax deductions. These deductions will lower your taxable income. These refunds are not a government freebie; they are your money.

Do this every tax season and claim your allowable deductions. Some deductions you may claim for your business include the following:

  • Business start-up costs
  • Advertising
  • Fuel costs
  • Insurance
  • Professional fees (e.g., legal, accounting, etc.)
  • Maintenance and repairs, etc.

3. Claim Your Credits

Depending on your industry, the CRA may offer tax credits to your business. These credits can lower the tax you must pay, so check with your province or territory.

You can also use the Canadian Government’s Business Benefits Finder to check whether your firm qualifies for tax credits. Some tax credits are industry-specific, while others benefit businesses implementing employee training and other valuable programs.

4. Get Your Documents in Order

Tax season can be hectic, and making mistakes or omissions when filing your taxes can happen. Still, accuracy and timeliness are essential to ensure the CRA doesn’t flag your firm for a possible audit.

Businesses usually use Form T2125 or Statement of Business or Professional Activities. This form allows you to report business or professional income and expenses. You may need to fill out multiple forms depending on the nature of your business activities.

Take the time to fill out and attach relevant forms and slips. Throughout the year, keep tax-relevant documents organized in one place to make filing your tax returns easier. Your accountant or bookkeeper will help you in this process.

5. Monitor Your Investment Losses

Businesses often make investment decisions to grow their business and increase income. However, not all investments result in growth. Some of them may fail and cause significant losses to your company.

While this situation could be better, you may still be able to get some of this money back. If your business has incurred investment losses in the past year, you may be able to deduct half the amount from your income.

Business investment losses can cover several situations. Some of these cases include the following:

  • Disposing of a share of a small business corporation
  • Disposing of a debt a small business corporation owes you
  • A small business corporation owing a debt that turns into bad debt by the end of the year
  • Owning a share of a small business corporation that goes bankrupt within the year, etc.

To claim your allowable business investment loss, fill out Chart 6 of Guide T4037, also known as Capital Gains.

6. File Taxes Online

While many companies and individuals prefer physically filing and mailing their tax returns to the CRA, doing it digitally also offers significant advantages.

The Canadian government offers various tax-related e-services for individuals and businesses. These online platforms allow you to quickly check your tax records and file necessary documents for tax purposes.

Filing taxes online is also a lot faster than mailing your documents. This feature is handy when trying to catch tax deadlines.

7. Keep Old Records

After filing your returns, hold on to your documents for at least six years. This practice helps you stay organized and ready should the CRA have any questions. It also allows you to review your financial records more easily.

Tax season is an annual affair, so individuals and businesses must stay ready. While the process can be complicated and time-consuming, the tips above can help you stay on top of your tax obligations and stay in the CRA’s good books.

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