In Canada, income tax returns are prepared and filed annually to determine how much tax a person or business owes to the government. There are several steps involved in income tax return preparation in Canada:
- Gather all necessary documents: This includes T4 slips for employment income, receipts for deductions and credits, and any other documents related to your income and expenses.
- Determine your tax filing status: In Canada, you can file your tax return as a single person, a married person, or a common-law partner.
- Calculate your total income: Add up all sources of income, including employment income, investment income, and any other sources of income.
- Claim deductions and credits: You may be able to claim deductions and credits to reduce your tax liability. Examples of deductions include charitable donations, business expenses, and moving expenses. Credits are amounts that can be subtracted directly from the amount of tax you owe.
- Calculate your tax liability: Use the tax rates and credits applicable to your income level to calculate the amount of tax you owe.
- File your tax return: You can file your tax return electronically or on paper. The deadline for filing your tax return is April 30 the year following the tax year.
If you need help preparing your tax return, you can seek assistance from a professional tax preparation service or use tax preparation software.
In order to relieve yourself from such hassle, you are recommended to rely on an expert who will handle the complexities of filing tax returns for you. In this blog, AccountingMississauga has shared some tricks to save your tax and tax credits.
1. Plan for home buyers
The CRA (Canada revenue agency) provides a grace period so that you do not need to make any payment to your RRSP (registered retirement saving plan) in the year of withdrawal or the subsequent year.
Here, it is to be noted that in case you fail to mention the repayment amount while making your tax return, after two years of the extended period, the amount will be added to your taxable revenue.
It is evident that the rules are complex but seeking advice from an expert in professional tax preparation service in Mississauga & Etobicoke or a nearby city before withdrawing money from your RRSP, can surely help you out in this.
2. The amount for children’s fitness
If your child or children are under the age of 16 or 18 (in the case of children with physical disabilities) and you have registered their names in a physical activity program, you or your husband or wife can claim the children’s fitness tax credit for up to $500 per child.
The physical activity program covers a vast area of activities and some of them are
- Sports (hockey, basketball, baseball), etc
You need to make sure that the receipt you received against the payment for the above-mentioned program, should clearly state that the program qualifies for the children’s fitness tax credit.
3. Medical expenditure
The amount you spend on your medical bills goes into the medical expense tax credit. This covers the payment to your doctor and the payment for prescribed drugs. At the time of preparing your tax returns, it is crucial for you to thoroughly count all your medical expenses, as it is an important part of your tax return.
4. Tax return preparation fees
Tax return preparation fees that you have paid to an accountant for arranging your personal tax return can be deducted in the situations mentioned below
- In case you have earned investment income, like interest or dividends
- In case you are an entrepreneur
5. Children’s art amount
Just like the children’s fitness amount, if you have enrolled your child’s name in a qualifying arts program, you or your spouse can easily claim the Children’s Arts Tax Credit for up to $500 per child.
In order to increase your tax-saving as much as possible, you are advised to keep the receipts of both the children’s fitness and arts amount for the preparation of your annual income tax return.
6. Canada employment tax credit
Your eligibility for the Canada Employment Tax Credit depends on the year of your employment. Only those who were employed in 2012 are suitable for them. For detailed information on this, contact your accountant who will assist you in your income tax return preparation.
Paying tax in Canada is our duty as responsible Canadian citizens and we all know that a substantial amount of our earnings goes to pay tax. We must aim to minimize the taxes payable as much as possible. That is why seeking professional help in this regard is the best way to deal with a complex task.