It’s that time of year again! Tax season. I wrote this piece for the 2020 tax season to help individuals prepare their documentation list. Not a whole lot has changed for 2021, so here it is again.
Your Tax-Filing Checklist
It’s impossible to be exhaustive and complete in a tax-filing checklist, given the depth of the Income Tax Act. So I’ll stick to the standards here. Here's a list of the documentation you'll need to file your taxes, whether you're filing yourself or having a professional file for you.
This is the standard stuff, but it’s very important for a variety of reasons.
- Official name: Use your official, birth-certificate-approved name. Your tax return follows you throughout your life and into death, so it's best to use the most consistent and official name you have to ensure CRA is always dealing with the right person.
- SIN: It's pretty difficult to file a tax return without a Social Insurance Number, so this one is a given.
- Address: Use your mailing address and physical address. There’s a chance you receive mail in one jurisdiction and live in another. Why does it matter? Because Albertans pay a lot less personal tax than Manitobans and your tax brackets are determined by where you live.
- Date of Birth: Very important for determining when you pay into CPP, when you can take out CPP, and for a variety of other senior-only tax credits.
- Marital Status: It is fundamental you file your tax return jointly with your spouse. The CRA considers you to be in a common-law relationship (the same as a married relationship for tax purposes) if you have lived with your significant other for more than 12 consecutive months or if you have a child together. Filing jointly has a number of implications and it is imperative you file jointly if you are in a relationship as described above.
- Names and SIN of Dependents: Important for transferring tuition tax credits, claiming childcare expenses, and ensuring eligibility for the CESG in the RESP programs. Also important for ensuring medical expenses are appropriately claimed and your Canada Child Benefit is appropriately calculated for the upcoming tax year.
- Other Information: There is a long checklist on every tax return for a variety of information, such as:
– If you’re eligible for the disability tax credit.– If you own specific foreign property of more than $100,000 CAD — if you do, you’ll be required to file an additional T1135 slip.– If you’re a Canadian citizen or when you entered Canada if you are a permanent resident.– If you sold your home and are claiming the Principal Residence Exemption.
These are, quite literally, all your “T” slips:
- T4 — Statement of Remuneration Paid — Most often received from your employer.
- T4A — Statement of Pension, Retirement, Annuity, and Other Income — Most often received from extra income sources, like pensions, patronage dividends, grants/bursaries, fees for service, and more.
- T4A(OAS) — Statement of Old Age Security — For those receiving OAS benefits after age 65.
- T4A(P) — Statement of Canada Pension Plan Benefits — For those receiving CPP benefits after the earliest age of 60.
- T4E — Statement of Employment Insurance and Other Benefits — For those who have received Employment Insurance benefits from Service Canada (this will be a big one this year for all COVID CERB recipients).
- T4RIF — Statement of income from a Registered Retirement Income Fund — For those who receive payments from a RRIF.
- T4RSP — Statement of RRSP Income — For those who have withdrawn funds from an RRSP.
- T5 — Statement of Investment Income — For those who have been paid interest on savings accounts, capital gains dividends, eligible/non-eligible dividends from Canadian corporations, and more. This one is specifically important for dividends, as the dividend gross-up calculations need to work appropriately through your tax return.
- T5007 — Statement of Benefits — Generally for those who have received benefits for injuries from Workers Compensation or other employment-related benefits.
- T5008 — Statement of Securities Transactions — If you've sold shares in a non-registered account, this slip is required to report taxable capital gains or losses.
- T5013 — Statement of Partnership income — For those who have investments in general or limited partnerships. The limited partnership rules for at-risk amounts are important to consider when filing a tax return.
- T3 Statement of Trust Income Allocations and Designations — For those who receive income from a trust or investment income from a trust.
- T2202 — Tuition Enrolment Certificate — For students who attended post-secondary education in the year. This is a fundamental slip for both students and their parents. If students don't have enough tax paid in the year, the credits can be transferred to their parents or grandparents. These are often only issued on March 1st, so be aware you may not receive it immediately.
- RRSP contribution receipt — For those who contribute to an RRSP. Keep in mind the RRSP deadlines run March 2nd to March 1st of the following year, meaning contributions you make in January/February of this year are eligible to be deducted on your 2020 tax return. In all likelihood, if you contribute monthly, you will not have received your final slips by the March 1st date.
