4 Tax Tips for the First Time Filers
With tax season in full swing, it’s the perfect time to look at everyone’s favourite topics, tax tips! There are many firsts in your life – your first kiss, first job and first home – but there’s nothing more frightening than filing your taxes for the first time.
Whether you’re a student or new immigrant to Canada, filing your taxes can be intimidating, but it doesn’t have to be. The key to a good relationship with the tax people is staying organized and starting early. Here are my top tax tips for those filing their taxes for the first time.
Staying Organized and Starting Early
The tax deadline of April 30th is fast approaching. Are you ready to file your taxes, or are you waiting until the eleventh hour? Whether you’re preparing your taxes on your own or taking them to your accountant, start early. If you have any questions, you’ll have plenty of time to get them answered by the Canada Revenue Agency (CRA) or a professional.
A common mistake by first timers is forgetting to file a tax receipt, and who can blame them? With tax receipts coming from all directions, by mail and email, it can be easy to miss one. Stay organized and keep a checklist of the tax slips and documents you need. Common tax slips include T4 for employment income, T5 for interest and T2202A for students. Remember, RESP payments are taxed in the hands of students, not parents. If you’re a student and withdraw money from your RESP, you should receive a T4A tax slip. The Education Assistance Payment appears in box 42.
Student Tax Credits and Deductions
Just because you’re a student doesn’t mean you shouldn’t file a tax return. Students can claim a number of tax credits and deductions, including tuition, textbooks and student loan interest. If you can’t take full advantage of the tax credit, why not transfer it to someone who can? Students have the option of transferring the tuition tax credit to parents or carrying it forward to a future year when they’re earning a full-time salary.
Making the Most of Your Tax Refund
Instead of spending your tax refund on a fancy vacation or the latest smartphone, save it. Better yet, why not get a head start on your TFSA or RRSP contributions for next year? Stop looking at your tax refund as a cash windfall; it’s really just an interest-free loan from the government.
Keep Up to Date on Tax Changes
Each year, the federal government introduces a number of tax changes. It’s important to keep up to date on these changes to make the most of them. For example, this year the Liberals are introducing the Canada Child Benefit for parents of children 17 or under. The onus is on tax fillers like you and me to be aware of any changes in the tax laws. The federal budget saw a number of positive changes that benefit students.
So there you have it; four tax tips that will help you make the most of the 2016 tax season and the many seasons to come.
Remember, there’s no need to panic come tax time; with a little forethought and planning, managing your tax return can be straightforward and stress-free. Happy filing!
Check out this page for more information on RESP tax benefits.