Preparing to File Your Taxes in Canada

It’s tax time! Hopefully, you’re getting ready to file your taxes, awaiting your tax package from the Canadian Revenue Agency and organizing your supporting documentation. You should receive your tax package, based on the province or territory in which you resided on December 31, sometime in January.

Each CRA tax package should contain the following:

  1. Your tax return form
  2. Your federal tax worksheet
  3. The forms for any schedules you require
  4. Provincial or territory tax worksheet
  5. Information guide

If you don’t have a tax package by the end of January, or if you have the wrong one (the CRA will usually just send you a package based on the way you file your taxes the previous year), you should make an effort to get your hands on one. You can download and print the right package for you from the CRA web site, request a mailed package using the Internet, order a tax package by calling 1-800-959-2221, or go to a postal outlet or Service Canada office and pick up a package in person.

Keep an Eye Out for Tax Slips from Others

As the end of February approaches, you should receive slips with tax information. Employers, payers, plan administrators and others will be sending you relevant information (it will go to the CRA as well). Your T4 slips include information about your income, pension plans, old age security income, benefits, insurance and other income. You might also receive T3 slips providing information about trust income that you need to file your taxes.

When you receive this information, keep it together, and somewhere safe. Set up a folder so that you know right where this information is, and so that it is easily accessible as you prepare your taxes. Understand which slips belong with which returns (you might need a separate return if you have a business), and organize your slips as they come in. Also, be aware of the organizations and people that might be sending slips. If an expected slip doesn’t come in, contact someone to find out where the slip is.

Organizing Your Paperwork to File Your Taxes

While you wait for your slips to come in, it might be a good idea to organize what paperwork you can. Collect relevant receipts and other documentation that you need in order to qualify for tax deductions and tax credits. Without documentation, you might be unable to reduce your tax liability. Keep documentation for tax breaks together, and when your slips come in, place them with the appropriate documentation. That way, the process of filing your taxes will go smoother.

Even if you have someone else prepare your taxes, you should try to organize your paperwork as much as you can. Call ahead of time to make an appointment so that you can get in, and ask what you need to bring to your appointment. Many accountants can provide you with a checklist of what to bring to your appointment when you file your taxes. Even if you don’t use an accountant to prepare your taxes, you can still ask for a checklist. The CRA also has a helpful checklist of items that you need for your tax return.

Start now, and prepare a little bit at a time, and you will be ready to properly file your taxes when the time comes — with as little fuss as possible.

Any other suggestions for when you file your taxes?

Giving to Charity – Sustainability for the Soul

giving to charityAs the financial year comes to an end and the holiday seasons approaches, Mrs. SPF and I have been reflecting on our personal finances which are now very much under control and quite sustainable.  As we plan for 2011 we recognized that our finances are strong but that we felt something was missing.  We felt as though we were not giving back to the community in which we live with our human or financial resources.  It is not as though we weren’t giving to charity, but we felt that we could, and should do more.

We sat down and looked at our current balance sheet and budget and determined we can afford to be giving to charity and that this is the time of year to do so.  Why now?  First, this is a time of year where many are in need.  The holiday season can be extremely difficult for those who are less fortunate than ourselves.  Second, we feel that we were too focused on purchasing presents for people who appreciate them, but are hardly in “need”. Third, we believe that investing in our community has great value.  Lastly, we recognize that charitable contributions in Ontario/Canada are tax deductible so while we are out of pocket today, we will receive a significant portion of our donation back from the tax man.  We decided that we would donate $1020 to charities in 2010 because giving to charity makes sense to us.

We decided to split up our donations relatively evenly.  We gave:

  • $150 to the local Women’s Shelter
  • $150 to  the Youth Emergency Shelter,
  • $150 to The Alzheimer Society,
  • $150 to a Children’s Foundation (for abused kids),
  • $150 to the local food share,
  • $150 to the AIDS network,
  • $100 to the Humaine Society and a smaller
  • $20 donation to “Mowvember” which is a cause where men in Ontario grow moustaches during the month of November to gain donations to raise funds for prostate cancer.

These organizations all have specific meaning for us and we felt that by giving to charity they could would receive financial assistance.

In addition to donating money, we also had some questions about boat donation. Basically, this is a service that allows you to donate an old boat to charity and receive a tax deduction for doing so. Since we have an old boat that just sits in our yard, it made sense to explore this option. Once you contact the charity and register your boat, it becomes part of an auction. If the boat is sold at the auction, it is picked up from wherever it is being stored and the seller receives a tax receipt in the amount of either the final sale price or the boat’s book value.

How does giving to charity work with tax deductions?

To encourage donations, the federal and provincial governments provide a two-tiered credit system. The amount up to $200 qualifies for a tax credit at the lowest tax rate. The amount over $200 qualifies for a credit at the highest tax rate.

For us, based on the $1020 figure we will get the following tax relief:

15% Federal + 5.05% ONT = 20.05% on the first $200 = $40.10
29% Federal + 11.16% ONT = 40.16% on the other $820 = $329.31

Total: $369.41 tax refund.  We will be out of pocket $650.59.  This investment in our community will return 36.5%.

We feel this is the right thing to do given our circumstances.  We bought a house and a Subaru Outback this year and paid for our wedding in full in the Fall of 2009.  We have been able to pay some lump sums against our mortgage and a personal loan.  We replaced our computers this year, I bought some tools and Mrs. SPF purchased some hobby items.  We can surely find room to give to our communities by donating to charity.  We can surely find room to give to our communities by donating to charity instead of thinking about things like holiday tipping.  For 2011 we are discussing running a contest on this site where we will donate $50 on the behalf of 5 readers as a contest.

Sustainability for our souls.

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