Tax Matters: Going to the Accountant

by Michael L. Crawford, BA(Hons), CMA

In Real Estate the three most important things are location, location and location; in tax preparation the three most important things are organization, organization and organization.

What do I mean? The best place to start is with last year’s tax return and last year’s Notice of Assessment or in some cases Notice of Reassessment. These documents can help you prepare for this year’s tax return. Start by looking at what was submitted for last year’s tax return. Did you purchase an RRSP last year? Did you have medical expenses? Childcare expenses? Make sure those receipts for the current year are ready and available for the accountant. What about investments? All financial institutions will mail your T-Slips, usually a T3 and/or T5 by the end of February. Make sure you have all of those slips before proceeding to the accountant.

Now move on to your Notice of Assessment or Notice of Reassessment. These documents contain a wealth of information. If applicable, it will show your RRSP contribution room and any unused contributions; the status of your homebuyers plan (HBP); the status of your Life Learning Plan (LLP). It will also indicate whether you have any capital or non-capital losses that are available for carry-forward not mention unused student tuition deductions. Most importantly your Notice of Reassessment may indicate any income information you forgot or did not receive (from your financial institution). Make sure you have that information for this year before going to the accountant. Nothing is more frustrating than thinking you have put another tax return behind you only to discover that something was missed and now the Canada Revenue Agency wants even more money from you PLUS interest and maybe even penalties.

Once you have gathered all of your information for this year’s tax return, organize it by type. Put all your income slips together (and I prefer clients to not separate the various parts of their slips but your accountant may feel otherwise). Place medical expenses together by type; that means all drug store receipts together, all dentist receipts together, and so on. Then group these various medical expenses together. Receipts for charitable donations should be grouped together in a similar manner as well as RRSP receipts. Finally include any other relevant documents.

Why are you interested in this organization? Two reasons: time and money. Accountants usually bill by the hour (but not always) and if you bring a shopping bag of receipts in that the accountant has to sort through that will take more time; and the more time it takes the more money it will cost you. Also a neat and organized file looks more inviting to accountants. If at the end of the day we have time to do one more tax return and we are faced with the choice of a neat clean file or the previously mentioned shopping bag with all its receipts and papers stuffed every which way, which file do you think we will grab? And the sooner the accountant prepares your tax return the sooner (remember time at the beginning of this paragraph?) you get it back and, if applicable, the sooner you get your refund (remember money at the beginning of this paragraph?)

But I hear you saying that you know you’re going to owe so what’s the point of filing early? First, remember that the deadline for paying any tax owed is April 30th.

Second, just because you have filed a return doesn’t mean you have to send a cheque in with it. Therefore if you file a return at the beginning of March, you have almost two months that the money can sit in the bank earning interest for you. Or you have almost two months to determine how you will come up with the payment. If you owe money the worst possible action you can take is no action at all. If you owe money and do not file a return eventually the Canada Revenue Agency (CRA) will catch up to you and then in addition to interest you will be hit with late filing penalties. Late filing penalties can be significant and are completely avoidable. If you take only one thought from this article, let it be this: Don’t file late!

Great. You are all organized now you can call your accountant and make an appointment to meet with him or her. The earlier, the better. As I write this article at the end of January I have already had one client schedule their appointment (in April). They know they are going to Florida and want to make sure I am available to help them when they get back. Also, by getting your return prepared sooner rather than later allows you and your accountant to resolve any problems that may arise before the filing deadline of April 30th.

You have organized your paperwork and you have an appointment with your accountant what should you do now? Get a piece of paper and write down any questions you will want to ask. By doing this you will be sure to ask all of the questions you may have.

When you meet with the accountant he will want to review the Notice of Assessment or Reassessment with you and briefly look through your receipts. The accountant will want to discuss any major life changes with you (i.e. a new baby; adoption; death of a spouse; change of job) as these are things that will impact your tax return. Depending on your situation the meeting could last anywhere from 10 minutes to a couple of hours. Before you leave make sure to get a commitment from the accountant as to when you may expect the completed tax return. And be sure to pay your bill promptly.

This article assumes that you already have an accountant, but what if you don’t? That is an article I will try and persuade the editors to let me write in another issue.

The Income Tax Act and other related legislation are large and complex laws that frustrate even the professionals at times. This article is intended to increase your awareness of issues that affect you and encourage you to look more closely at the ones that relate directly to your situation. You are encouraged to seek professional guidance specific to your unique situation.

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