Your 2021 Tax-Preparation Checklist
By Shamez Kassam, CFA, MBA
The 2021 tax-filing season is just around the corner. With all the stress of the last year, you may be as ready as we are to leave 2020 behind as soon as possible—and that means you may want to file your taxes sooner rather than later.
While the Canadian Revenue Service extended the filing deadlines last year to help residents deal with the COVID-19 pandemic, it is still unclear if they will do the same this year. As of now, employees can start filing their taxes on February 22 and are subject to an April 30 deadline. Self-employed Canadians, or those who have a partner or spouse who is self-employed, have until June 15 to file their taxes.
Regardless of when your taxes are due, it is a good idea to start gathering your documents and getting organized now to give yourself plenty of time to file. Organizing your documents is the key to filing your taxes with the least amount of stress possible.
Step 1: Organize All Income Information
The first step is to gather all income documentation for both you and your spouse. This could include any of the following income slips:
T4 State of Remuneration Paid
T4A Statement of Pension, Retirement, Annuity and Other Income
T4E Statement of Employment Insurance and Other Benefits
T3 Statement of Trust Income Allocations and Designations
T5 Statement of Investment Income
T5008 Statement of Securities Transactions
T4A(OAS) Statement of Old Age Security
T4A(P) Statement of Canada Pension Plan Benefits
T5007 Statement of Benefits
You may also have other sources of income, so you will also need to gather documentation related to those alternative sources, such as capital gains or rental income. This documentation could include the following:
T2125 Statement of Business or Professional Activities documenting any self-employment
T776 Statement of Real Estate Rentals documenting rental income and expenses
Charges and interest expenses related to investments
Tips and gratuities not already on your T4 or T4A
Spousal and/or child support payment documentation
Step 2: Collect Documents And Receipts Verifying Your Expenses
Canada has over 400 different deductions and credits. (1) This is good news for many Canadians who qualify for deductions or are eligible for a tax credit. Eligible expenses can count toward deductions which could lower your tax bracket and help reduce your tax liability. Eligible expenses could include the following:
Medical expense for yourself or members of your family
Home accessibility expenses
Support payments made
Student loan interest amounts
This is not a comprehensive list and some credits or expenses are very case-specific. Before you start looking for your receipts, it may be a good idea to consult with a tax professional to nail down which tax credits or expenses you can deduct.
Step 3: Gather Personal Information
Completing your taxes is not the most exciting activity for most people, but there is nothing quite like the feeling of relief and success you feel when you finish them. Don’t add to your stress by waiting until the last minute to gather together the personal information you know you will need. Have the following on hand:
Social Insurance Numbers for you and yourself
Copies of last year’s tax returns
Bank account numbers and routing numbers
It’s a good idea to use last year’s tax returns as a starting point in filing this year’s tax returns, but remember to keep in mind any possible changes to your life this year that could affect the deductions you qualify for or any tax credits you may receive.
Did you have another child? Did your family adopt a child? Did your oldest start college? Did you start withdrawing from a retirement account? These changes will need to be included in this year’s filings.
When it comes to taxes, there is a lot of information to know. As we mentioned before, sitting down with a knowledgeable tax professional who understands your situation and is also familiar with your available tax strategies could help mitigate your tax liability. We at Northfront Financial are here to help you through this year’s tax season. Please call us at 403-571-8960 or email firstname.lastname@example.org.
About Northfront Financial
Northfront Financial is a boutique full-service financial planning firm serving individuals and families in Calgary, Alberta. We pride ourselves on being a different kind of investment firm. This stems from our humble roots, entrepreneurial spirit, and a culture of integrity and professionalism. Our goal is to offer the best investment products, services, advice, and ideas the financial industry has to offer from our experienced team, which includes individuals with the Chartered Financial Analyst (CFA), Chartered Investment Manager (CIM), and Certified Financial Planner (CFP) designations. To learn more about Northfront Financial and how we can help you, visit our website and schedule a complimentary appointment.