Let the scrambling begin: Canadians have two weeks to file tax returns
Thu Apr 15, 2:32 PM, Lauren Krugel, The Canadian Press, storyform yahoo finance
CALGARY – Many Canadians will be spending the next few weeks wading through paperwork and scouring their homes for months-old receipts, as the April 30 deadline to get their taxes in order looms.
“People hate doing this,” said Dennis Tew, chief financial officer at Franklin Templeton Investments Corp.
“They know that they have to go and find all their information. They know that they have to pull it together.”
Tew said he’s made a habit of getting his own tax return done early each year – mainly because his tax refund arrives that much quicker.
“I can spend it and use it in my life better than having it sit with the government for a few more months,” he said.
While Gena Katz, executive director of Ernst & Young’s tax practice, agrees it’s “silly” to put off filing a tax return if the government owes you money, she said it’s even worse to miss the deadline when it’s the other way around.
If you fail to pay your 2009 taxes by midnight April 30, the Canada Revenue Agency will charge a five per cent penalty on the balance owing, plus one per cent of the balance for each full month the return is late for up to 12 months.
“For people who owe money, they really have to file on time or at least pay on time because the penalties are pretty severe for late filing,” said Katz.
With two weeks to go until the taxman comes knocking, chronic procrastinators across Canada may be at a loss of where to start.
“All of a sudden you go into this panic because now you’re trying to find all of this information,” said Cleo Hamel, a senior tax analyst with H&R Block.
The government needs any information relating to income, so first and foremost it’s important to round up those T-slips.
The next priority is to track down forms and receipts related to any number of available tax credits – charitable donations, children’s health programs, childcare, home renovations, tuition, and healthcare costs.
“If the only thing you have is your income information, I know that by the end of it you’re not going to be happy with the result. You’ll probably owe money or maybe you’re not getting as much of a refund,” said Hamel.
“At least it would save you from any marks against your file with the CRA by filing on time.”
If the receipts for tax deductions turn up after April 30, it’s always possible to file them to the CRA for an adjustment later on, she said.
Once the stress of the current tax season passes, it’s probably a good time to start thinking about how to do things differently in 2010 tax year.
A system to collect any tax-related papers in one place year round is a must – and it doesn’t need to be fancy.
“Everyone laughs when I say ‘actually get the shoe box.’ And I literally mean ‘get the shoebox,”‘ said Hamel, who said it’s not uncommon for people to walk into an H&R Block location carrying a box full of paper.
It’s also worthwhile to get a head start on taking steps that will help make next year’s tax bill more favourable, said Myron Knodel, a tax and estate planning expert at Investor Group in Winnipeg.
One way is to sort out capital gains or losses on investments by the end of the calendar year. Losses from one year can be applied against another year’s realized gains, half of which can be taxable.
There’s no point in waiting for the government’s notice of assessment to arrive in the mail before contributing to a Registered Retirement Savings Plan, Knodel added.
A lot of people believe they have to wait until the government tells them how much room they’re able to contribute to their RRSP before making a move.
“The one thing that people aren’t aware of is that your RRSP contribution room for a year begins on Jan. 1 of that year, not when you receive your notice of assessment,” he said.
“With the RRSP, the earlier you can contribute, the longer you’re going to be able to tax shelter your investment income.”