‘Key to succeeding’: Tax season tips from an expert

As Canadians approach this year’s season, an expert offers tips for getting ahead of the filing blues.

“Taxes are overwhelming for everybody. Nobody likes taxes. But the key to succeeding in your taxes is to be organized,” Josee Cabral, senior tax specialist at H&R Block, told CTVNews.ca Monday.

Cabral recommends organizing documents pertaining to taxes — whether it’s receipts or invoices — in a folder.

“Anything where you know that’s where you put all your tax stuff. It’s good for anybody but especially for (those who are) self-employed,” she said.

Carbal also noted the importance of marking important deadlines.

“The first date to keep in mind is, of course, Feb. 20, which is next Monday,” she said. “That’s when we can officially start (filing income taxes online).”

She warned that it’s important that people don’t try to file ahead of this date, “because they won’t be able to send them out.”

Another important deadline, Cabral said, is March 1, which is the RRSP deadline.

“You have until (then) to contribute to your RRSPs. Please take note that the first 60 days of RRSP go on the previous year’s income taxes. So don’t forget to include those in your 2022 income tax,” she said.

Cabral added that it’s important to be aware of contribution limits before purchasing RRSPs. “This 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.”

Until you withdraw them, Cabral explained, you could receive one per cent penalty per month.

“We definitely don’t 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’ll cap it at the max contribution limit.”

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. “Last year it was $6,000, and now it’s gone up to $6,500,” Cabral explained.

“Keep in mind, though, that TFSAs have no impact on your income tax per se,” she said. “Contrary 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.”

You can also, she added, withdraw money from TFSA at any point, without penalty.

“If you withdraw from your RRSPs, it adds onto your income and then you have to pay taxes on that. In the long-run, you’ll have more income tax to pay on your tax report.”

Cabral also said that people often forget to include their medical expenses in their income taxes.

“A lot of people don’t 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.”

“Get ahead of yourself. It’s a work in process throughout the whole year,” she said.