Sunday, June 23, 2024

Adulting 101: 5 things you need to know before tackling your taxes this season


Spring is just around the corner, and for Victoria, that means a few things are certain – cherry blossoms are blooming, warmer temperatures are on the horizon, and the inevitable – tax season is upon us!

If you’re like many people, preparing your taxes each year can be a daunting task – most of us have never received any formal training in the subject, it was never taught to us in school (required course, anyone?), and it can sometimes be a frustrating (and stressful!) time for some.

Fortunately, there are some great (local!) resources to help navigate the treacherous tax season waters, such as popular group Black Is The New Red. Serving up their financial prowess spread across not only their over 6,000 members, they have professionals from many areas to add their expertise to the conversation with zero sales pitch.

The Facebook group’s resident tax expert Casey Ralph, CPA of C. Ralph & Associates has even offered up his insight into a few of the most important points when it comes to preparing your taxes this year, answering popular questions to things you may have always wondered about – or didn’t even think of! Because you can never be too prepared, right?

Without further ado, let’s dive headfirst into 5 things you absolutely need to know before tackling your income taxes this season:

1. Filing taxes late – or not at all! Are there penalties?

It’s always a good idea to file your taxes properly and before the deadlines – it literally pays to be on time here!

  • If you end up owing on your tax return, you could get dinged – late filing fees plus interest can be charged – up to 17% plus interest on a first offence and up to 34% on a second offence! 
  • Filing deadlines for individuals are April 30th, and June 15th if you’re self-employed!
  • If you don’t file at all, you’re risking losing out on receiving:
    • a refund if it is due
    • GST/HST credit
    • Guaranteed Income Supplement (GIS)
    • Canada Child Benefit
    • Working Income Tax Benefit (WITB)

2. Who can (and should!) claim transferable credits?

Are you sitting pretty on credits you could be claiming for? Read ahead to find out!

  • Medical expenses:
    • Generally best to claim lower-income spouse
    • Best to claim all medical expenses on one spouse
    • Threshold is lesser of $2,268 or 3% of net income
  • Tuition Tax Credit:
    • Can transfer up to $5,000 of the current year tuition amount to a spouse, parent, or grand parent
    • Can carry forward unused tuition credits for future use
    • Generally best to claim by the higher income spouse
  • Donations:
    • Best to combine donations with your spouse
    • If you donate small amounts annually, consider combining two or more years
    • Ensure you have an official donation receipt in the event the donations are questioned by the Canada Revenue Agency
  • Child Care Expenses:
    • You can claim to $8,000 per child under age of 7, and  $5,000 per child aged 7 to 16
    • These are required to be claimed by the lower income spouse
    • Child care expenses can include day nurseries and daycare, caregivers providing childcare, educational institutes, day and sport camps, and even boarding or overnight schooling

3. Filing as single, common-law or married – even if you’re not!

Relationships can be confusing enough, so making sure you give the Canada Revenue Agency the right status update can help you avoid tax issues down the road.

  • You put a ring on it? Congrats! Make sure you update the CRA accordingly to avoid a hefty tax bill
  • Common-law and married statuses are technically different, and couples must be living together for 12 months in a row to be considered common-law for tax purposes. If you have children together, then you’re considered common-law as soon as you begin living together
  • Lovebirds might share everything, but you both still need to file taxes separately. Couples can’t file a joint return in Canada, they’ll always file individually so one partner won’t be held responsible for the other’s tax debt

The rental market in Victoria is a hot one, and the list of deductibles you can claim on your tax return if you have a rental income is long – read below for what that entails!

  • Deductible rental expenses:
    • Advertising
    • Insurance
    • Interest (mtg, loc, bank charges)
    • Office expense
    • Legal, accounting, and other professional fees
    • Management and administration
    • Maintenance and repairs (important to confirm items are expenses in the period and not capital)
    • Property taxes
    • Travel
    • Utilities

5. Some credits are null as of 2018!

It’s important to keep in the know on what you’re entitled to in the way of credits this year and going forward, and we have detailed a few changes that the CRA has made this past fiscal year.

  • You can no longer claim the Children’s Fitness Tax Credit or the Children’s Arts Tax Credit as of 2018
  • The Universal Child Care Benefit (UCCB) has been replaced by the Canada Child Benefit (CCB), meaning you can no longer claim the UCCB as of 2018
    •  Although UCCB has been eliminated, if you have payments that have been received in 2018 for years prior, they would still need to be reported. Also, any UCCB repayments can still be claimed

Tax season can be an overwhelming one, but having financial gurus in your corner such as the ones in Black Is The New Red at your disposal definitely helps. Don’t forget to join their Facebook group among members like chartered professional accountant Casey Ralph for continued financial tips – they’re currently even offering discounted tax preparation for people who join!

Suddenly that pile of T4s doesn’t seem so terrifying..

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