It’s that time of year again! TAX TIME! If you didn’t get a chance to implement any of my 16 Tax Tips for Year End, don’t fret, my friend, there’s still time to get more money back from your tax return!
NOTE: These suggestions are for the Canadian Tax system. If you are claiming your taxes in the US, then sorry, this post ain’t for you!
I started filing my own taxes last year. Before that, I hired an accountant to do my taxes (my taxes were really simple) and paid about $125 for his services. He gave me a few good tips which I carried on to use for the next year, when I learned to do it myself. I decided to do my own taxes because:
- I didn’t want to pay someone else $125 when I could do it myself
- I didn’t have my own business so I couldn’t deduct my accountant expenses
- You care about your own money the most (using an accountant is kind of akin to hiring a financial adviser, right?)
- I wanted the challenge
One thing that I would recommend you possibly NOT do is go to H&R Block. They can charge exhorbitant fees if your tax return is complicated and the people doing your tax returns are not accountants. They have taken H&R Block’s tax return course (and likely paid $350+ for it) in hopes of working for H&R Block. I saw the H&R Block ad in the paper for the course and was interested in going to it…I do hear that it is helpful in preparing your own returns though. That said, there are good experienced people who work at H&R Block and people who are inexperienced.
Doing taxes by yourself is actually kind of fun (yes, I know I sound lame… but maybe I really was an accountant in my past life) but I would only say it is fun if you use a tax software program. Calculating everything by hand with a calculator and a pencil and eraser would likely drive anyone batty.
On the other hand, if you have your own business (for example, you have rental or investment property) it can be helpful to hire an accountant because knowing what you can deduct and how can be kind of complicated.
Alright my friends, so here are some ways to Get More Money Back from Your Tax Return:
One key thing to remember is that you really need to KNOW what you can deduct IN ADVANCE, or else you won’t be aware to collect them for your deduction!! (e.g. receipts, transit passes) So you kind of have to embody the accountant mindset anyways, in order to reap the rewards.
- Contribute to your RRSP before March 1: The RRSP deadline is March 1– so hurry up fill yours! You can find how much you’re allowed to contribute on your Notice of Assessment (you know, that form that sent with that cheque?) You’ll be able to receive a tax refund equal to your marginal rate, that you can later then contribute to your TFSA! (Hey, two birds with one stone– not bad, I say!)
It is important to remember though, that if you make about $36,000 or less, then you should contribute to a TFSA instead, because you’re not getting taxed to the nines. When you get taxed to the nines, then contribute to an RRSP because then you can receive a larger tax refund. Having said that, if you have enough dough to contribute to both a TFSA and your RRSP, you can contribute to your RRSP BUT hold off on using it as a tax deduction until future, more income-generating years (use Schedule 7 for this).
- Keep your Transit Passes: You can get a tax credit of 15%. If you’re a student, keep your monthly pass because you can deduct the cost you pay for it on your taxes. If you have a monthly transit pass you can claim those as well (don’t lose them or throw them away! They’re worth something even after the transit pass expires). The transit passes have to provide detailed information (e.g duration of use, transit authority, amount paid) and are good for a Federal Tax Credit (GOOOO CANADA GO!)
- Tution Credit: If you’re a recent grad (congradulations!) you can claim your tuition credits .
- Claim your Student Loan Interest: Yes, having student loans looming does have it’s minor minor silver lining- that is, you can claim the interest that you are charged on your student loan.
- Claim Medical Expenses: Keep your receipts for any prescriptions and medical or dental expenses that weren’t covered by your Health Benefits Plan. If you plan to get laser eye surgery (which can be upwards of $1000) for example, you should make sure you keep other expenses you incurred within any 12 month period (it doesn’t have to match the tax year– e.g. it can be from April 2008 to April 2009 instead of January 2009 to December 2009) as long as you hit the magic number: 3% of your net income OR about $2000 (for tax year 2009). If you live common law or are married, you can add up your expenses for both of you and claim it against the person with the smaller income.
- Utilize Dividend Tax Credits: THIS is why Canadian corporations that pay dividends are best kept in a non-registered account. The taxes on dividends are much lower and almost favourable if you are in the lower income tax bracket.
- Claim your cell phone bill: The tip my accountant gave me was that you can deduct a reasonable amount of your phone bill (e.g. 50)% if your employer regularly uses it to call you to obtain work (this works for example, if you are a ‘casual’ employee and they usually call you to see if you can come in to work). The percentage used should be traced back to your airtime.
- Donate: Oftentimes charitable organizations that are approaching you personally (for example, I had a colleague at work who was asking for donations for a worthy cause in the local community she was representing) may be able to change the date on the tax receipt to the 2009 year. She offered to write to date of the donation for the 2009 tax year.
