‘Tis the season – for income tax: Make financial and tax planning easier on yourself this year

1. Develop an organizational system for your finances that you can actually stick to.

It might be that it takes a few days to set up, but it provides ease for the other 360 days of the year. This is not rocket science. You should do whatever makes sense to you. I usually recommend a simple, labeled filing system to hold paper statements or, if you receive everything electronically, keep separate files on your computer sorted by year and type. Consider one file for each investment account to hold the statements you receive – ie. RRSP, TFSA, RESP, non-registered. Also consider separate files for each type of tax documentation you receive such as T-slips, RRSP contribution slips, donation slips, deductible expenses etc. Setting up separate files for each document you know your accountant will be looking for, means it will be easier to determine if something is missing. As you receive these items through snail mail or email – put them into their respective files as soon as you get them.

2. Check out the CRA’s “My Account for Individuals”.

If you are computer savvy, this will make your life infinitely easier when it comes to those nagging questions your investment advisor or tax preparer might ask you. You need to sign up, but once you do, you will have access to all the tax-filing related information you ever needed to know (and more). Access the CRA site here. This website is a great resource that shows a history of your tax filings and notices of assessment. It also shows you all T-slips you received in prior years: so, if you can’t remember what you received or you think you are missing something, you can find out what you did last year with a few clicks. It shows you all amounts owing, any payments and instalments made, your RRSP and TFSA contribution limits and the list goes on… One other great feature about the “My Account for Individuals” is that if you ever need to send documents to the CRA (like donation slips you don’t need to file with your tax return, but the CRA later asks you to send them in) you can upload them and send them through this account too.

3. If you have any connections with other countries, understand your reporting requirements in Canada and abroad to ensure you are retaining the correct documents.

If you do have connections with other countries through citizenship, residency, assets or beneficiaries of your assets, then this means you are likely to have extra tax filing requirements here in Canada or tied to the citizenship or residency of the other country. For example, if you are a Canadian resident and own foreign property, such as real estate or stocks, and the cost of which is greater than $100,000, you will need to file an extra form called the T1135. The form requires one of two methods for completion: the simple method or the detailed reporting method. The simple method is straight forward, however, if you fall under the category of the detailed method because your total cost of foreign property is greater than $250,000, then more information is required to complete the forms. You will need records indicating the maximum cost of the property held during the year, the cost at the end of the year, the income you earned on the property and all of this needs to be reported on a country-by-country basis. See suggested organizational system in item #1.

4. If you own non-registered investments, you need to keep more records than just T-slips.

If you hold investments outside of RRSPs, TFSAs or any other registered account, there are two components to the information you need to provide for tax filing. The first is the T-slip – either a T3 (if you own a pooled fund or a mutual fund) or a T5 (if you own a bank account or investment account that holds individual securities). The T-slip component reports the income on the investments – interest, dividends or foreign income – that you earned during the year and that must be reported. The other component is any realized capital gains or losses that you received because you sold an investment. This applies to units of pooled and mutual funds and individual stocks and bonds. When you sell an investment, it will trigger a reportable gain or loss. This information is not included on the T-slip. It can usually be found on the investment or custody statement on the date sold or in a year-end report. You need the cost at which you bought the investment and the market value at the date of sale.

5. Align your assets with your current financial and estate plan goals and wishes.

Life is busy and with the passing of each year it is easy to forget your good intentions and plans when it comes to financial and estate goals. As you start to get organized to file your tax return or pass on information to your accountant to prepare it for you, it is also a good time to take stock of your current assets and liabilities. This includes the current market values, how they are owned (solely, jointly with right of survivorship, through a corporation or a trust etc.) and who you have designated as beneficiaries on your registered accounts and life insurance policies. Once you have done this then you should also review your financial plan and estate planning documents. Then consider whether your current ownership, type of account, beneficiary designations etc. align with your financial and estate plan goals and wishes.

6. Set some financial goals for the balance of 2017.

Perhaps after gathering up your tax information and reviewing your accounts you might decide you need to make some changes to your savings or spending habits or even pay off lingering debt. Set up a new budget for the year or add a little bit more to what you are stashing away in savings.

Tax season doesn’t have to be daunting! If you stick to your Financial and Tax-Year Resolutions throughout the year, the annual ritual of getting ready to file your income taxes will be easier on you and you can delight in knowing your financial house is in order.