Preparing for Tax Time
The air is cold. The snow has fallen. As we sit and dream of warm sand and drinks with umbrellas, we realize, yes, it’s that time of year again. Time to get ready for taxes!
As your stomach sinks at the thought, take heart. Starting your tax planning early can ease the pain and help ensure you take advantage of every deduction available to you.
Here are some considerations as you prepare for your 2016 taxes:
So many of us have been there: you’re feeling on top of things and file your taxes early. A couple of weeks later, what should arrive in the mail but another pesky T-slip. It’s not for much. Just a little interest or dividend income. It’s tempting to think, no problem. CRA will have received the same slip and they’ll simply adjust the return. This can turn out to be a big mistake.
CRA imposes a harsh penalty if a taxpayer fails to report income twice within a four-year period.
In the event that you find yourself with unreported income, it’s important to file an amendment with CRA, prior to their reassessment.
Dividends are a bit of an odd animal in the way they are taxed. Due to the dividend tax credit, it may be beneficial to transfer dividends received from the lower-income spouse to the higher-income spouse. Seems counter-intuitive, but it can result in lower taxes paid.
One of the most commonly missed tax deductions are those for medical expenses. Often we don’t bother adding up all those small medical slips because we think we won’t have enough to claim. While it is true that there is a threshold that must be met, many of us meet that threshold more quickly than we imagine.
Medical expenses can be claimed for any 12-month period ending in 2016, and can be combined with your spouse and dependant children. CRA provides a lengthy list of eligible medical expenses on their website.
As with everything tax related, there are criteria and restrictions that must be considered. Be sure to consult with your tax advisor as to how these and other provisions may affect you.
Melody McClain is a chartered professional accountant with MJ McClain Professional Corporation.