Experts give advice for the upcoming tax season
As Canadians approach this year’s season, one expert offers tips for staying ahead on disappointment.
“Taxes are overwhelming for everyone. Nobody likes taxes. But the key to successful tax return preparation is being organized,” Josee Cabral, senior tax specialist at H&R Block, told CTVNews.ca on Monday.
Cabral recommends organizing tax-related documents – whether it’s receipts or invoices – in one folder.
“Wherever you know that is where you put all your taxes. It’s good for anyone, especially for self-employed (people),” she said.
Carbal also notes the importance of marking important deadlines.
“Of course, the first date to keep in mind is February 20, which is next Monday,” she said. “That’s when we can officially begin (online income tax returns).”
She cautioned that it is important that people do not attempt to apply by this date, “because they will not be able to submit them.”
Another important deadline is March 1, which is the RRSP deadline, Cabral said.
“You have a (then) deadline to contribute to your RRSP. Please note that the first 60 days of the RRSP are included in the previous year’s income tax. So don’t forget to include those in your 2022 income taxes,” she says.
Cabral adds that it’s important to be aware of contribution limits before purchasing an RRSP. “This is important because if you buy too many RRSPs and you go over your limit, the CRA will ask you to withdraw those RRSPs.”
Until you withdraw them, Cabral explains, you can be fined one percent per month.
“We certainly don’t want to get ahead of ourselves and contribute to the RRSP and then get penalized for it. One way or another, even if we make excessive contributions, the CRA will not allow us to transfer them to our account as a tax deduction; they will limit it to the maximum contribution limit.”
Cabral added some good news about the RRSP — specifically the contribution limit that has increased this year, now at 18% of your earned income (with a maximum of $29,210), will become place to contribute to your RRSPs.
Additionally, the TFSA limits for 2023 have also been increased. Cabral explains: “Last year it was $6,000, and now it has grown to $6,500.
“However, keep in mind that the TFSA does not affect your income taxes,” she says. “In contrast to RRSPs, which help reduce your income taxes or maximize your return, the advantage of TFSAs is that they are great for short-term or even long-term savings.”
You can also withdraw money from the TFSA at any time, she added, without penalty.
“If you withdraw money from your RRSP, it adds up to your income and then you pay taxes on that money. In the long run, you will have to pay more income tax on your tax return.”
Cabral also says that people often forget to include medical expenses in their income taxes.
“A lot of people don’t know that your out-of-pocket portion — if you have private insurance — is deductible. Anything (in terms of medical fees) that you pay out of your own is deductible.”
“Get ahead of yourself. It’s a work in progress throughout the year,” she said.