5 Tips to Prepare Early for Tax Season

I just purchased my tax software recently. While I don't really do taxes for people anymore, I like to have everything installed and ready to go way before the deadline (Apr 30 here in Canada) for my own personal taxes.

Here are a few things I do to make sure everything goes smoothly during this potentially trying time:

Planning – I usually start the planning process a year in advance. Most tax software packages have a planning module where you can take your current data and use it to forecast for the following year. This is helpful because you can avoid nasty surprises like finding out you actually owe instead of getting a refund.  Also, many tax deductable items require future planning, ie. by the time the following tax year hits, it's too late.

Using Estimates – at this time of year, it is quite possible that employers and other institutions haven't sent out appropriate tax slips yet. To make up for this, I'll enter an estimate into my tax software so that I at least have a rough idea of how much I'm going to get back (or actually owe).

Detailed expense statement from Money – by doing this, it allows me to quickly get at the information I need such as donations, entertainment and other business expenses. I rarely have to reference my receipts as I enter everything into my financial software as soon as I purchase something. My receipts are always available for quick reference in an envelope if I need them, however.

Filing – all my taxes slips and related information are filed in their own place right next to my desk for quick reference. Sometimes I think dealing with paper is half the battle when it comes to taxes and personal finance!

EFILE – if you don't EFILE your taxes, I highly recommend that you start. It's just so much easier and quicker to not have to photocopy receipts and make sure they're attached to your return. Keep in mind, you do still have to provide receipts should you ever be audited or if the government asks for verification.

My taxes are unofficially already done, but I'm waiting for a few additional receipts.

The beauty about doing your taxes early is that it's a great way to see if you're missing receipts or any other information that you might need.

There's nothing worse than getting a surprise re-assessment because you've accidentally omitted a receipt. It happened to my brother (a year after the fact) and he was heavily penalized. The fines here in Canada are monstrous … so completeness is always the order of the day.

Photo: PaulKeleher

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