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David A. Townsend, CPA, CFP Professional Corporation

"Before You Sign Your Tax Return"   an article by David A. Townsend

I appreciate your confidence in choosing me to prepare your tax return. It is a responsibility that I take seriously and I hope that you are satisfied with the services provided. I try to do my clients' tax returns the same way I do my own.

My objective is to prepare the return to the taxpayer's best advantage, but it should also stand up to CRA (formerly Revenue Canada) scrutiny if necessary. You should not pay any more tax than absolutely necessary!

For that reason, I always recommend that one accountant prepare the returns for all family members rather than having the returns prepared separately. There are sometimes income-splitting possibilities, credits that be transferred among family members (e.g. tuition, disability), and credits that can be combined (e.g. medical, donations).

Things are always rushed at income tax time but if in doubt about anything, please ask. It is better to take a few extra minutes now rather than have to deal with a problem years down the road.

Therefore I hope you will take the time to consider the following prior to bringing in your information and especially before signing your tax return.

  1. Have you moved or have there been any family changes over last year, for example, a new child or elderly parent living with you? I understand that it is sometimes difficult to know what is relevant to your tax situation. Again, if in doubt, ask!
  2. Do you have last year's notice of assessment? Sometimes there is important prior years' information on this form, so bring it in if possible.
  3. Have you paid installments during the year? If so, do you have the CRA record of total installments paid?
  4. If you are reporting business income, are revenues and expenses clearly stated? Have you included GST in these figures? Have you considered all possible business expenses, such as office in home, gifts, vehicle, salary to spouse? Have you purchased new equipment or a new vehicle? Remember that self-employed taxpayers have to pay CPP when filing their return - approximately 10% more!
  5. If you have a rental property, have you provided information on all relevant income and expenses? Have you included mortgage interest, property taxes, insurance, utilities, maintenance, travel? Is there any personal portion of these expenses?
  6. If you have a private company, has all salary and dividends taken out of the company been included in your personal income?
  7. Do you have the same pension income and slips as last year? Did something change with a pension plan or RRIF?
  8. Did you withdraw funds from a RRSP? If so, do you have the slip? Remember that RRSP withdrawals are taxed at your marginal rate — therefore you will have to pay additional here!
  9. Have your investments changed from last year? Is there a new investment slip that should be included this year or one that was included last year that is now gone? Have you split investment income with spouse or children as appropriate?
  10. Have you sold any non-RRSP property, stocks, bonds, mutual funds? I find that clients often have the selling price but do not know the original cost of these items. This information can usually be obtained through a broker or other third party, but that takes time. It is best to plan ahead here.
  11. Do you have proper receipts for items such as charitable donations, RRSP, medical expenses, tuition, childcare? As you know, your return is e-filed so CRA sometimes asks for these receipts at a later date. Therefore it is important that I have these on hand.
  12. Has there been a family inheritance? There could be different ways of accounting for this, depending on who actually inherited the money. Therefore there should be some advance planning here.
  13. Looking at the big picture, are there any additional deductions or credits that could be claimed? Consider interest on investment loans, accounting and legal fees for business or investment purposes, investments or loans that are worthless.

The above list is not exhaustive and certainly not all points will apply to everyone. As you know, I usually provide a comparative five-year summary of your income, deductions and credits. For me, this provides a better summary of the big picture and makes a missed deduction or credit easier to spot.

I encourage you to take a little extra time, look at your summary or return closely, and ask questions — it could save you some money in April!

Contributing Editor to Canadian Money Saver Magazine