Pre-Tax Warm Up

Well with tax software on the shelves and ads everywhere for RRSP contributions you know we have hit: tax preparation season.  So while you wait for all those slips to come in you might want to consider doing a little pre-tax warm up.

What do I mean by a warm up?  Well rather than waiting to the last minute to find all your paper work and entering everything in to a program (if you use one) you start now and make your life a bit easy.

To help you out I’ve written up a list of steps I’ve done in various years:

  1. Write a list of slips you expect to get. There is nothing worse than missing a slip because you forgot to change an address or someone wrote down your wrong address.  That way you can follow up in a timely fashion to file your taxes on time and ensure you get all your deductions and income in.  By doing the list now you can slowly add to it as you think about it and you recall all the paperwork you will need for some of those odder tax credits.  For example, I should look up my boys swimming lessons since I got a tax deduction for that in 2009.
  2. Gather all related forms/slips into one or two folders. That way you don’t have to look around you entire file system for one slip later one.  Or if you get audited you will already have all the information in one place.
  3. Estimate your T4. If you buy software consider entering in your information on your last pay statement for the year as an estimated T4 slip (if you have year to date totals).  It likely won’t be exactly right, but should give you a ballpark estimate of where you stand prior to getting all your final slips.   You can even do this for other slips if you have a good idea what they will be.  That way you can actually have a bit more time to think about any RRSP purchases you might need to do.
  4. Read up on Tax Deductions.  Yes I know reading tax information is boring as hell, but if you save a lot of money it can more than pay for your time.  So try to find a good summary of tax deductions and read up on anything that might apply to you.  If you are looking for a place to start check out this site.

So that’s my ideas on a pre-tax warm up.  What have you done in the past to get ready? Or are you a last minute kind of person?

5 thoughts on “Pre-Tax Warm Up”

  1. I’m generally ready in advance, but I’m hesitating this year. I ran an unsuccessful business this year which I incorporated, so it’s going to complicate my taxes. I only did a few jobs, so I can’t imagine the taxes will be difficult. However, the accountant’s cost for doing an incorporation’s taxes is a standard $1000.

    I noticed QuickTax has an incorporated version for $250, but I’m not sure if I should go that route or not. I’m wondering if it would be worth it to pay the accountant.

    Any thoughts?

  2. @ Financial Student – If your business lost money, you probably wouldn’t have to pay taxes – why not try doing it yourself? Depends on what your threshold of time vs. headaches are, but really if you do it incorrectly and no taxes are due there aren’t really any penalties to pay.

    @ Tim – The reading up on tax deductions is a good idea. I have a friend who has celiacs and found out that they are able to write off some of their food, which I found interesting.

  3. I find that taking a look at my return from the previous year can to useful in jogging my memory.
    My tax entries usually don’t change much from year to year.

  4. @ Financial Student – I would have to agree with Dave here. I think you might be better off trying to do your own business taxes and save the additional losses, if you are comfortable doing that.

    @Hazy – Actually not a bad idea if your taxes are fairly stable year to year. I always seem to have something a bit odd each year (moves, selling taxable stocks, or something else).

    Tim

  5. Thanks guys! I was kind of leaning that way anyhow. Just needed a push. 😉

    Seeing as I’m studying to be an accountant, I suppose I should give it a try. Just a little nervous because it’s a corporation. I’m sure I’ll figure it out. If I get too stuck I suppose I can pass it on.

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