Tax season is upon us once again, and with it comes the flurry of paperwork and deadlines. As wealth advisors, it’s crucial to ensure that both you and your clients are well-prepared to navigate through this period without any unnecessary stress or financial setbacks. Let’s take a moment to review some friendly tax reminders that can help avoid common blunders and ensure a smooth tax season ahead.
Important dates and deadlines.
- TFSA: The Tax-Free Savings Account contribution limit for 2024 has increased to $7,000.
- RRSP: Remind your clients to review their Notice of Assessment to confirm their individual contribution limit.
Avoiding Penalties and Maximizing Benefits
The tax filing deadline matters! If your client owes money, the penalty is hefty if they miss the deadline. There is a 5% penalty for filing late, and that’s not all; add a 1% penalty for each additional month they are late. The interest costs can add up quickly.
Claiming benefits can sometimes be tricky. Some of your clients may miss benefits they are entitled to, and others will overstate benefits they feel they are entitled to. Claiming benefits is often in a grey zone, so encourage your clients to seek expert advice when unsure about their eligibility for certain benefits. The cost of professional guidance is often far less than the potential expenses associated with an audit.
Maintain Accurate Records – Be Prepared for Potential Audits
Even if your client believes you’ve filed correctly and claimed all relevant deductions, it’s essential that both parties keep thorough records. The Canada Revenue Agency (CRA) can audit tax returns for up to seven years after filing. Avoid the headache of retroactive repayments by maintaining organized records and retaining all receipts.
Common-law relationships can impact tax filing status. If clients have lived with their partners for more than 12 months, they may be considered a couple for tax purposes, regardless of marital status. It’s important for clients to understand these nuances to ensure accurate tax filings.
Ensure clients declare all sources of income, including earnings from employment, investments, rental properties, and business ventures. Tax avoidance, while not illegal, should be approached cautiously, as the CRA discourages such practices. Failure to report income can result in penalties and legal consequences. In Canada, if you have income from any source, you must file a return.
Utilize Available Resources
Lastly, inform clients about online resources like the My Service Canada Account portal. This platform allows users to access important tax documents, view past returns, and apply for various government services conveniently. By staying informed and proactive, clients can maximize their financial benefits while minimizing potential errors.
It’s important to guide our clients through the intricacies of tax season and help them navigate potential pitfalls. By staying informed about important deadlines, maximizing benefits, maintaining accurate records, and utilizing available resources, we can ensure a successful and stress-free tax season for all parties involved. Remember, the CRA is a lifelong business partner, and collaboration is key to achieving financial success. It’s better to work with them and not against them.
Pattie Lovett-Reid
Chief Financial Commentator
HomeEquity Bank