Income Statements from Other Sources of Income
Are you self-employed? You’ll need to fill out a T2125 — Statement of Business or Professional Activities form, which includes all your incomes and expenses. This is an in-depth tax schedule and requires its own post, but you’ll need:
- Motor vehicle expenses and a mileage log
- Copies of your motor vehicle purchase agreement/lease agreement
- Home office expenses pro-rated to the area used exclusively for business inside your home. This includes property tax, insurance, mortgage interest, repairs and maintenance, utility bills, and rent.
- Your capital asset list including all your equipment, tools, computers, vehicles, and other major business assets
Do you own rental properties? You’ll need to fill out a T776 — Statement of Real Estate Rentals for each individual property you own. You’ll need:
- Motor vehicle expenses and a mileage log
- Copies of your original purchase documents showing how much you paid for the property (best found on a Statement of Adjustments from your lawyer)
- Copy of the property tax bill allocating land and building amounts
- Prior year depreciation/CCA schedules used for prior year rental income
Do you run a farm? You’ll need to fill out a T2042 — Statement of Farming Activities. This is a massive, massive tax schedule. You should discuss the requirements with a professional accountant to ensure you’re receiving appropriate tax advice.
Tax Deduction and Credit Receipts
This list can become extensive, so I’ll do my best to check as many boxes as possible:
- Medical receipts for all out-of-pocket medical expenses
- Medical appointment cards with addresses to showcase the distance travelled for the medical appointment
- Charitable donation receipts from registered Canadian charities and registered political organizations
- Childcare expenses paid to a daycare or to an arm’s length individual caring for your children.
- Union and professional dues receipts
- Moving expenses if you’ve moved more than 40KM to start a new job or business
- Spousal support payment receipts
- Employment expenses (you’ll require a signed T2200 from your employer to be eligible for these expenses)
- Digital news subscription receipts (though these are for authorized digital news organizations for 2020/2021, so you’ll need to be aware of which organizations you’re subscribed to and ensure they are authorized)
- Adoption expenses
- Statement of Adjustments from a lawyer if you’ve bought or sold a piece of real estate in the year
- Property tax bills for your personal residence (some provinces have odd property tax credits that may be claimed on your personal tax return)
- T2201 — Disability Tax Credit Certificate (if you are eligible)
- Interest payment receipts for eligible student loans (specifically the ones advanced by governmental organizations and not financial institutions)
- Home accessibility expenses if you upgraded your home to be more accessible for someone who lives in the home with a disability
- Teaching supply receipts purchased by schoolteachers
- Statement of tax instalment payments made
- Calendar of days worked from home for the temporary home office expense deduction
That’s quite a long list and I’m probably only half done.
Data From Prior Years
The fundamental reason for requiring your past year’s tax return data is to ensure all your carried forward amounts and limits are appropriately applied to your current tax return. The following carry forward amounts are very important:
- RRSP contribution limit
- Required repayments under the Home Buyers Plan
- Federal and provincial tuition credit carry forward amounts
- Allowable business investment losses from prior years
- Non-capital and capital losses from prior years
- Capital gains from prior years
- Capital gains reserves from prior years
- Lifetime Capital Gains Exemption limit utilized in past years
Now that is quite the list. Of course, the entire list won’t be applicable to every person, but this should cover the majority of the scenarios we see roll through the office.
Technology advancements have allowed for better and better software for individuals to file their own tax returns, allowing folks to save money and avoid having to pay a professional. I'm one of those professionals and I genuinely recommend taking a look at personal tax software before asking for professional help.
That being said, in Canada especially, the Income Tax Act becomes more complicated, more complex, and increasingly specialized each year — there are special credits for special individuals that never make the news, and it'd be impossible to keep your finger on the pulse of all the individual credits you may be eligible for.
Plus, I'd be remiss not to mention the increasing importance of tax planning in regular lives. Structuring your affairs with at least some intent is likely to save you tens of thousands of dollars in the long run. Elements like pension income splitting, appropriate timing of RRSP withdrawals, and appropriate transfers of tuition credits are somewhat complex and may require some additional help to structure properly.