Clueless About Filing Taxes? Follow These Tips and Sail Through Tax Season
Taking on your taxes for the very first time can be intimidating- it’s hard to know where to start. Even so, it doesn’t always make sense to pay an accountant to file your taxes. Doing it yourself can save time and money and it doesn’t have to be as complicated as you think.
Advances in online tax preparation and filing have made it easier than ever for you to file on your own. In fact, according to the Canadian Revenue Agency (CRA), over 9 million Canadians chose to file their own taxes in 2020.
There are plenty of options to choose from if you decide to complete your own tax return using CRA certified software. All the best tax return apps will guide you through the preparation and filing process from start to finish. It’s possible to file your taxes without any prior knowledge- and using an app like TurboTax can help.
In This Article:
TurboTax Filing 101
There are plenty of things that you’ll eventually need to know about tax returns, but for now, let’s stick with a crash course on the basics and have a look at what it takes to file your own taxes with a CRA certified app like TurboTax.
Working with a tax preparation app like Canada’s best-selling tax software for over 20 years can bring with it a certain peace of mind for a first-time tax filer. TurboTax guarantees:
- A maximum refund: If you get a larger refund or smaller tax refund from another tax preparation method, they’ll refund you the purchase price paid.
- 100% accuracy: If you pay a penalty because of a TurboTax calculation or Live Tax Expert error, TurboTax will reimburse you the penalty and interest.
- A 60-day Money Back Guarantee
With this in mind, let’s dig in and work through the steps of filing your own taxes.
3 Important Steps to Filing Your Taxes for Any Beginner
1. Update your Personal Information
The first thing you’ll need to do is to register with the CRA for My Account and update your personal information. You’ll want to update important information like your:
- Home address
- Banking information
- Marital status
- Children in your care
Keeping your information up to date with the CRA will save time and make sure you get the right benefits and credits.
2. Report your income
The amount of tax you owe the CRA depends entirely on the amount of money you made in the given tax year. The next step here is to report all of your income, that is all the money you made through your job(s), investments or benefits, in your return. Remember to report anything that was paid in cash, including any side gigs or tips that you’ve received.
3. Claim deductions, tax credits, and expenses
The third step in the process is to claim your deductions, tax credits, and expenses to reduce the amount of tax you need to pay. Deductions and credits can change every year and this tax year is no exception. There are plenty of tax changes that can keep more money in your pocket. While there are a wide range of deductions and credits available, common things to consider include:
Student loan interest– You can claim interest payments on eligible student loans received under the Canada Student Loans Act or similar programs. You can’t claim interest on personal loans or lines of credits that you used to pay for your education.
Moving expenses– If you move to a home that’s 40 km closer to your new place of work than your last residence, you can claim a wide range of moving expenses for your family. This includes travel expenses, fees for changing your address on your legal documents, and even the cost of utility hook ups.
Medical expenses– Everything from dental visits, prescriptions, doctors’ fees and even private insurance premiums can add up quickly over a year. Keep track of all your medical expenses because they can land you a credit come tax time.
Child care expenses– Child care expenses are tax deductible if you pay them so you can go to work or school. You can claim costs paid to daycares, nannies, overnight camps and even summer day camps.
Union and professional dues– If you’ve paid union dues or professional association fees, keep the receipts and claim them as a deduction. Just remember- if your employer has already reimbursed you for these fees, they are not eligible expenses and you cannot claim them as deductions.
Employment Expenses– You might qualify for a deduction if you have certain job-related expenses like tools or home office equipment. To be eligible, you typically need a signed form T2200 (Declaration of Conditions of Employment) from your employer that will outline what kind of expenses you can claim. If, however, you worked from home for during the tax year due to the pandemic, you can claim a deduction of $2 for each day you worked from home (up to a maximum of $400). To be eligible, you must have worked from home more than 50 percent of the time for at least four consecutive weeks in 2020.You don’t have to worry too much about having to know all the details about every deduction- that’s where using tax prep app, TurboTax, can help make things a little easier.
You don’t have to worry too much about having to know all the details about every deduction- that’s where using tax prep app, TurboTax, can help make things a little easier.
Deadlines, Penalties, and Interest
For most people, the deadline to file your tax return and to pay any taxes you owe is April 30, 2021.
If you don’t file your return on time and you don’t pay the taxes you owe by April 30, 2021, the CRA will charge you a late-filing penalty. The penalty is 5% of your balance owing plus 1% of what you owe for each full month your return is late (up to a maximum of 12 months). On top of that, the CRA will start to charge about 6% interest on what you owe until your balance is paid.
In 2021, not everyone will have to pay their taxes by April 30, 2021. If you had a taxable income of $75,000 or less and received one or more of the following COVID 19 benefits, you won’t have to pay your taxes until April 30, 2022:
- Canada emergency response benefit (CERB)
- Canada emergency student benefit (CESB)
- Canada recovery benefit (CRB)
- Canada recovery caregiving benefit (CRCB)
- Canada recovery sickness benefit (CRSB)
- Employment Insurance benefits (EI)
If you qualify for the tax payment deferral or even if you can’t pay your taxes by the due date, file your return on time so you don’t have to pay the late-filing penalty.
Keep Your Receipts and Records
Once you’ve put in all the hard work and filed your taxes, keep your receipts and supporting documents for at least six years. During that time, the CRA may review your return and ask you for proof to make sure that your deductions and credits are reported accurately. Keeping these records will make it easier to face the taxman when supporting your claims.
Make Tax Filing Easier With TurboTax Free
Using CRA certified tax preparation software doesn’t have to break the bank. You can file your taxes for free using TurboTax Free. TurboTax Free works on any Mac or PC with a current web browser. You can also do your taxes on your smartphone or tablet of choice using the mobile apps for both iOS and Android.
TurboTax Free works with the CRA’s Auto-Fill my return, a secure service that lets you automatically fill in parts of your tax return with data the government already has on file. You have to be registered for the CRA’s My Account mentioned earlier to use this service. Importing your income slips (like the T4, T3, and T5), benefit slips, and RRSP receipts right into your return- instead of entering it all manually- will speed things up.
TurboTax Free can help find tax saving opportunities. The app will provide suggestions on credits and deductions that might apply to your situation and help apply the recommendations where it makes sense. After you’ve calculated your payment or refund, you’ll securely file your return to the CRA with the click of a button. By filing your return electronically with the CRA, you can expect to receive your tax refund by direct deposit in about 2 weeks.
Watch this short clip on How to file your taxes using TurboTax Free to see it in action.
Choosing the Right Turbotax for You
There are a number of TurboTax options to choose from depending on your situation. The online TurboTax options work best for filing single returns. If your tax situation is straightforward, the Free or Standard versions will do just fine. The Premier version can help if you have investments and rental properties and the Self-Employed option can help if you have a business or side hustle.
Consider the downloadable TurboTax options if you have more than one return to file. The different tiers follow the same general principles but include more returns and can be more cost-effective.
Using tax return software such as TurboTax to guide you through the filing process for the first time, can make the whole ordeal much less intimidating. Combining that with your newly acquired basic understanding of tax prep rules, you’ll be in even better shape to file your taxes the next time around.