As Canadians approach this year's season, an expert offers tips for getting ahead of the filing blues.
鈥淭axes are overwhelming for everybody. Nobody likes taxes. But the key to succeeding in your taxes is to be organized,鈥� Josee Cabral, senior tax specialist at H&R Block, told CTVNews.ca Monday.
Cabral recommends organizing documents pertaining to taxes -- whether it鈥檚 receipts or invoices -- in a folder.
鈥淎nything where you know that鈥檚 where you put all your tax stuff. It鈥檚 good for anybody but especially for (those who are) self-employed,鈥� she said.
Carbal also noted the importance of marking important deadlines.
鈥淭he first date to keep in mind is, of course, Feb. 20, which is next Monday,鈥� she said. 鈥淭hat鈥檚 when we can officially start (filing income taxes online).鈥�
She warned that it鈥檚 important that people don鈥檛 try to file ahead of this date, 鈥渂ecause they won鈥檛 be able to send them out.鈥�
Another important deadline, Cabral said, is March 1, which is the RRSP deadline.
鈥淵ou have until (then) to contribute to your RRSPs. Please take note that the first 60 days of RRSP go on the previous year鈥檚 income taxes. So don鈥檛 forget to include those in your 2022 income tax,鈥� she said.
Cabral added that it鈥檚 important to be aware of contribution limits before purchasing RRSPs. 鈥淭his is very important because if you buy too many RRSPs and you exceed your limit, the CRA will demand for you to withdraw those RRSPs.鈥�
Until you withdraw them, Cabral explained, you could receive one per cent penalty per month.
鈥淲e definitely don鈥檛 want to get ahead of ourselves and contribute to RRSPs and then be penalized for that. One way or another, even if we do over-contribute, the CRA will not let them go through in our account as a tax deduction; they鈥檒l cap it at the max contribution limit.鈥�
Cabral added some good news about RRSPs -- namely, that the contribution limit is up this year, now standing at 18 per cent of your earned income (with a cap of $29,210), which turns into contribution room for your RRSPs.
On top of this, TFSA limits for 2023 have also increased. 鈥淟ast year it was $6,000, and now it鈥檚 gone up to $6,500,鈥� Cabral explained.
鈥淜eep in mind, though, that TFSAs have no impact on your income tax per se,鈥� she said. 鈥淐ontrary to RRSPs, which lower your income tax to pay or maximize your refund, the advantage of TFSA is that they are great for short-term or even long-term saving money.鈥�
You can also, she added, withdraw money from TFSA at any point, without penalty.
鈥淚f you withdraw from your RRSPs, it adds onto your income and then you have to pay taxes on that. In the long-run, you鈥檒l have more income tax to pay on your tax report.鈥�
Cabral also said that people often forget to include their medical expenses in their income taxes.
鈥淎 lot of people don鈥檛 know that the portion you pay out of pocket -- if you have private insurance -- is deductible. Anything (in terms of medical fees) which you pay out of pocket is deductible.鈥�
鈥淕et ahead of yourself. It鈥檚 a work in process throughout the whole year,鈥� she said.
