Another tax filing season just bite the dust - well almost. Self employed individuals still have till June 15th to file to avoid late filing penalty. Mind you, there are many delinquent tax filers out there, so if you are reading this, and you are one of them, get your act together and get your tax filing up to date. This is especially important if you are expecting a refund and or have children and is or could be entitled to the Child Tax Benefit, GST/HST rebate or the provincial tax benefits. If you are near retirement age it is also very important to get your tax filing up to date as the Canada Pension Plan benefits are based on contributions and you reconcile your contributions when you file your income tax return.
That said, it never cease to amaze me how individuals respond to news of their refunds versus having a balance owing. Folks make plans for a refund and don't do the necessary planning to increase the likelihood of getting a refund, or having a larger refund.
One thing I know for sure about our income tax system is that it is a level playing field for those who play by the rules. There is no special treatment, everyone with the same income and circumstance pay the same amount of tax/get the same benefits. What set households apart, especially once the individual income hit the $50,000 per year mark, is planning. For a young family - husband, wife and one more children it is even more important and beneficial to take the time to do some tax planning and strategizing. If you have a couple with each spouse making $50 - $60k per year, all of a sudden, looking at the T4's together now you have a $120,000 per year income household! This slaps you squarely in the middle class bracket even though you might be struggling to keep up with the bills after all the deductions from your gross pay and the cost of going to work. No tax planning could mean no Child Tax Benefit, or significantly reduced benefits. This couple would think because they have children, make under $100,000 individually, have mortgage, that they would be automatically entitled to tax refund - WRONG!
This is where I switch hats and become a "grief counsellor". At this point, when the plans have been made about what's going to happen with the refund, only to find out there is no refund, or worse, there is a balance owing - a debt, that can be severely disappointing and even traumatic if the hopes were high. I probably spend more time explaining why there is a balance owing, how the income tax system works and suggesting solutions for the future in addition to consoling the client than it actually took to complete the return. I was chatting with a colleague the other day and he told me a couple came in to do their taxes, he imputed their data and when he told them they would be owing CRA, the lady paid him for his time, took their papers and left! That's how dramatic it can be. If they are honest folks and get good advice, they would get the same answer - paying twice to get their taxes done.
Retired folks with multiple sources of income have the same challenges, even more so than when working. Planning doesn't stop just because you are no longer going to the job. Actually, many healthy seniors continue working well into their 70's, many not because they have to, but because they like to keep active and want to continue earning. Nothing wrong with that, I applause them, because it is good for the mind, body & pocket book, and our economy. But do plan for the tax man at the end of the year.
I am a tax preparation professional through my sole proprietorship TaxSmart Income Tax Services in addition to being and Investment Funds and Insurance Advisor through Desjardins Financial Security Independent Network and Desjardins Financial Security Investments Inc. Please feel free to direct message me with your questions.
Now is as good a time as any to start planning for 2016 tax filing, if you haven't started yet - only eight months to go before the year ends!
Plan smart,
MissSam
Wednesday May 4, 2016
