Skip to main content Skip to search Skip to search

Lesley-Anne Scorgie Takes the Pain Out of Tax Season

April doesn't have to be the cruellest month when it comes to filing your taxes.

April doesn't have to be the cruellest month when it comes to filing your taxes. Financial consultant and bestselling author Lesley-Anne Scorgie (Well-Heeled: The Smart Girl's Guide for Getting Rich) breaks down the process and shares tips for making tax season less dreadful. 

Well Heeled

*****

So the piles of tax receipts have arrived. They may be littered on your kitchen table, still enclosed in envelopes or stuffed in a drawer. As dreadful as tax season may seem, it’s manageable. To successfully navigate your tax filing in 2014, start by taking a bit of time to organize your 2013 receipts for things like home office expenses or transit passes, forms, and other relevant information. A good-old-fashioned file folder usually does the trick.

Armed with an element of organization, next you’ll need to decide on your approach to filing—specifically whether to go at it alone or hire a professional.

The pros of do-it-yourself tax filing are that you’ll save money by not having to pay an accountant or tax filing service. Throughout the process, you’ll also have the opportunity to learn more about your taxes and further opportunities to save money. The cons are that you could miss credits and benefits that may be relevant to you or file incorrect information, which typically leads to a reassessment.

Tax credits and benefits are incredibly valuable because they allow you to reduce what you owe. Some of the most powerful are for RRSPs, charitable donations, childcare, medical expenses, small business expenses and more. www.cra-arc.gc.ca lists the credits and benefits available to you in your jurisdiction.

The pros of hiring a reputable tax accountant or professional service—and NO, I’m not referring to your Aunt Maddy’s free family special—are that they have plenty of experience, know the right questions to ask so you save the maximum on your taxes and they can be far more efficient, thus saving you time. The cons are that you’ll have to pay them.

Either approach will work if you’re equipped with the right tools and advice. If you really dig money matters and are willing to do the required prep and research, a do-it-yourself tax filing will suffice. But, if you’re like the majority of Canadians who are not interested in taxes, and lack the tax savvy to successfully process their own return, hire a pro. But, be sure you get a referral from a trusted friend or family member.

Once you’ve filed, you’ll know if you owe money or can expect a refund.

Unfortunately, owing money leaves you with few choices—either you pay-up or start receiving harassing letters from the government. If you’re totally strapped for cash, you may qualify to make installment payments. You’ll also likely need to adopt the Frugal Fundamentals, principles to help you save money every day, as outlined in my new book Well-Heeled: The Smart Girl’s Guide to Getting Rich.

However you decide to pay-up, ensure you don’t end up in the same situation next year. Ask your employer to deduct more tax from your paycheque or if you’re self-employed, set aside a larger amount.

If you’re in line for a refund, congratulations! Though it may feel like you’ve won the lottery, a refund essentially means you paid too much in taxes the year prior, so the government is giving you back what you overpaid—far from a winning ticket. But, it’s better than the alternative.

The big question now is what to do with your unexpected stash of cash. You’ve got four options: first, give; second, save; third, pay off debt; or fourth, spend it. Why not strike a balance?

Take 10%  off the top and give it to your charity of choice. Not only will this help your community and make you feel good, but the CRA will issue you an attractive tax credit which can be applied to next year’s tax return.

Take 20% and invest it in your RRSP. You’ll receive another tax credit for next year’s return in exchange for your contribution. Annually, you’re allowed to contribute up to 18% of your income in your RRSP. In most cases, the generous tax advantages within the RRSP make it the best tool for long-term retirement savings. Alternatively, you can top up your TFSA account.

Apply 50% to bad debt such as credit cards, car loans or lines of credit. If you’re lucky not to have bad debt, pay down your mortgage instead.

Use the remaining 20% towards a treat for yourself.

Paying taxes is inevitable, but through organization, research and good advice there are numerous ways to reduce your tax bill. You can make the overall tax filing process seem less like pulling teeth and more like operating a well-oiled machine.

Lesley-Anne Scorgie is the bestselling author of Rich by Thirty, Rich by Forty. Her newest book, Well-Heeled, hits shelves this month. She’s also a columnist with Masters of Money and Metro, and a sought-after financial coach. Follow Lesley-Anne on Twitter @Lesleyscorgie.