With tax season around the corner, K. Jeske & Company Inc. has some tips to help you protect your wealth and avoid paying more in taxes than you have to.
1. Take advantage of tax credits and deductions
Missing a credit is like leaving money on the table. Consider all tax credits and deductions you may be eligible to claim, including RRSP contributions, employment expenses, charitable donations, child care costs, tuition, and medical expenses.
2. Defer tax where possible
Deferring a tax bill to a future year allows you to keep your money longer and put it to work earning returns. There are a number of ways in which to do this. Here are some options to consider:
- Contributing to your RRSP by March 1st allows you to defer tax on up to 18% of your previous year’s income, to a maximum of $26,230.
- If you operate a business through a corporation, you may want to consider establishing an individual pension plan.
- If you’re selling an asset at a profit, you may be able to spread the capital gain over several years by deferring the collection of some of the sale proceeds.
- If you always receive a refund when you file your tax return, you may want to remit less tax throughout the year.
- When choosing investments, you may want to consider investments that provide a return of capital, which is not immediately taxable.
- If you have an established business, you may want to consider an estate freeze to lock in the current value (and tax liability) while passing on future growth to your children.
3. Take advantage of income splitting opportunities
You may be able to save tax by moving income from a family member at a high tax rate to one at a lower tax rate. New rules effective January 1, 2018 limit the ways in which this can be done, so be sure to confirm your eligibility before you file.
4. File on time
Filing late can be costly. If you have a balance owing and do not file your return on time, the CRA will charge you a late-filing penalty. The penalty is 5% of your balance owing on the due date of your return, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
The deadline to file is Monday, April 30th. If you’re self-employed, you have until Friday, June 15th; however, if you have a balance owing, you have to pay it on or before April 30th.
If you have overpaid the government over the course of the year, you’ll want to file your return on time and get your tax refund promptly, as the government doesn’t pay interest.
5. Keep your tax papers organized
Every piece of paper could mean a little less you have to pay in taxes. Here are some tips for keeping everything organized.
- Keep all your paperwork in one place so it’s easy to find at tax time.
- If you’re self-employed, keep a record of payments you receive, business-related purchases you make, and what their business purpose is. Track your phone and Internet usage for business and write off the appropriate percentage. If you use your car for business, document personal and business mileage separately.
- Keep a record throughout the year of your capital gains and losses from the purchase and sale of stocks.
- Scan your paperwork and save an electronic copy. Receipts fade over time and having scanned copies will ensure you have a permanent record.
We hope you found these tips helpful. If you have any questions about your personal tax return, please don’t hesitate to contact us at 604-534-7701 or firstname.lastname@example.org.