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Tax nightmares? Tips for a smoother return

tax nightmaresDoes the thought of getting your tax information together send waves of dread through your body?  Do you wake up in the middle of the night in a cold sweat, dreaming that you’re drowning in a shoebox full of t-slips and receipts?  Time to wake up from that nightmare!  I can’t promise to make tax preparation completely painless and fun, but if you follow some simple steps, the process will be less – uh – taxing (pun intended!).

I’m a big believer that setting things up properly in the beginning will save you time in the long run.  So, this week, before the bulk of your slips start arriving in the mail, we’re going to complete 3 simple tasks to make your life easier.  When I say simple, I mean it – promise.

Task 1 – The list

Make a list of all the slips that you expect to receive for your tax return this year.  Start by looking at last year’s return (you do still have a copy, right?) and add/subtract slips as necessary.  I used to do this on a handwritten piece of paper stuck to my fridge, and that method worked just fine.  I’d put it there in January and then as slips arrived in the mail, I’d strike them off my list.

I decided after a year or two that I was too lazy to rewrite the list each year, so I made an Excel file with the list and just printed the page each year, or used the strikethrough function to cross them off right in the file.  A list making app on a smartphone would work for this as well.

The checklist that you’re making is specific to you and will contain only your items.  If you’d like to look at a more generic checklist to get an overview of the credits available, the best one I found in my quick Google search was this one (last item under “Individuals”).

Once you have checked off all the items on your list you’ll know you’re ready to go.  No sense in getting knee deep in your return only to discover that something is missing.  Even worse would be filing without a slip and having to file an adjustment.  The absolute worst would be having CRA make the adjustment for you – they charge hefty penalties for missing slips.

Task 2 – The file

Where is my T4 again?  I think I saw it in the laundry room….

Start a file.  Or a box.  Or whatever works for you.  The point is to put all the slips in the same place when they arrive so that you don’t misplace anything.  I have two files in my desk drawer – one for my husband and one for me.  I actually start these files at the beginning of the year so that during the year when I get receipts for things that I may be able to claim (like medical expenses for example), I put them in the file right then.  In January/February of the following year when the other slips start to arrive, I just add them to the file.  When I’m ready to start my return, I’m not scavenging the house to find missing slips.  They are exactly where I need them to be.

Task 3 – The software (or the accountant!)

If you’re planning on having an accountant prepare your return, now is the time to start calling around to find someone that you can work with.  If you have an accountant already, great!  You can skip this step.

If you’re planning on preparing your return yourself, that’s great too.  Just please make sure you know what you are doing.  If you have no idea what your form should look like when you’re done, no software on the planet is going to save you.  Either spend the time to learn what you need to do or hire someone to do it for you.

The list of software options that are certified by CRA is on their website at this link.  The only one on this list that I have actually used is StudioTax, which is free.  You can find my review of that software (last year’s edition) here or download the software here.  I’ve also heard good things about TurboTax, but have never used it myself.  You can purchase Turbo Tax Basic, Standard, Premier,or Home Business (affiliate links).

Once you’ve got your software chosen, get it installed and ready to go.  We’re going to use it next week when we do some RRSP number crunching.

That’s it – you’re off the hook for a while.  No more waves of dread, cold sweats or nightmares.  Have a great week!

January 28, 2013

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