Filing taxes for the first time?
Here are the Do’s and Don’ts
As a child, you likely received plenty of unsolicited advice from adults on the subject of finding the right life partner. Don’t rush, find somebody that accepts you, as you are, and that isn’t afraid of commitment. All great advice. But you probably didn’t hear much about the longest-term adult relationship that you will inevitably have - your relationship with Canada Revenue Agency, aka CRA.
While your first year filing a tax return is surely the end of your youth, it’s not all bad - indeed, it may mean that you’ve landed your first paying job. In any case, you have embarked upon a relationship that will require annual attention (at least) and CRA is a partner that you definitely want to keep happy. Just like the pursuit of bliss in any relationship, there are some definite do’s and don’ts.
Do learn the basics of a tax return
I’m not saying you should enroll in accounting courses. But, a basic understanding of a personal tax return will help you decipher any advice you receive from family, friends and tax professionals, as everybody has their own opinion about how to handle your taxes. It will also help you make sense of the letters and memos that CRA will be sending you throughout the year. The Internet is your friend, here, with its endless resources. I suggest becoming familiar with the different types of income, deductions and credits, and some of the more common elements such as RRSP and TFSA contribution limits.
Do start keeping records
When I started paying taxes, I started keeping a neat file folder for each tax year, in a cabinet, so that I could organize all of the paper slips I received in the mail, as well as other important information to keep on hand, like donation and expense receipts. Nowadays, of course, the process is much more digital. Many slips, investment reports and expense summaries are available in electronic form and can be stored on your computer, or even in the cloud. Wherever you decide to store your records, I suggest keeping separate folders for each tax year. At some point in your relationship with CRA, you will undoubtedly be asked about something from a previous tax year. It will save you a lot of time and frustration if you have tidy records.
Don’t put off filing
There are a million more fun things to do than taxes. A billion, maybe. The temptation is to procrastinate and do everything at the last minute, or even after the tax deadline if you are certain that you don’t have an amount owing. The first problem with this is that rushing at the end may mean that you forget something important. Forgetting a source of income can lead to painful penalties. Likewise, failing to include a deduction or credit means you will pay more tax (or get a smaller refund). It’s better to start early and take your time, so you can be sure you’ve covered everything. If you have an accountant preparing your return, also remember that they will be doing taxes for many people and their workload towards the deadline will be immense. You are surely going to get better attention if you engage with them in February, rather than March or April.
Don’t ignore CRA’s letters
Yes, your new lifelong partner is also a pen-pal. You will soon be able to instantly recognize their letters and memos as they arrive in their light-brown envelopes, or emails with bilingual subject lines. Open them right away and read them, thoroughly. These communications may be simple reminders, such as when your tax instalments are due for the following year. But, sometimes, they concern an anomaly in your file or a question that CRA has about your records. Remember, almost every transaction you will have with CRA is tied to a due date. Many little brown envelopes sit on kitchen tables for months, while taxpayers incur financial penalties for situations that could have been easily avoided with prompt attention.
To end on a positive note, filing your first tax return doesn’t mean doom and gloom for the rest of your days.
On the contrary, it is quite possible to have a lifelong relationship with CRA that is as stress-free as the best friendships. But, like a good friend or partner, CRA does need your focused attention, from time to time. Nobody likes to be taken for granted, or forgotten about!
If you need a little bit of help getting started, consider working with us. At Blackspark, we provide tax preparation remotely and for a fixed price. Our goal is to make sure your taxes are taken care of, so you don’t have to worry about it.