- Working from Home: If you work from home more than 50% of the time, there are a large number of deductions that you can account for. You can deduct your internet expenses and stationary bought provided that you use these to obtain income. If you rent, you can deduct the portion of rent and any other maintenance costs you would pay for your office space. Per the CRA “Work space in the home expenses” site, you can also deduct:
You can deduct the part of your costs that relates to your work space, such as the cost of electricity, heating, maintenance, property taxes, and home insurance. However, you cannot deduct mortgage interest or capital cost allowance.
- Consider not giving an interest free loan to the government: Yeah, you heard me…that lovely tax refund you get in the summer? It’s basically YOUR money that the government was keeping warm for you. If you fill out a T1213 form and hand it over to your employer, they can deduct less of your income on your paycheque. You’ll get more money on your paycheque (BONUS) but if you’re like me, you might have a psychological crutch that makes you WANT to see that big tax refund cheque from the government… I’m not sure what it is, the cheque seems so symbolic. HINT: Don’t do what I do! Get your T1213 forms. I’ll try and tell myself to do that for next year too.
Another helpful tip my accountant gave me was to submit it through the mail instead of online. When you submit it online through NETFILE, you keep all your receipts and documents (e.g. T4′s ) and if they ask you to submit it in the future, you do. The accountant I spoke to said that doing it this way may seem more convenient, but he said that more often than not, your tax return gets audited more often than if you were to send it in through snail mail.
There’s a variety of tax return software available. Some are free. You could even use the tax return software to do all your calculations, and then input the numbers into your paper tax return (the tax return booklet).
Here are a few that are popular, FREE, and NETFILE certified if you want to send it through NETFILE:
- Studio Tax Not the fanciest of websites, but it’s great for basic tax returns. It’s completely free (if you file less than 20 tax returns)! Free download of tax software and you don’t need a license key or registration key to get it. They even have student versions. You don’t have to pay $40 for Ufile or Quicktax. Studio Tax is highly recommended.
- QuickTax recently launched free tax software. Good for 1 return. They have the QuickTax Free online edition, free student edition, and free Freedom Program. These are good for basic returns (if you have any investment slips e.g. T5′s and T3′s then this isn’t for you!). The good thing is, that if you start the free QuickTax free online edition and realize that it’s not meeting your needs, you can upgrade to the QuickTax standard edition without losing any of your precious work. It’s very user friendly and easy on the eyes.
- CANTAX This was the program I used last year. It’s super comprehensive and it’s designed for tax professionals. It’s NOT free, but it’s good. It was free for me because my dad the accountant let me use it. =)
- UFile You can file for free with UFile if you earn less than $20,000 per year OR if you are a student (Oooh the perks of being a student). If you do not fall into that category, you can try it for free and only pay when you have to print or submit it online through NETFILE. It’s $15.95 for this.
- H&R Block has a free online filing product if your tax returns is really simple. Again for their other products, you can start for free and pay if you need to print or file.
Well, that’s all I can think of for now folks. Good luck doing those tax returns! If you liked this post and want to acknowledge the blood-sweat that I poured into writing this, please subscribe and/or add me on Twitter. Thanks!
Have you ever filed your taxes by yourself? What do you think of it? Any suggestions or tips with any of the free tax preparation software mentioned above? Have you ever filed with H&R Block?
This is a great thread and you can tell that a solid effort went into getting some crucial details out there for the readers.
I totally agree with you in that H&R block is not up my alley in this stage of the game. When I was a student, it was probably the most practical decision to make in retrospect, but as time goes by it becomes increasingly obvious that serious tax planning is a very important part of our lives as it can save us thousands of dollars.
I took advantage of the renovation tax credit and completed all bathroom renovations (and expenses incurred) by January 31, 2010. This means that I will qualify for the credit. [And from what I can gather, it doesn't seem like the Cdn Gov't will be reinstating the credit for the 2010 tax year.]
Personally, I use a professional accountant for my taxes and have done so over the past years. My reason for this is not to just simply hand over a pile of paperwork and say, “here you go, deal with it”. It’s because I have gotten some very good advice from my accountant over the past years for tax planning and business purposes. A good accountant knows tax law very well, and depending on the extent to which a particular individual is involved in personal investing, business in general, etc., it may become increasingly important to have one over time.
I keep all of my T5s, T4, travel receipts, medical expenses, business expenses, etc. all separate and each ‘component’ (for lack of a better word) has its own folder.
