Five easy ways to stay ahead of next year's tax deadline
If you or your spouse or partner is self-employed, you may be spending much of this weekend scrambling to complete your 2014 personal tax returns by Monday's (June 15) midnight deadline. Any balance owing was actually due on April 30, but interest on the amount outstanding will only accrue from May 6 as a result of the Canada Revenue Agency's previously announced deadline extension. If you don't file by Monday, however, an automatic late-filing penalty of five per cent will apply.
But if you're having trouble getting all your information organized this weekend and want to do a better job for 2015, here are five easy tips to consider.
1. Create hard folders for your receipts: Purchase an accordion file with dividers (or some other form of folder system) and pre-label your folders with categories of expenses, rather than just throwing all receipts into one large (shoe)box. Consider having a separate folder for business expenses, donations, medical expenses and T-slips. It's then a simple matter of adding up like expenses and putting the totals on your return come tax time.
2. Create electronic folders to store tax-related e-mails: E-mail software allows you to create folders that can be accessed online (or offline) that can be used to store important e-mails separate from your in-box. Unless you're one of those super-organized people that regularly clears their in-box, it's a lot easier to continuously move any tax-related e-mails, such as electronic donation receipts, from your primary e-mail box to a subfolder daily than trying to find those receipts at tax time by doing a burdensome electronic search.
3. Put business expenses on a separate credit card: Credit cards are a great way to track your business spending and, in some cases, earn reward points while doing so (provided you pay your balance in full each month), but it's a good idea to get a separate credit card to be used only for your business spending. It makes it a lot easier to then determine which expenses were legitimate, tax-deductible business ones versus others that are personal.
4. Bifurcate your line of credit: If you regularly draw on a line of credit for both personal and business expenses, why not ask your financial institution to separate your line into two separate, smaller lines. That way, it will be easier to track and write off your deductible interest expense on your business line of credit when preparing your return.
5. Get a head start: Finally, if the above resonates with you, consider making tax planning a year-round priority. After all, there is very little you can do when filing your return to save taxes. But why not sit down with a tax professional during the summer months to review your entire tax situation for 2015. Maybe there are income splitting strategies you could be putting in place now, for the balance of the year, to save taxes for 2015 or perhaps there are other deductions you may be missing. Having that discussion up front, without the pressure of the looming filing deadline hanging over your head, may lead to more money in your pocket for years ahead.