If you’re getting a migraine just thinking about having to file your taxes, why not take some free advice from CPA Kyle McMurtry? We sat down with the managing partner at Grant Thornton LLP to see if he had any advice on how to make tax season a little less stressful.
What are one or two particularly common things that you see individuals overlooking or doing incorrectly when filing their tax return?
Sometimes the simplest things are also the easiest for people to miss and that is true of what we see overlooked. Often, we will see new clients that have significant dollar values in RSP or loss carry-forwards that haven’t been claimed in years. Reading your assessments or other correspondence from CRA can be a valuable use of time for some people. On the other end of the spectrum, for individuals the most common areas we see done incorrectly are deductions for vehicle or other employment of self employed expenses. The rules can be very particular, and we are seeing CRA get more and more ‘picky’ about documentation to support various claims.
What are some business write-offs that tend to fly under the radar, or that many people seem to not know about?
There have been so many significant tax changes in Canada over the past few years that it would be easy to miss some of them. Most of these would apply to incorporated businesses, but certainly can impact the shareholders of these businesses too. For example, the expanded Tax on Split Income (“TOSI”) rules are very complex, and anyone receiving a dividend from a private corporation should be aware of the potential impacts that could have on their personal tax returns.
Other business items that we still see under-utilized are various tax credits and government incentives, such as the various Provincial and Federal Apprenticeship and Co-op credits which can significantly reward businesses that employ eligible people.
The other business tax measure that came into effect last fall was increased Capital Cost Allowance (“CCA”) rates for some asset additions. Depending on the timing of the acquisition, this may allow businesses to deduct a higher amount of depreciation of assets in their current tax return which has the potential to be a significant benefit for these taxpayers.
What are some things individuals can do or keep in mind throughout the entire year to make tax season quicker and easier when it comes around?
Like many things in life and business, organization and communication go a long way. With a tax and business advisor on your side, there shouldn’t be any surprises come “tax time.” Transactions should be thought out throughout the year, and even specific planning steps considered prior to December 31. Keeping documentation on revenue and expenses up to date throughout the year makes the filing process much smoother and less stressful. The other thing we always encourage clients to do is ensure the information is as complete as possible. Amendments to returns can be costly to have a professional prepare, and in addition can cause delays for CRA in processing returns.
If you had to give one ‘Golden Rule’ for filing taxes, what would it be?
Actually, I’m not sure there is a “Golden Rule” especially with as complex as the Canadian Income Tax system has become over the past few years. I would certainly encourage filers to be honest of course, take a step back to ensure they have included and deducted everything, and make sure to file on time to avoid potentially costly penalties and interest. The other thing is to ensure if an individual’s or especially a business owner’s situation has become too complex, to engage the help of a knowledgeable professional.
Should your average Winnipegger be working with a firm/advisor for filing their taxes? Who should be, and why?
That really depends on how you define the average Winnipegger. With the advancements in technology and the capabilities of “do it yourself” software, even in a relatively complex taxation system, many people will likely be fine doing their own returns. However, for business owners, whether incorporated or not, or farmers for example, getting your tax compliance done by a professional is certainly advisable. Not to mention the valuable tax and business planning advice that should be offered along with that. Other examples of returns that might be more suited for a professional would be final returns for a deceased taxpayer, trusts and estates, returns that report complex investment portfolios, rental properties, etc.