Make Your Taxes Easier with this Detailed Checklist

The deadline to file tax returns is quickly approaching, resulting in various degrees anxiety for some taxpayers and accountants, many of whom having a number of questions about personal and business taxes.  The good news is that the stress can be managed fairly easily with some simple organization techniques.  The most effective starting point is to evaluate your tax situation and prepare a checklist of the documentation that you will need with respect to your specific tax situation. A checklist can help to ensure that important items are not overlooked in the rush to put everything together (and, of course, its always satisfying to cross something off the list).

I have compiled a list of tax items that apply to the majority of taxpayers

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Basic Information:

If this is the first time that you are filing your tax return, you will need the following information with respect to yourself, your spouse (common law or married) and dependents:

• Full name

• Social insurance number

• Current address

  Note that if your address has changed since the last time you filed your tax return, you must contact Revenue Canada and, if applicable, Revenue Quebec to advise them of the change before e-filing your return to avoid the inevitable confusion that can ensue from filing the tax return without making this change. The best way to do this is by signing up for “my account” with CRA and RQ.

• Date of birth

• Province of residence as at December 31st which determines where you are taxed and what tax rates apply.

• Marital status

• Quebec residents must also determine if they are signed up for the Quebec prescription drug plan or if they have private insurance to cover prescription medication.

If you have filed your tax return before either using tax software or with an accountant, this information can be carried forward. Any changes since the previous year should be assessed and changed on the tax return, if applicable.

Employment Income - T4 and RL-1(Quebec):

If you are or were an employee at any point during the year, you will have received a T4 (AND an RL-1 in Quebec) for every place that you worked whether part time or full time (even if for just a couple of weeks). If you have not received the T4/RL1 you should contact your employer and make sure that they send it to you as there can be penalties for failing to include all relevant slips. Another way to see your T4s is to access your CRA account online, where any of the T4s that have been filed by your owner electronically are posted for the current and previous years.

other t-Slips

If you received CPP or QPP during the year, you will receive a T4(P) slip which reflects amounts received and any taxes withheld. Retirees will also receive an T4 (OAS) reflecting their old age security. You might also receive other pension benefits or EI benefits both of which are accompanied by slips that should be reported. Note that if you have received income during the year, for which you did not receive a slip, you should look into whether the item is taxable (internet searches can be a great help). If it is taxable, you should reach out to the issuer to get the slip.

Investments and Dividends - T5 and RL-3 (Quebec):

• T5 slips and RL3s are issued by financial institutions and corporations to anyone who has earned investment or dividend income in excess of $50 annually.  If you have any investments in corporations, trusts or banks ensure that you have the tax slips.  The deadline to submit T5 slips is the last day of February.

• In addition to T5 slips, you might also receive a T3 slips which applies to trusts (and is very common for investments). Note that the deadline to issue T3 slips is March 31st which means that you might not be able to do your tax return until you receive it. It is important to verify with your financial institution whether they will in fact be issuing a T3 before submitting your tax return as this can result in penalties for non inclusion.

• Note that there are no slips for investments in RRSPs as income accumulates tax free until it is withdrawn at retirement. There are however situations where you might withdraw funds from your RRSP early for which you will be issued a T4RSP tax slip. There is usually a withholding tax that is automatically taken which should also be entered as tax paid .

• There are also no tax slips for contributions to, or income earned in a TFSA account as the income in this account accumulates tax free. It is important to ensure you are not trading frequently otherwise CRA might consider it to be a business and disallow the TFSA tax exempt status.

• If you are an owner of an incorporated business and have taken dividends during the year, you should have a T5 slip and an RL3 (if you reside in Quebec). 

Capital Gains and Losses:

If you have an investment portfolio, any gains or losses on sales of investments (i.e. realized gains or losses) must be reported on your tax return. Most investment brokers will provide clients with a T5008 - Statement of Securities Transactions - which reflects the sale of investments. However, they don’t always provide you with the cost of securities which is required to calculate the capital gain or loss. If this is not provided by the investment provider, you will have to keep track of your purchases along with related costs and foreign currency rates on the date of purchase, if applicable.

Rental Property Income

All amounts earned from rental property must be declared, while expenses relating to rental property may be deducted.  Ensure that you have these amounts on hand to enter into form T776. These include:

• Rental income

• Interest paid on the mortgage (most banks will send you year end summary which provides you details relating to principal, interest and other fees and costs)

• Property taxes including municipal, school and water tax

• Insurance

• Utilities (if not paid by the tenant)

• Repairs and maintenance during the year

Related: What You Need to Know about Rental Property Income and Expenses

Unincorporated/Self Employed Business Income/T4A Box 20 or Box 48

Anyone who earns income via the gig economy, as self employed, a small business, freelancer, etc. is required to complete an additional schedule on their personal tax return referred to as the statement of business activities form T2125.  To complete this form, you require your sales from your business and related expenses by category. This information is essentially found in a profit and loss statements which can be prepared using accounting software such as QuickBooks or compiled in an excel sheet. It is important to include the date of each transaction along with the supplier, category of the expense (eg. rent, office supplies, cost of goods sold etc.), net amount before sales tax and sales tax amounts. (Note that it essential to also maintain all the related documentation including invoices, bills, receipts, bank and credit card statements).

Many small business owners also receive a T4A for business services provided. This is usually reflected on box 20 or box 48 on the slip. These should be reported on the T2125 in the line item for income from T4As.