Aside from my non-registered investments, TFSAs and RRSPs are important for consideration for taxes and deserve attention. The great thing with RRSPs is that you can contribute more than 18% of your prior year’s gross income if you have contribution room built up. As you mention, if you are able to contribute enough, you can pump the return you get into a TFSA! That’s provided you don’t owe too much due to salary, non-registered investment income, or other avenues, etc.
Nice post.
Cheers,
The Rat
.-= The Rat´s last blog ..Is A Housing Bubble Imminent? =-.
@The Rat, LOL thanks for acknowledging the blood-sweat I poured into that post. It’s over 1500 characters for goodness sakes! =P
How much did you pay for H&R Block when you were a student? You probably had very simple returns then.
Good for you for taking advantage of the renovation tax credit! It’s a great idea. I don’t have a home to get a credit from! lol! =) (but hopefully soon, hopefully soon).
Yes, some accountants are very good and they know the tax laws like the back of their hand, some aren’t as hot (I guess it’s all in their experience, right?)
Thanks again for stopping by!
Hmmm..that H&R block fee when I was a student is hard to remember. It was such a basic tax filing (maybe some RRSP purchases and tuition considerations, and a summer job) but I know it didn’t come to anything like 300 dollars.
I totally agree with the accountant comment you made. Just like any professional, you will meet some that just don’t meet your standards while there are others that you just know are great to work with. If you ever decide to deal with one and are able to find one you like working with – stay with that person.
.-= The Rat´s last blog ..Is A Housing Bubble Imminent? =-.
Just wanted to put in a correction for you, you can’t carry your tuition credits forward if you have taxable income. If you file without using them the return will automatically be corrected to utilize the credits. As long as you have taxes payable though, the amount you will get back is the same regardless of how much money you make as it is a non-refundable tax credit which currently is a 15% credit for your return. The only way the amount would change would be if the tax rates are changed again (2008 we went from 15.5% to 15% for non-refundable tax credits for instance)
Hi MayJay,
Thanks for the clarification and spotting the error! I always tend to get my tax credit and deductions mixed up— (dangerous I know). Yes, the tuition tax credit is a straight amount and isn’t affected by your income.
maybe you should go in and correct that – i almost made this mistake before i read the comments section!
@Lulu= Thanks! Done!
I totally agree with you in that H&R block is not up my alley in this stage of the game. When I was a student, it was probably the most practical decision to make in retrospect, but as time goes by it becomes increasingly obvious that serious tax planning is a very important part of our lives as it can save us thousands of dollars.
I took advantage of the renovation tax credit and completed all bathroom renovations (and expenses incurred) by January 31, 2010. This means that I will qualify for the credit. [And from what I can gather, it doesn't seem like the Cdn Gov't will be reinstating the credit for the 2010 tax year.]
@Joabs State- No, that tax credit was a Godsend! Except that I didn’t take advantage of it
I’m excited for you and your hefty tax return!
thanks for this. i am a new resident of quebec and find the taxes quite complicated. with daycare deductions, rental income, and property claims, i really needed to go to an account for both myself and my husband. we didn’t go to an account and now are being reassessed for a previous return. the quebec government wants $3500 back! so, we are desperate and willing to pay $700 for the assistance.
@Mary- Thanks for reading Mary. Oh dear, sounds like you’ve got a handful with the Canadian revenue agency! That’s my worse fear, reassessment and audits. Good luck, I hope you are able to keep your $3500.
I work from home and want to file tax returns. I had read some where else that i can have deductions for the my phone bills because i am using phone for my work purpose.
- Samantha Greg
@Samantha- Yes, that is true. You can usually deduct the cost of the % of your cell phone bill you use for business.
This would be a great article and basically important to us. I really appreciate this. Its one of a kind and informative article. More power to your site! nice job!
@Celen- Thank you!
I’m wanting to file my own taxes this year.
My husband and I both make around 37000$ each and we are contributing to both RRSP’s and TFSA. I also have some dental bills (can I claim those? They are around 450$)
I would like to file my taxes on my own and send them by Canada Post. Is there a link you can provide me to print and fill in all the appropriate forms I may need?
Last year I filed with H&R block and he said I owe 80.00$ to the government..and on top of that I had to pay the rep 80.00$!!!
Are there any tips you can provide me with so I could possibly get a refund this year???
Thanks in advance!
@Anie- I will be posting a Tax filing software giveaway very soon! So stay tuned! If I’m not mistaken, the medical bills have to be a certain amount, and I think $450 is too low. Have a look at the CRA website, it’s a great resource for what you can and cannot claim. The forms can be picked up at the tax centre (or the libraries have them too). You can file it by hand and mail it in. Or you can do it online.
Question is about cell phone deducting.
