Filing your personal taxes is never an easy task. There are various forms to fill, receipts to keep track of, and more. Almost all Canadians hate taxes, which is normal, but that doesn’t decrease the importance of submitting your personal taxes on time. Whether you like it or not, you have got to do it. As tax season approaches, more and more people look around for an easy and convenient way to submit their taxes. Here, we will give you a complete rundown of what you can do. Read on to find out how to file your personal taxes in 2022.
Choose the Right Personal Tax Service Provider
Yes, you can do it yourself. Yes, you can download a tax software and automate most of your tasks. But it still takes up a lot of your time. Also, there are chances of mistakes that might land you in trouble with the CRA. There are a bunch of software that you can use to file your personal taxes, but many people still prefer the old-school way. They contact a professional and certified CPA with an experienced accounting firm who can take care of their taxes for them. Accounting firms provide you with a wide range of tax-related services to ensure you don’t lose any money or your sleep. They will prepare and file your taxes for you.
1. Bring All Your Documents Together
So, you’ve decided to file your personal taxes yourself in 2022? Good for you. The very first step is to collect all your income documents. Whether you are self-employed or work in a firm, there are dozens of papers and forms you need to keep, like PayPal transactions, payroll services, and more.
What you can do is to create a new folder and name it “Personal Taxes 2022.” This is by no means mandatory, and you can name your folder whatever you like, just as long as you can remember where to put all your documents. These will include all the income documentation, sales receipts, and more. If you have all of these things, it’ll make preparing your taxes easier for you. All you need to do is to go through the list and check items. If you have an item in your list that you don’t have in your folder, then you’ll have to follow up with that particular government or institutional department. Some of the documents you’ll need are:
- W-2s from all employers
- The 1099-MISC form from freelance clients
- PayPal 1099-K for sales and payments
- W-2G for gambling income
- Income and sales receipts for other sources (such as Amazon Affiliates)
- Bank account interest, savings interest, CD interest, etc.
- Dividends or stock sales from investments
- IRAs, Social Security, pensions
- Rent or royalties from rental properties
- Earnings from hobbies, prizes, bonuses, etc.
- Alimony records
- Throughout the year, you may need to file other tax forms
2. Keep a Record of Any Life Changes
Fortunately, none of us are required to pay taxes on the entire amount we earn each year. To lower our taxes, we can use tax deductions, exemptions, and credits. A number of factors determine how much we will pay in taxes:
Your Filing Status
The following five filing statuses are available: single, married filing jointly (MFJ), head of household (HH), married filing separately (MFS), and qualifying widow/widower.
Any Big Life Changes
The most common things that can affect your tax situation are things like buying a new home, moving to a new state for work, having a child, and getting divorced.
Your Personal or Professional Pursuits
Other expenses that may affect your taxes include starting a new business, going back to school, or opening a retirement account.
Be mindful of all the life changes you have experienced during the year and not put unnecessary pressure on yourself to remember them all by the end of the tax year. There is a tendency for tax years to get mixed up, especially when a significant change occurs in the spring. Events further back in time are harder to remember. Be sure to keep a record of all the changes you’ve experienced this year with your tax folder for this year.
3. Know your Tax Deductions and Credits
You should also gather up your expense and income documents as well. You can offset taxable income by collecting proof of eligible expenses. As a result, you will get more of your hard-earned money back, leaving less of it subject to federal and state taxes.
Tax credits and deductions are most commonly used for:
- Being a homeowner
- Donations to charities
- Health care costs
- Insurance coverage
- Costs associated with child care
- The cost of education
- Expenses related to employment
- Fees pertaining to tax preparation
- Local and state income taxes
- Contributions towards retirement
- Maintaining or starting a business
4. Go Through Your Taxes File Again
If you have an incorrect number or name on your return, the CRA can delay the processing of your return. If this happens, you may be charged late fees and penalties. Misreporting your income or omitting to include income documentation may also result in fines and interest fees.
The worst scenario is rushing through your tax return and then realizing you forgot to include a tax deduction or credit that you qualified for. Make sure you don’t overpay the CRA. Be sure the numbers are correct by checking them twice and three times. You could save big on taxes or avoid late penalties by taking a few extra minutes.
Doing your taxes is always complicated and challenging. Most people turn to personal tax services for this purpose. If you are thinking of doing your taxes yourself, you have to ensure correct information, all the income, and submit it all on time. If you get stuck somewhere in the middle, you can always contact us for help. We will make sure that your taxes are submitted on time, and you save as much money as you possibly can.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.