Read this article for a comprehensive review of tax considerations for unincorporated business (sole proprietorship or partnership)

RRSP Contributions and Withdrawals/First Home Savings Account (FHSA)

You should receive a slip from your financial institution for contributions to your RRSP from March 2nd of 2023 to March 2nd of 2024. The slip will indicate whether it is “remainder of the year 2023” of the “the first 60 days of the current year 2024” both of which can be deducted on your 2023 taxes.   Keep in mind that you are only allowed to claim RRSP contributions that do no exceed your unused contribution room. This information can be found on your prior year notice of assessment from Revenue Canada. If you overcontribute to your RRSP, penalties will apply.

The T4RSP slip represents any withdrawals taken during the year along with the withholding tax. This must be reported on your tax return.

Contributions to your FHSA, starting in 2023, are deductible similar to RRSPs. You will receive a receipt for your contribution although this will be for the calendar year 2023 unlike RRSPs where you can contribute up to two months after the end of the year.

Medical Expenses

Individuals are entitled to claim medical expenses that exceed a certain amount which is the lower of 3% of their net income or $2,635 in 2023. Note that medical expenses can apply to any 12 month period as long as at least one month pertains to the current taxation year and was not previously claimed.   All expense receipts including date of visit, name of healthcare provider and amount should be accumulated which includes any amounts paid by the individual (not the employer unless in Quebec) to a private health insurance plan

To determine if the medical expense is claimable, you can see this comprehensive list from CRA

Union or Professional Dues

If you contribute to a union or are a member of a professional order, you are usually allowed to claim this as a deduction.

Related: Line 21200 - Annual union, professional, or like dues

Charitable Donations

All amounts paid to charities must be supported by official receipts from the registered charity and the amounts paid should correspond to the receipts (there is often a service component that is not included in the total amount). Also note that amounts contributed to an American charity can only be deducted against income received from the US. International charity donations are generally not deductible.

Related: 9 Facts About Charitable Donations

Tuition Amounts

If you have enrolled for post secondary education, you will likely receive a T2202, T2202A, TL11A, B or C.  from your educational institution which means that it is deductible. If you do not receive a slip, you should reach out to the educational institution to determine if it is in fact tax deductible.

Any scholarship or grants should also be reported as income, for which you will usually receive a tax slip. Usually enrollment in a full time education program offsets any taxes owing on scholarships.

Interest paid on student loans is tax deductible. You will receive a document from your financial institution indicating the amount that is deductible.

You can also carry forward tuition expenses from prior years that have not been offset against income. This is why students enrolled in post secondary education should complete a tax return even if they don’t have any income to report (they will also be entitled to a GST credit).

First Time Home Buyer’s Credit

If you are a first time home buyer, you are entitled to claim a tax credit of up to $10,000 starting in 2022 (previously it was $5k). To qualify both of the following conditions should apply:

• you or your spouse or common-law partner acquired a qualifying home

• you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer)

Although no documents need to be sent at the time of filing, the CRA might ask to see copies of the purchase agreement and other documentation (which you should have on hand in case they ask)

Related: Line 31270 – Home buyers' amount

Sale of Principal Residence

If you have sold your principal residence (your home) during the year, you must report the details of the sale on Schedule 3 which is where you report capital gains and losses. You are not taxed on the proceeds but if you neglect to report it, capital gain exemption will be disallowed.

Dependants

You are allowed to claim certain expenses for your dependants for which you must have documentation.  These include: 

• Babysitter

• Boarding School

• Daycare

• Camp

• Tuition (see above)

In most cases you will receive a tax slip or document that will provide you with the exact amount that you are allowed to claim. In Quebec, individuals receive the RL24 which should reported on the tax return. Quebec subsidized daycare is not deductible in Quebec, however, it is deductible on your federal (CRA) return.

Babysitters must provide a receipt that includes their social insurance number, name period to which the babysitting applies and total amount received (as this is reported on their personal tax return as business income).

Home Office Expenses

If you are an employee that works from home, you are entitled to claim home office expenses. During Covid, from 2019 to 2022, you were permitted to use the temporary flat rate method where you could deduct $2 per day worked at home without requiring any additional documentation.

For 2023, the temporary flat rate method is no longer an available option. Instead, to claim your home office expenses, you must have your employer complete and sign the T2200 detailing the types of expenses you are entitled to.

Foreign Income verification statement T1135

If you have any foreign property, investments, bank accounts etc. the combined total of which exceeds $100,000 in Canadian dollars it must be reported on the T1135. Failure to report this by the deadline of April 30th for individuals or June 15th for self employed individuals can result in a hefty penalty.

Related: T1135 Foreign Income Verification Statement

other income and deductions to consider

• Workers compensation T5007

• Moving expenses can be deducted if certain criteria are met.

• Carrying charges (e.g investments fees) on investments can be deducted against taxable investment income

• Determine if the caregiver amount is applicable to your situation

• Eligible teachers are entitled to a tax credit for school supplies purchased by them

• Disability tax credit for disabled members of the family

There are a variety of other tax items, the majority of which will be accompanied by some sort of tax slip or other documentation.  When you receive something that looks vaguely official it is always a good idea to keep it and if you are unsure what to do with it, seek the guidance of an accountant.  If you are e-filing your return, then it is not necessary to include any of the tax slips or supporting documentation, however CRA or RQ might ask for the supporting documentation (and generally do for tax items that are not received electronically by them). It is good practice to keep your tax return for at least 6 or 7 years after the year for which the income tax return is filed.  It is important to note that it is the responsibility of taxpayer to ensure that they meet their tax obligation and report all (worldwide) sources of income .  Although this same obligation does not necessarily extend to deductions and credits, it is clearly in the taxpayers interest to ensure that they claim everything that they are entitled to.

Ronika Khanna is an accounting and finance professional who helps small businesses achieve their financial goals. She is the author of several books for small businesses and also provides financial consulting services.

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