As the tax deadline is approaching, the procrastinators out there are scrambling to get their receipts in order to file their income taxes. Yes, I am one of those procrastinators, but this year tax preparation has been easier than previous years.
There have been years where my receipts were a mess and difficult to locate. This year was much easier due to the fact that I decided to get on the ball and finally got organized. This article will focus on how to make tax preparation much easier for next year.
Get a Filing Cabinet
- This will save you a bunch of time when you need to retrieve paperwork, like during tax season. Not only does it keep everything in one place, it keeps all the paperwork separated by topic.
Label the Files Properly
- Investment Properties. If you have investment properties, there should be a file for each property. Expenses should be charged to each individual property.
- Retirement Accounts. Contributions, and tax records should be kept here. Note that you should receive a tax form from your brokerage at the beginning of the new year indicating your contribution amounts.
- Non Registered Accounts. Trade confirmations and tax records should be kept here. Non registered accounts are a bit trickier in that all trades/dividends/interest must be tabulated and reported to CRA.
- Home Office. If you have a home based business and have a designated home office, there are a few things to keep track of. You'll want to keep track of the mortgage interest, property tax, cable/internet/phone bills, insurance, power bills and office related purchases. A portion of these expenses can be claimed depending on how big the home office is relative to the size of the home.
- Other Business Expenses. For home based businesses, travel, dining out and other qualified business expenses can be claimed at year end.
- Vehicle. If you have a home business, you can claim a portion of your car usage that was for business. Keep your loan servicing, gas,maintenance, license/registration, and repair receipts here. Also keep a log of the KM's that you use for business as a percentage of total KM'S for the year.
- Charitable Donations. Keep all your charity receipts in one spot, as it will help if you decide to build up your receipt amount before making a claim. Remember that the first $200 donated receives a tax credit at the lowest marginal rate, everything after that is given a tax credit at the highest rate.
- Medical Expenses. If you have high medical expenses, it may be worth your while to gather all your medical expense receipts to get a few tax dollars back from the medical tax credit. Only amounts greater than $1,925 or 3% of net income (whichever is less) can be claimed. Note that private health insurance can be included as an expense, along with dentist visits and prescription eye glasses.
Get a Bankers Box
- Once you have filed taxes for the year, take all your receipts and store them in a labeled bankers box by year. You are required by CRA to keep your receipts for up to 7 years.
Use Money Tracking Software
- If you have a home based business, then using a program like MS Money or Quicken can save you a lot of hassle if you keep close dibs on your income and expenses as they occur. At year end, you can simply print off all the applicable events which will give you a rough guideline as to what to expect from your filed receipts.
How do you keep organized for tax season?
Photo credit: casey.marshall