There is no doubt about it. Doing your taxes can be a real headache and require tons of time and effort to complete. However, there are some tips which will make the process at least a little bit easier and cut down on the amount of time it will take to finish them.
First off you need to do some preliminary organization of all your tax slips, receipts, expenses, and anything else you might need in order to do your income tax return. Ideally getting a plastic tub to put everything into throughout would be best, but if you haven’t done that you can always do it next year.
You should have received by now tax slips for any income you earned, employment insurance or any benefits you may have received during 2012. If you haven’t received these tax slips yet contact your employer or whoever you were receiving the money from to find out how you can get a copy right away.
If you’re filing your taxes yourself go out and purchase one of those $40 tax software programs. It will make the process much easier and cut down on the amount of time the whole process will take. Plus, if you have any self-employment income, and you keep the receipt, you may be able to write off the purchase as an expense on your taxes next year.
If you’re nervous about filing your taxes yourself there are several income tax preparation companies you can turn to, but pay attention and make sure that you understand what they’re doing. You’ll be the one who will have to sign the tax return and will be held legally responsible for what is entered. So ask every question you have, even if you think it’s a silly one.
Next, when filling out your tax return make sure to declare all the income you made last year. In this time of government austerity agendas, many of them have empowered their tax agencies to really go after people; so if you’ve not been declaring all your income in the past it’s probably not a good idea to continue with that practice now. The financial fines and other penalties that they can heap on you if you’re found to be hiding money can be quite severe and once the tax agencies have you on their radar they’ll be after you every year. So it’s better not to take the risk and declare everything including any tips you might have earned.
Conversely, feel free to claim any expenses you may have; just make sure you have a receipt for them. There is nothing the matter with claiming an expense especially if you have self-employment income. The key is you need a copy of the bill or a receipt to prove to the tax agency that this isn’t something you made up. If you are declaring any expenses it’s probably best not to file your tax return electronically because all that will happen is they’ll ask you to mail in the receipts for the expenses that you’re claiming. What usually happens though is the tax agency doesn’t ask for the receipts right away because they know you may lose them in the interim from when you filed and when they’re asking for them. So it’s best to just send them in when you file your return by paper.
Here in Canada there is what is known as a Registered Retirement Savings Program (RRSP), which when you contribute to it, will reduce the amount of taxes you pay. Money contributed to a RRSP can then be invested in various things and grow without being taxed. It is only taxed when it is withdrawn which is why people only usually do so when they’ve retired and the income they receive from a salary has dropped.
Depending on where you live your country may have a similar financial vehicle. If so you should contribute as much as you can to something like an RRSP because the more you do, the more it will not only reduce your taxes, but it may even result in you getting a tax refund. However, for the 2012 tax year there is a deadline date for RRSP contributions so make sure you haven’t already missed that date. Otherwise your contribution will only count towards your 2013 tax year.
Even if you are currently a student, and haven’t earned any money during 2012, you should file your taxes for that year. You will likely have received a tax slip from your school for the college/university courses that you paid for in 2012, which could possibly result in a tax refund, or at the very least a deduction you can carry forward into future years when you’ll need it to reduce the taxes you pay on the money you earned.
When sending in your tax return by paper, either send it by registered mail, so that you can track it, and have proof that you did in fact file on time, or go to your local tax centre and drop it off there. The last thing you need is getting nailed with financial penalties for filing late.
Lastly, if you will be receiving a tax refund contributing that money to your RRSP is a great way to build-up your savings for retirement and will help to reduce your taxes in 2013. So it is highly recommended as the benefits years from now might be a real boon to you!