2020 has come and gone. And that means there are some important tax season deadlines coming up. Every year, the Canada Revenue Agency (CRA) has certain deadlines by which you need to have your taxes filed and paid. There are other important CRA deadlines that aren’t as well known but are just as important. With that in mind, here are the two most important CRA-related dates to mark on your calendar in 2021.
March 1: RRSP contribution deadline
March 1 is the final date on which you can make RRSP contributions for 2020. Any contributions made past that date will count for 2021.
The RRSP contribution deadline has big implications for your taxes. Every dollar you contribute to an RRSP takes a dollar off your taxable income. If you miss the deadline, then you may end up having to pay more taxes for 2020 than you hoped. So, if RRSP contributions were a big part of your tax minimization strategy for 2020, make sure to mark March 1 on your calendar. It’s a very important, yet overlooked, tax season deadline.
April 30: Tax-filing deadline
April 30 is the date by which you’ll need to have your 2020 taxes filed. There’s been some speculation that the CRA might extend the tax-filing deadline again, like it did last year, but there’s been no official announcement on that. So, you should have your taxes filed by April 30. If you’re self-employed, the deadline is June 15.
Final tip: Get your investments in order!
An often overlooked part of filing your taxes is getting your investment paperwork done. Investment income and gains have to be reported to the CRA. Whenever you file your taxes, you need to report:
- Realized capital gains (money from selling stock)
Getting all of these calculated can be hard. Capital gains are offset against capital losses, so if you own more than one stock, you may need to work out what your actual taxable gain is. Additionally, you need to figure out whether any dividends you received are eligible for the tax credit or not and how much money you save with the credit. All of this takes time. If you have a complex, diversified portfolio, then investment calculations alone might take more time than every other tax-filing task you have to complete.
Imagine that you held $50,000 worth of Fortis (TSX:FTS)(NYSE:FTS) stock in 2020. If you received four dividends from your Fortis shares and then cashed out at a 10% gain at the end of the year, you’d have quite a bit of tax work to do. At minimum, you’d need to:
- Report the amount of dividends received (in this example it would be $1,940);
- Figure out whether the dividends are eligible (in Fortis’s case, they are);
- Calculate the dividend tax credit;
- Report the capital gain; and
- Figure out whether the capital gain could be offset by losses on other assets you sold.
That’s all just for a single $50,000 position in Fortis stock! If you own a diversified portfolio of 100 stocks, all of this work gets a lot more complex. So, if you invest, definitely make sure you’re well ahead of all the relevant tax deadlines. This isn’t the kind of work you want to leave to the last minute.