Plan ahead in 5 steps
1. Start your tax planning early
At the beginning of the tax year, plan how you’re going to arrange your financial affairs to lower your taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition bill. To help you get started, check out these tax tips from the Canada Revenue Agency (CRA).
If your financial affairs are more complicated
You may need expert advice. For example, if you are self-employed or earn investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition income, you may want to hire a tax professional to recommend strategies for minimizing and deferring your taxes. Their fees may pay for themselves in terms of tax savings. Speak with a chartered professional accountant who specializes in income taxIncome tax A charge you pay based on your total income from all sources. The Canadian government and your province set the rate.+ read full definition. Depending on your needs, you may also need to hire a lawyer to set up a corporation or draft documents.
2. Keep good records and receipts throughout the year
Organize and file your receipts as they come in. This will make it easier at tax time. This includes tax information slips, as well as supporting documents, such as bills, credit card statements, receipts for car, home office and other business expenses, stockStock An investment that gives you part ownership or shares in a company. Often provides voting rights in some business decisions.+ read full definition transactions, and housing, business and rental property records.
3. Make sure you receive all tax information slips
This includes receipts for RRSPRRSP See Registered Retirement Savings Plan.+ read full definition contributions and charitable donations. It also includes:
- T4 slip – if you are an employee,
- T4A – if you have received pensionPension A steady income you get after you retire. Some pensions pay you a fixed amount for life. Others save up money for you while you are working. You use that money to create income after you retire.+ read full definition income, lump-sum payments, self-employed commissionsCommissions What you pay to a broker or agent for their services. Often called a “sales commission”. For example, you pay a fee to someone who buys or sell stocks or real estate for you.+ read full definition or annuityAnnuity A contract usually sold by life insurance companies that guarantees an income to you or your beneficiary at some time in the future. An annuity is a contract with a life insurance company. When you buy an annuity, you deposit a lump sum of money, and the insurance company agrees to pay you a guaranteed…+ read full definition income,
- T3 – if you have earned income from a trustTrust An account set up to hold assets for a beneficiary. A trustee manages the assets until the beneficiary reaches legal age.+ read full definition, and
- T5 – if you have received investment income.
All slips must be issued by February 28, except for the T3, which is issued 90 days after a trust’s tax year-end.
4. Decide if you need tax preparation help
If your tax return is fairly simple (for example, you only have employment income and an RRSP deduction), you can prepare it yourself using one of the many software programs available. The ones on this list are compatible with the CRA’s NETFILE Program.
Free tax clinics for low-income earners
Free Tax Preparation Clinics are held each year in Ontario for low-income residents with very simple tax situations (no rental or business income, no returns for deceased taxpayers).
If your affairs are more complicated (for example, you have business, rental or investment income), you will likely need professional help. Your options include:
- hiring a chartered professional accountant to prepare and file your return. Fees are often calculated on an hourly basis.
- using a tax preparation service. Ask for a fee estimate when you go in for your consultation and ask how long they have been providing this service in Ontario. Ask questions before you use a preparation service.
5. Prepare summaries and organize your receipts
Before going to a tax professional, summarize your different sources of income, and your deductions and tax credits. This will save you money in tax preparation fees.
Keep your tax records for 6 years
Organize and file your tax returns, receipts and supporting documents by tax year so you can retrieve them easily in case you are ever reviewed.
Filing your tax return
In most cases, you have to file your personal tax return — the T1 Income Tax and Benefit Return — by April 30 of the year following the tax year. You can send your return by mail or file it online. Learn more about sending your return to the CRA.
If you or your spouse or common-law partner is self-employed:
- The filing deadline is June 15.
- You must pay any amounts owing by April 30.
When a return due date falls on a Saturday, a Sunday or a public holiday, your payment is considered to be made on time and your return is filed on time if it is received by the CRA or postmarked on the next business day.
Auto-fill my return
CRA is offering a new secure service called Auto-fill my return that lets you automatically request and receive tax information that the CRA has available at the time you’re filing, in order to fill in certain parts of your tax return. CRA will have most tax information slips and other tax-related information like T4, T5, RRSP information and carry forward amounts (find a complete list from the CRA).
To take advantage of Auto-fill my return, you must be registered with CRA’s My Account, and be using a certified software product that offers this service. Before you file using the information delivered by Auto-fill my return, you have to make sure that all the proper fields on the return are filled in and that the information provided is true and accurate.
If you file your tax return too early – before you have all your documents and tax slips – it could trigger a review of your return by the CRA.
Register with the CRA’s My Account to view or change your return, track your refund, and check your benefitBenefit Money, goods, or services that you get from your workplace or from a government program such as the Canada Pension Plan.+ read full definition and credit payments and your RRSP deduction limitDeduction limit The most you can deduct for your RRSP contribution on your income tax return. Any money that you put into a pension plan at work counts as part of your RRSP contribution.+ read full definition.