Entrust your income tax in the right person
Would you have your car repaired by your hairdresser? Of course not! If, like most people, you know nothing about income tax, go to a professional accountant. He will look at your financial situation and advise you accordingly. Most accountants will make an evaluation of their fees depending on your financial situation. It’s obviously more expensive than doing it yourself, but it is usually worth it.
If your current “accountant” is your brother-in-law or a friend whose only competence is knowing how to work with an income tax software, be careful! Although these softwares are easy to use, they are more effective when the person using them knows about accounting. You must understand what information the software is asking for. For example, the software will ask you: Do you ask for GST and QST credit applications? For one person? Do you want to transfer your credit applications to your spouse? You must know the prerequisites, and most of all the consequences of your answers. If you do your income tax on paper, we highly advise you to use one of these softwares. It will save you time and it will be easier for you to transfer the tax amounts as the years go by.
Your old receipts!
Have you found old receipts that you forgot to claim, like charitable donations or medical fees? You can ask for adjustments on your past income tax. You might have been entitled to a bigger tax return than what got!
Charitable donations
Are you are in a relationship and both of you have made charitable donations? If so, only one of you should claim them to maximise your credit return. You can even accumulate your donations for up to five years and enjoy a bigger tax return. There are two levels of credit, the first percentage applies to the first 200 $, and a higher credit is given for any sum of money exceeding the first 200 $. If you give 200 $ per year, you are entitled to a tax return of about 65 $. However, if you accumulate your 200 $ receipts during five years (maximum period), you will then declare 1 000$ in charitable donations and your tax return will be of about 450 $ rather than 325$ (5 x 65). That’s an extra 125 $ in your pockets.
Medical fees
Make sure that the spouse with the lowest income claims all the family’s medical fees. However, make sure that this person has a sufficient income to take up the maximum credit. You may also claim all medical fees for parents or grand-parents under your care.
Credits
Verify all the possible credits since we tend to forget some. Deductions for public transport, school books, federal credits for children’s sports (maximum 500$), etc.
RRSP
Contribute to your RRSP to the maximum. Of course, this is easier said than done, but it remains the best way for beneficiaries to lower their income and to get a reimbursement. Also think about spousal or common-law partner RRSP, because it allows for maximum tax return and minimum income tax payment when withdrawing money from the RRSP account for retirement or before that if need be!
Special RRSP
If your retirement is just around the corner, put money into the QFL or CSN RRSP. By doing so, you will get a 15 % federal tax credit and 15 % provincial tax credit. For a maximum contribution of 5 000$, this represents a 1 500 $ cash return in addition to your regular tax return. This type of fund is not as beneficial for younger people because the returns are usually lower and the money must remain in the fund until retirement, with certain exceptions (buying a house, going back to school).
Children’s declarations
If your child earned a little money this year (part-time job, babysitting, etc.) you should do an income declaration for them, even if it is not required. The advantage is that they will start to accumulate unused contribution rights for their RRSP, which they will be able to use later on.
Unused RRSP contributions
If you have unused contributions in your RRSP, it may be interesting to use them now. You may even consider asking for a loan to do so. Caution! Analyse your financial situation carefully before getting a loan and try to reimburse the loan in a short amount of time, a year or two, maximum. Financial institutions will offer you to reimburse the loan during 10 years…That’s a long time, and a lot of things can happen in 10 years.
Other credits
Don’t forget to reduce your interest rates on your student loans, and of course, daycare, summer camps and day camps.
RESP
Contribute to your children’s RESP. With the 10 % provincial benefit and 20 % federal benefit (minimum, depending on your income), you will receive 30 % on a maximum contribution of 2 500 $, for a 750 $ return. That’s interesting!
Too good to be true?
Avoid financial propositions that seem too good to be true. For example, donations that should allow you to receive more than the actual donation itself! Or, RESP contributions that shouldn’t cost you a thing, or almost! These techniques are often the result of a number of manipulations, and even if it goes through in your declaration, it doesn’t mean that the government won’t come back in a few years to claim its dues! When that day comes, it will hurt!
Obviously, these simple tips are mainly destined to people with an income and not to entrepreneurs or self-employed individuals. Don’t hesitate to consult a specialist to get a realistic view on your personal financial situation!
