Five Tips to Consider Before Filing Your 2022 Taxes
It is that time of the year again! You guessed it, it’s the Tax Season.
In Canada, filing your tax return every year will ensure you receive any Canadian government credits that you may be eligible for. The 2022 tax return deadline is April 30, 2023. Even if you don’t have a balance owing on your return, or don’t have an income to report, you should still file your taxes annually. If you have a spouse or common law partner, under Canadian law, they should file an income tax and benefits return too.
Continue to read the rest of our newsletter to learn about the five steps we recommend taking before filing your tax for the year 2022.
1. Create an online account with Canada Revenue Agency (CRA)
A great way to keep track of all your previous years’ taxes, benefits and credits, balancing owing, and more is through creating an online account with Canada Revenue Agency. Your CRA account helps you easily manage your taxes and credit information online, from the comfort of your home. Here are a few excellent ways you can utilize your online CRA account:
- Apply for benefits and credits
- Update your account information (marital status, address, phone number, etc)
- View your notice of assessment or reassessment
- Pay your payments
Electronic returns are usually processed within two weeks whereas paper returns may take several weeks for processing. According to research, 92% of tax returns are filed electronically due to their convenience, security, and faster processing.
If you are registered for “My Account” with CRA, you can use “Auto – fill my return” to quickly fill in parts of your return with you information the Canada Revenue Agency has on file. If you choose to file your 2022 tax return digitally this year, access Canada.ca to learn more about the certified tax software you can use to file your tax.
2. Entre your income and other benefits payments
If you are employed, you should receive your T4 from your employer by the end of February 2023. You may receive other slips from different payers such as pension providers, financial institutions, and educational institutions that you should also include when filing your income tax return.
If you have received benefits from CRA such as Canada Recovery Benefits, and Canada Recovery Caregiving Benefit, you will receive a T4A information slip that you should add as an income for the year 2022. You should also receive these slips from the Government of Canada by the end of February 2023.
Other sources of income are still required to be reported but may not generate a tax form, such as:
- Income from sales of goods and services regardless of whether payments were in cryptocurrency or traditional monetary currency.
- Income earned through buying and selling crypto assets.
- Tips and gratuities earned at your place of work.
- Withdrawals from RRSP or registered accounts.
If you also generate a world-wide business income, you should report that through the platform economy. One example of this type of income is social media influencers', who earn income that is generated through social media platforms. These income sources may be generated through advertisement, referral codes, merchandise sales or commission on sales, sponsorships, or barter transactions.
Click here to learn more about reporting international income.
3. Claim your benefits, credits, and deductions
You may be eligible for tax deductions, credits and expenses on your tax return for the year 2022. CRA uses the information from your return to calculate your benefits and credit payments. Some of these payments include:
- Canada Child Benefits
- Good and Services Tax/ Harmonized Sales Tax (GTS/HTS) credits
- Provincial or territorial benefits.
You might be able to claim a deduction that can reduce the amount of tax you may owe. Examples of those expenses are childcare expenses and home office expenses (if you work from home as an employee and have arranged deductions with your employer). If you are self-employed, you may be able to claim certain business expenses such as a motor vehicle, and business–use–of–home expenses (heating, home insurance, & electricity).
Learn more about the tax credits and benefits you might be entitled to here.
4. File on time, pay on time!
Filing your taxes on time will ensure your taxes returns and benefits credit will not be delayed or interrupted.
If you owe a balance to the CRA, it is important to note that retirement income benefits such as the Old Age Security (OAS) and Guaranteed Income Supplement (GIS) may be held back if you do not file on time.
The deadline for filing for 2022 income tax is April 30th, 2023. If you, your spouse, or common law partner are self-employed, you have until June 15th, 2023 to file your taxes and benefit return. If you don’t file your taxes by deadlines, you may be subject to late filing penalties on any money you owe.
In addition to filing on time, any balance owing is also due by April 30, 2023. Paying your balance owing in full ensures interest will not be charged. If you are unable to pay your balance owing, contact the CRA to make a payment arrangement that suits your ability to pay
Learn more about payment arrangement here.
5. Maximize your tax return with Registered Retirement Saving Plan
An excellent way to reduce taxable income is through contributing to a Registered Retirement Savings Plan (RRSP).
If you earn taxable income, a RRSP may be a good option for you. Contributions you make to an RRSP will attract a tax deduction annually. The savings within your RRSP account will grow on a tax-deferred basis. Taxes will be payable at retirement or upon withdrawal, based on your marginal-tax rate (MTR) at that time.
Generally, the RRSP contribution room (limit) is 18% of your annual earned income from the last tax year (up to a maximum of $27,830 for 2022). However, each individual has unique RRSP limits, subject to multiple factors such as room carried forward from previous tax years.