I am a tour bus driver. Spend most of time away from home and the other veteran drivers claim all their cell phone expenses on their taxes. How is this done? I am doing my taxes and am at the employment expenses form and under the ‘other’ category and it has three spaces to enter digits in:
1. Gst taxable
2. HST Taxable
3. Zero Rated and Exempt
What the heck am I supposed to write in those boxes if I am trying to claim the 1416.00 from January – December 2011? It was only used for work and the old retired drivers say they can claim it all.
@Michael- I just took out your email address in your comment, I don’t think you’d want to be showing everyone your email address
Well, Michael it depends on whether HST was charged on your cell phone bills. If you were charged HST from Jan to Dec then you put it in the HST taxable category. Do you use your cell phone for work 100% of the time? If you don’t, I would caution against putting the full $1416.
Hey Young!
Great post, I share your same concerns with H&R block in that every year I go to them it seems the reps experience level is different. Although I still plan on going to them for my taxes sometime this week. Do you advise it? Seeing I’m a full-time university student, I worked part time made a little less then $20,000 in 2011. I have all my transit cards and my tax receipts for all my donations and my slips for my investments.
How important is this tuition credit? Can i use it right now if I wish? And what are some questions I should ask the rep and things I should look out for when doing my taxes at h&r block. If I feel like their quote isn’t good enough can i walk out and say I’ll do my taxes else where?
Feel free to email me!
@Rahim- Thanks for the great question. PERSONALLLLY if I were a full time student and had simple taxes, I would probably DIY. Have you tried the H&R block or the Turbo tax programs?
You can use the tuition credit right now if you wish, but if I were you, I would save it up until you make big money to deduct your taxes with. Right now, you’re probably not paying much in taxes, so there’s not much point to use up your precious tuition credit. I believe you can carry it forward for up to 5 years.
I don’t think there’s probably any room for negotiation with H&R Block in person taxes…you could try finding a “mom and pop” type of accountant who will probably be cheaper.
Hey Young,
Thanks for the tips! Great article. I’m doing my tax report myself with a software and i’m trying to find the form where I can deduct cell phone bills. My wife and I work for airlines and are on the road all the time. I was wondering if you know which form page it is. Would you only deduct air time fees? And what percentage? When you say 50%, is it a general rule of thumb?
Thanks
Jason
@Jason- Do the airlines call you and are you on call? You have to use your cell phone for work related purposes. I believe that it is form T777 http://www.cra-arc.gc.ca/E/pbg/tf/t777/
I am a causal (on-call) employee at a hospital. Does my employer need to fill out the T777 in order for me to claim my cell phone bill?
@JDP- No, you shouldn’t have to. As long as you include the proportion of minutes used (that they call you) to your total minutes used and claim only that amount it should be fine.
So, what section do I claim this? Sorry, I’m new at this!! Thank you for your help, by the way!
@JDP- Now don’t quote me! but I think it’s the T2202? I haven’t started my taxes yet so can’t remember off the top of my head.
Hi! I loved reading your article but you made it sound sooo easy!
My parents always did them for me but I want to take it on my own this year and
get the maximum amount, which I deserve
( Everytime I get my paycheque, I notice a $50 minus for tax! Its ridiculous!)
help!? -kelly
Sure Kelly, if you don’t mind, you can keep yourself anonymous and tell us what your situation is, and maybe we can help you out a little bit.
Great article! Thank you! In response to an earlier comment: Being reassessed isn’t that bad, they went back through all my taxes from 2o09 forward and credited me 400 dollars. Scary thought, I hired a professional accountant to do all my taxes, he miss calculated half my rent away.
Hi,
I work on-call as a substitute teacher and I would like to try claiming cell expenses. The school districts call me in for work on my cell phone as I don’t have a land line. Can you please provide a more detailed explanation of how to claim your cell phone expenses and what evidence you need to include i.e phone bills, monthly plans??? It would be very helpful!
Thanks!
This is a fairly detailed question on-call. I’d say you should probably contact an actual accountant about this. I’ve been a sub before actually and I’ve never heard of deducting your cell plan, but I can see how there is an argument for it. The paper trail you’d want is the actual phone bill, but again, I’d recommend a professional opinion on that one.
Re: Cell Phone deduction.
You actually cannot deduct any employment expenses without having your employer fill out the T2200 (Declaration of Conditions of Employment).
Here is a link to the form, which specifically states this in the first line: http://www.cra-arc.gc.ca/E/pbg/tf/t2200/t2200-12e.pdf
If your return was ever reviewed or audited and you don’t have the form from your employer they will throw out all of your “employment” expenses.
More info regarding employment expenses can be found here: http://www.cra-arc.gc.ca/E/pub/tg/t4044/t4044-e.html
Very few employees are able to deduct expenses – very common misconception.