Tax Planning & Filing Tips For Beginners In Canada
Are you filing your income tax first time? Here are some useful tax filing tips to help you better understand this process.
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Tax filing in Canada is mandatory for all Canadian citizens at all stages of their lives, earning money. You are about to start your first job or close on your retirement. You need to file taxes and do tax planning at all stages of your career. Benjamin Franklin quotes, “Nothing is certain, except death and taxes.”
This article is to help you lower your tax bill to save more money and steer you towards perfect tax planning.
Let us have a glance at important documents and various tax planning instruments in Canada.
T4 Statements
It is a year-end overview of your work earnings and deductions. It is the most typical slip reported on the annual tax return, and your employer or company issues it
Tax-Free Savings Account (TFSA)
The federal government implemented TFSA to encourage Canadians to save money. It allows them to build savings and earn interest while getting exemptions on income tax on TFSA investments.
NETFILE
Individual taxpayers can use NETFILE to transmit their income tax returns to the Canada Revenue Agency electronically.
The following are some of the fundamental ideas to keep in mind while filing for tax in Canada:
1. Be Systematic
Have all your information handy, including the T4 statements you get from your employer and any additional income statements, or tax slips issued to you by anyone else. Save all expense receipts and income slips for reporting your income or claiming deductions for tax benefits.
2. Open My Account with CRA
CRA helps you track your refund, check credit payments, track your return, RRSP, and TFSA contribution limits. It even helps set up direct installments for tax payments leveraging My Account of the Canada Revenue Agency (CRA).
3. Invest in Tax Saving
When you have extra money to invest, make sure you do so in a method that permits you to pay as little tax as possible. Being employed, you will continue to make annual contributions to your Registered Retirement Savings Plan (RRSP). You can get tax exemptions for the amount you invested in RRSP.
All investment income earned is tax-free. You do not have to pay tax until you make withdrawals.
4. Do not make mistakes while filing the tax return
If you are planning to use NETFILE to file your return, ensure all your information is correct.
Ensure your personal information, such as your name, date of birth, or SIN that you have accurately entered, or else you cannot file the tax return if they do not match the details the CRA has on their file.
5. Do not cross the Deadline
If you file your return late, you may be subject to penalties and interest in any sums owed to the CRA. It may also cause some of your tax benefits to get delayed.
No one enjoys paying taxes, but if you plan and take advantage of all the credits and deductions available to you, you could change your perception of it altogether. Lying on your tax return is never a clever idea since you may face consequences that go beyond fines and penalties.
So, being prepared is the right thing to do, but the skills of filing your tax come with experience, so let the information sync in with time. If you want to know more about tax-related topics, you can refer to the links given below.
