DIY taxes - it's easier than you think!
It’s the most wonderful time of the year! TAX time! Not even I can tell if I’m being serious or sarcastic. :)
We adults have a love/hate relationship with taxes. Yes, we enjoy the benefits of living in a civil society. Here in Canada, we have great health care, wonderful neighbourhoods and for the most part we benefit everyday from the pooled funds that provide what we need.
Thanks to the negativity bias, the tax sting comes from seeing your hard earned money leave your paycheque or bank account.
The negativity bias, also known as the negativity effect, is the notion that, even when of equal intensity, things of a more negative nature (e.g. unpleasant thoughts, emotions, or social interactions; harmful/traumatic events; taxes) have a greater effect on one's psychological state and processes than neutral or positive
Doing your taxes is easier than you think
I thought I’d share some resources that may help you during tax time. For those of you who are not Canadian, I’d love to hear about your favourite resources in the comments below.
DIY with Ufile
It’s much easier than you think to file your own taxes!
Sign up for ufile for free using your email and fill out the “tax interview” to figure out which sections you need to file your taxes. Type the numbers from your tax forms into the boxes and click “calculate my return”. If taxes are owing, you still have time (until March 1/19) to contribute to your RRSP and offset your current tax bill.
Ufile makes it easy to file both your and your spouse’s taxes at the same time. By paying taxes as a couple, you may be eligible for tax credits (money back) that you wouldn’t access alone. Check out the benefits, including sharing donation credits here.
Charitable giving in Canada gives you a tax credit
The charitable donations tax credit can be up to 29 percent of the amount you donated at the federal level. You may also be entitled to an additional amount reaching up to 24 percent of your donation depending on your province of residence.
Make sure you give in the calendar year that you want to use the tax credit and the charity you support can issue tax receipts. You can verify charity status on the CRA website.
RRSP contributions offset current taxes
By saving money in your Registered Retirement Savings Plan, you get a tax credit now. The deadline to contribute for the 2018 tax year is March 1/19. When you open up your ufile account, you can play around with contributing different amounts to your RRSP and see how much tax you defer a.k.a, how much money you get back.
If you’re wondering what the difference is between RRSPs and TFSAs, here’s the quick and dirty:
They are both registered accounts with contribution limits (meaning the government keeps track of them).
Contributing to your RRSP offsets your current tax bill. When you use your RRSP money (other than for the Register Home Buyers Plan and the Lifelong Learning Plan) you pay income tax.
When you contribute to your TFSA, you don’t get immediate tax relief. The benefit is that you don’t pay tax on money earned in your TFSA and there’s no restriction on taking your money out of the account. This account is best used for invested savings that you will grow over time.
What happens if you owe taxes?
Most people with traditional employment won’t owe any additional taxes however you still have to file a return. If you do have a tax bill that you can’t pay, you can call the CRA and ask for a payment plan. Be honest with what you can afford and pay off the debt.
How about you?
Do you file your own taxes? Which program do you use? Do you contribute to your RRSP or TFSA monthly? I want to know!