Be ready to file your taxes in Canada
There’s nothing more empowering than having your taxes under control and taken care of. Now imagine if you could use taxes to your advantage to increase your financial stability. We can feel the sigh of relief already! Let’s dive in a little deeper.
Why is filing taxes important?
A good thing about filing taxes in Canada is that you can look back and understand what your annual income is and how it’s calculated. It allows you to gain clarity on your financial situation and plan strategically. For instance, you might be eligible for certain deductions or credits and you might not even know it. Consider any potential child or dependent benefits, or disability credits.
Plus, it’s the law! You’ll be penalized if you don’t pay the taxes you owe, and that’s not financially healthy for anybody.
Tips to use taxes to your advantage
Be strategic with your tax situation. Let’s say you get a refund on your taxes. You can use that money to pay down your debt and move up to the savings level on the priority pyramid. Remember to use your refund for your “needs” (like debt repayment) first, before purchasing any “wants.”
You could also think about deferring your income taxes with a Registered Retirement Savings Plan (RRSP) or a Tax Free Savings Account (TFSA). Depending on your circumstances, you could leverage these tax vehicles as a way to lower your tax payments, avoid paying additional tax, and give yourself great flexibility as you work towards your long-term financial goals.
Be resourceful
You might think this is all fine and dandy, but what if you need more help? The great news is there are wonderful resources available for Canadians to take advantage of.
The Canada Revenue Agency (CRA) has a “Community Volunteer Income Tax Program” where community organizations host free tax clinics. Here, volunteers file tax returns for people with a modest income and a simple tax situation. Think of it as a free support system to lean on and keep you empowered.
Key takeaways: how to use your tax filings to your advantage
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Confirm if you are up to date or behind on your tax filings.
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Make a list of what you need to file/any outstanding income taxes.
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Research deductions and refundable tax credits that you may be eligible for (e.g. Disability Tax Credit)
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Start action on any income tax filings you may be behind on, ASAP!
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If applicable, look up your local/free Community Volunteer Income Tax Programs or any professional support systems to lean on.
Words of encouragement: keep going!
Taxes can feel stressful. Taking it step by step and focusing on small actions can bring some relief, build momentum and keep you empowered to do more in other areas of your personal finances.