As tax-filing time grows closer, it is a good idea to start thinking about organizing your taxes. If bad credit and financial woes have been plaguing you for some time, perhaps it is even more critical that you consider taking the extra time to prepare your taxes sooner rather than later.
As it turns out, there are many benefits to preparing your taxes as early as possible – the most significant of them being, the fact that this has the potential to help increase the size of your tax return this year.
Here are some ways that preparing your taxes NOW can help you maximize your return.
Avoid Missing Out on Potential Deductions
First and foremost, by beginning to organize your tax file now, you can benefit from not having to do it all at the last minute. In the event, you are having to do your taxes under the wire, you are likely to also be rushing through this process. Feeling rushed may also mean more stress and anxiety, and also the greater chance of missing out on potential deductions.
With that being said, since there are many deductions to consider, having more time and a clear head can also ensure you are completing a more thorough tax file. In order to include all of the various deductions in your file be sure to go through all of your documents, as well as consult the Canada Revenue Agency (CRA) to find out which areas you are entitled to claim. Since there may be some new additions to this list each year, be sure to do a bit of research and learn about all of them before you move forward with your file.
In the end, missing out on any one of these deductible areas could mean that you will miss out on the opportunity to receive more money back on your tax return, and therefore it is best to be sure to identify all of your options.
Remember to Top Up Your RRSP Contributions
If you are currently contributing to an RRSP, one method of increasing your tax return is to make sure you contribute the highest amount that you can before March 1st 2017. You will also want to find out what your total contribution limit is by reviewing your Notice of Assessment. You can obtain a copy of this (if you don’t already have it) by contacting the CRA.
As you probably already know you can earn tax benefits from the amount you contribute to your RRSP, and by saving more (up to your allotted limit) you can maximize your tax returns as well.
Consider Filing Your Taxes Online
If you are able to do so, you may want to consider filing your taxes online through the CRA website. While some of the online tax filing resources the CRA offers may include some programs that do require a fee, they also do provide some that are free.
Not only are you likely to receive your tax refund a lot sooner than if you don’t file online, the programs you can use will help guide you through the tax filing process. With this support, you may find you are able to file a more comprehensive tax file, remembering to claim everything you are entitled to. In turn, this step by step online process may also help you to maximize your tax returns.
Be Sure to File on Time
There is yet another reason why preparing your taxes ahead of time is important. Not only does taking the time to organize your tax file mean that you are less likely to forgot to include the necessary claims, it also means that you won’t miss the deadline.
With the deadline for filing being April 30 2017 (May 2nd, because of the weekend), this now gives you 3 months to prepare your taxes. Despite having a lot of time each tax season to file, many individuals still continue to submit their taxes after this date has passed.
In the event, you do file your taxes late, you may be subjected to additional charges. While it does depend on the circumstances – and sometimes the CRA will let you off the hook altogether, if you miss the tax deadline there is a real chance you will be charged a fairly lofty fee.
There are a few different scenarios that can occur with late filing, depending on the nature of your tax file and previous filing habits. For example, on one hand if you owe a balance, you could be charged a late filing penalty equaling 5% of the amount you owe. On top of that, for every month you are behind in your filling, another 1% will be included each month (up to 12 months).
As mentioned, the CRA may go easy on you and overlook this, however this typically applies more so in the case of first time tax filing tardies. If, on the other hand you are someone who is known to habitually file after the deadline, you are likely looking at a steeper penalty. These higher late charges are likely to include a 10% charge, with a 2% monthly late fee (up to 24 months).
In the end, if your goal is to maximize the amount you receive from your tax return, it is best to file on time and avoid the additional expense. Not only will preparing your taxes AND filing them on time provide you with a better chance of earning more in the form of a return, it will also help you avoid the typical stress that is often associated with filing taxes altogether.
‘Tax Time’ doesn’t have to be an overly unpleasant time. Instead, by getting a head start on your taxes and making sure you have not overlooked anything of importance, this year could be the year you receive a higher return. After all, you could also consider using this extra money to help improve your financial position moving forward, even unloading some serious debt in the process.