Expert Blog

Your Canadian tax preparation checklist

Posted March 5th 2014

Documentation is very important when it comes to filing your income tax return. The Canada Revenue Agency can reject your claim without the proper slip or receipts, so keeping all the paperwork is very important. Whether you’re filing taxes yourself or trusting a third-party preparer, the process becomes much easier if you have your documentation together beforehand.

In the most general sense, the documentation you’ll need falls into three categories: slips, receipts and other.

Slips

Slips mostly document the income you’ve received. By the end of February, you should have received T4 slips from all of your employers throughout the year. If you’ve switched jobs, make sure all employers have an up-to-date mailing address for you.

If you received government benefits during the year, those will be reported on a variety of slips. For example, a T4E records Employment Insurance (EI) benefits paid. If you’ve received Canada Pension Plan (CPP) benefits, Old Age Security (OAS) payments, the Universal Child Care Benefit (UCCB), social assistance or worker’s compensation benefits, you should receive documentation of the amounts.

You should also receive slips covering interest paid on bank accounts and mutual funds, along with dividends, from the financial institutions and companies involved.

Overwhelmed yet? Bear this in mind: the CRA matches every slip to its own records after the tax season, so they will discover if you missed one, even if you don’t realize it.

Receipts

Here’s where we get to reduce the tax bill. Receipts for eligible expenses can result in tax credits or deductions. They reduce the tax burden in different ways. Deductions like childcare expenses, moving expenses and registered retirement savings plan (RRSP) contributions are applied directly to reduce income, which could effectively lower your tax bracket. Credits – such as transit passes, medical expenses, and children’s art and fitness credits – are applied against your tax owing at a 15 per cent rate federally.

There are myriad deductions and credits available – you can find a list of tax credits on the CRA Web site – and while they affect your tax bill in different ways, they’re equally important.

Some credits, such as charitable donations, can be carried over to future tax bills. So you may want to pool five years of charitable contributions to enjoy more tax savings. Others such as transit passes and medical expenses can be combined with other family members for maximum benefit.

If you file electronically, of course, you don’t have to include your receipts. But you’re responsible to keep receipts for six years, and the CRA may ask to see them. Since receipts fade and an unreadable receipt is an unclaimable, it’s a good idea to scan them and store them on a computer as a backup.

Other documentation

You’ll need any other correspondence you’ve had with the CRA over the course of the year, especially your Notice of Assessment or Reassessment. This helps establish what your RRSP contribution limit is for the current tax year, among other things. If your marital status changed during the year, you should have sent the CRA a change of status form; the date of your marital status change will affect your household income.

You’ll need records of business income and expenses if you’re self-employed or make money on the side that’s not reported on your T4. If you claim car and travel expenses, make sure your log book records how much travel is for business and how much is personal. And if you work in a home office, you can claim a percentage of your related expenses based on how much space you use for your work.

If you have an investment property that you rent out, or even just a granny flat in the basement, that income has to be claimed, too.

There’s a handy checklist on the H&R Block web site that will help guide your documentation collection and, hopefully, help you make the most of your tax return.

 

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