Getting ready for tax time
Prepare now for taxes next year. It’s never too early to think about paying and saving on taxes. Here are some helpful tools you can use to plan for tax time.
Adjust withholdings
When you are first hired at a job you will fill out a TD1, Personal Tax Credits Return. It gives your employer information they need to calculate how much tax to withhold from your paycheque. Some employers have their employees fill out a TD1 each year to have the most up to date information. If you have any changes in your life, such as marriage, job change, or start school, you can re-fill out the form.
You may increase how much tax is withheld each pay by filling out the “Additional tax to be deducted” section. If you wish to have less tax withheld fill in the section about tax credits you can claim for the year.
Make tax payment
If you run your own business, work multiple jobs, or have lots of investments through the year you can make estimated tax payments throughout the year. If you owed tax in the last few years of $3,000 or more or will owe that amount this year, you will need to be set up with instalment payments for your tax liability. Instalments are due on the 15th of March, June, September, and December of each year. You can either pay through the mail or on My Account on the CRA website. If done through the mail you will need to fill out Form INNS3 to go along with the payment.
Plan for refund
If you consistently get a refund each year or plan on getting one next year, have a plan on how you will receive it. When you file your tax return you can fill out to have your refund directly deposited into your bank account. You can also log into the My Account on the CRA website to connect your bank account. All refunds and credits will go to that account. If you are planning on making a big purchase, don’t rely on getting the refund by a certain date. Refunds done through direct deposit are received quicker than through the mail. Make sure you file your taxes on time, by April 30th, to receive all your tax benefits on time.
If you don’t expect to get a refund you should still plan on how you can save any if you do get some. You can put any refunds and credits you receive into a savings account, retirement account, or tax-free savings account. You can deduct any amount you put into your retirement account on your next year's tax return.
Organize records
You should keep all tax records for 6 years. Have a system to keep track of all your records, be it in paper or through in electronic forms. If you prefer having physical documents, have a folder where you can organize each document as it comes to you. If you prefer saving through electronic forms you can have everything saved on a secure external hard drive or encrypted cloud drive.
Some documents you should watch for are:
T4, Statement of Remuneration Paid (Income tax slip)
T4A, Statement of Pension, Retirement, Annuity, and Other Income
T5, Statement of Investment Income (Bank savings account)
NOA, Notice of Assessment
Copy of filed tax return
RRSP contributions
TFSA contribut