18
Feb
It’s the least wonderful time of the year – tax time!
That seems to be most people’s feelings towards getting through their annual tax return. In addition, there is usually some concern about what is tax relevant and what is not, and exactly what paperwork is needed. Taken together, this usually results in a higher payable/lower refund as deductions and credits are not maximized (and it’s likely a drawn-out process to boot, as there is a lot of follow-up). Here are some points to consider to make sure your 2024 tax return puts as much money as possible in your pocket and goes smoothly as well.
Major Life Events
While somewhat vague, this can be thought of as anything that happens in the course of a year that is not a typical year-over-year event. Certain events are always tax-relevant – death, birth, marital status changes, retirement, becoming disabled, pension transfers. The death of a taxpayer is particularly poignant as there are items that must be dealt with immediately – please notify your preparer as soon as possible.
Other events that usually have an impact are real estate purchases, continuing education, and side hustles. Finally, there are ones that may or may not make a difference like moving, renovations, and insurance proceeds. The important thing to note is to discuss it with your preparer, as some can have a very large impact.
Medical Documentation
Most people collect individual receipts/invoices, yet all medical providers can supply an annual payment summary for any client, ensuring all amounts paid are captured. For instance, your pharmacy can provide a prescription printout (the name of that summary) for the previous year. It is much more accurate and efficient to get that summary from each provider and have it ready for the tax call. If you have insurance, run every expense through it (even if you’ve maxed out a category for the year) as that summary will hold all of your medical expenses on a few pages.
Donations
Cash donations are not usually tracked, so be sure to save any physical receipts.
A series of small donations to a bunch of different charities is keep track of. From an accounting standpoint, it is preferable to pick one or two charities you want to support, donate on a credit card monthly, and get an annual donation contribution slip.
Rent/Property Tax
If you purchased a property or a home in the past year, your preparer will need the buy/sell agreement or the final tax bill for the property.
If you paid rent, you will need to reach out to your landlord for a receipt or annual summary.
Business Deductions
Take some time to go over your bank and credit card statements with your preparer to see if anything was missed. Every additional deduction comes off the top – that is, saves tax in the highest bracket.
For example, Susan runs a business that has $120,000 in gross revenue and $80,000 in net profit. If Susan finds an expense for $500, it is worth $212.50 in taxes saved – $147.50 in income taxes and $65 in HST. There are not many activities in a business that have the potential to pay as well as reviewing statements for expenses.
All Sources of Income
Although tax returns can be filled automatically in terms of T slips, there can be a lag between when the CRA receives the info and when the tax return is prepared. It is not uncommon for the taxpayer to have a physical slip that is not available online with the CRA yet, so if the return was filled in automatically by software that slip would be missing.
Prior Year’s Tax Return and Notice of Assessment
These documents are especially important when going to a new provider as they provide a comparative baseline and have other important information that your provider will need.
As always, effective communication remains the key – if you think something may pertain to your situation, please make a note and bring it up.
Have questions? Looking for an experienced and knowledgeable tax professional? Give us a call at Keenans Accounting Service today at (705) 526-7628.