This tax season is likely to be a stressful one for many Canadians. COVID-19 may have already put financial stress on your family’s lives, and with taxes coming soon, that stress could be heightened even further. There are bills to pay, groceries to buy, and you might be working from home or even not working at all to pay for those expenses.
So, to make sure you keep the most from taxes this season, let’s look at a few tricks.
If you’re a family, make sure you are taking advantage of all the tax benefits you can be. The Child Care Benefit is just one way that Canadian families can cover expenses from child care. Parents can claim up to $553.25 per child per month for children under six and $466.83 per month per child for children between six and 17. Say you don’t have children, but you are still looking after a dependent with a physical or mental impairment, you can claim the Canada Caregiver Credit, which has more conditions but can still help cover expenses. These are just a few of the many benefits you should be trying to claim.
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If there’s one simple thing you can do for yourself, it’s to not be late this tax season! The late penalty for not filing on time is a whopping 5% of your balance owing, plus another 1% for every month that goes back where you haven’t filed your return, up to a maximum of 12 months.
But it doesn’t stop there. If you’ve made a habit of not filing, the Canada Revenue Agency (CRA) will charge compound daily interest on those amounts you haven’t paid from previous years. On top of that, the CRA states, “If the CRA charged a late-filing penalty on your return for 2016, 2017, or 2018 your late-filing penalty for 2019 may be 10% of your 2019 balance owing, plus 2% of your 2019 balance owing for each full month your return is late, to a maximum of 20 months.” Ouch.
Bottom line? Even if you can’t pay the full balance, file on time. The penalties will just keep adding up.
Start saving, tax free
If you don’t want to report all your savings, you don’t have to. Simply start up a Tax-Free Savings Account (TFSA) and start storing cash away. The TFSA now has a whopping $69,500 contribution limit as of 2020, so if you start putting money away each month, you can start investing and increasing your funds tax free!
On top of that, if you have a Registered Retirement Savings Plan (RRSP), you can claim a tax deduction on the money that you put in your RRSP for the year. The more you put in, the more it can lower your tax bill. If you’re in a higher tax bracket, this is especially useful information.
If you’re worried about your funds this tax season, it can be simple to just take a beat and look over where you can take advantage of what’s out there. Simply claim benefits, file on time, and take advantage of your TFSA and RRSP to be sure you have the most amount of cash on hand at the end of April.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned.