5 tips to help you get ready for tax season
While it is only November, we are coming closer to the end of the year and I am already starting to think about tax season. Now is a great time to start thinking about how you are going to gather everything you need to prepare your taxes in spring of 2021, and I’d like to share some of my favourite tips that keep me organized.
Medical expenses - If you currently have extended benefits through your workplace, you can pull a summary of all of your medical expenses you’ve claimed throughout the year from your benefits provider. These summaries will total the amounts you paid personally for medical expenses and the amounts paid through your benefits. This is a great statement to prepare to submit with your taxes as it makes it easier to total your medical expenses. If you don’t currently have benefits, I like to create folders in my email inbox that I put into a “medical expenses” folder which puts them all in one place for the year. If you need a summary of what you’ve paid for prescriptions, you can contact your pharmacy and ask for a statement which will total the amount you’ve paid throughout the year.
Business expenses - If you are self employed and need a way to manage your receipts, creating folders in your inbox for online receipts can be helpful for keeping them all in one place. I create a “business expenses” folder in my inbox, and move all of my online receipts to this folder to make things easier at the end of the year. Once I have all of my receipts gathered, I like to sort them by category, and add the totals for each category. This can also save you a lot of billable time at the end of the year if you have a tax professional preparing your return for you.
Donation Receipts - Donation receipts are another item that can be organized in your email inbox and put into a separate folder. Keep in mind that donations to US organizations are only deductible if you have US income. Donations to personal causes like “Go Fund Me” are also not considered to be a charitable donation. If you are unsure about whether your donation is tax deductible, you can find a list of eligible charities on CRA’s website here
Did you sell a principal residence this year? Even if you have sold a home that was your principal residence, you are still required to report the sale to CRA at the end of the year. To make this process easier, it is helpful to have details of the initial price you purchased your home for, and the documentation related to the sale price of your home.
RRSP Contributions - If you have made RRSP contributions throughout the year, download the copies of your receipts from your online banking system. You can make RRSP contributions for 2021 to the end of February in 2022. If you’re unsure of how much you should contribute, now is a great opportunity to make an appointment with your tax specialist or CPA to start doing some tax planning!
