Ensuring you Maximize your 2022 Personal Tax Deductions and Tax Credits

Unfortunately, any tax planning for your 2022 personal tax return needed to be done by December 31^st of 2022 and there is very little, if any, planning you can do in March and April of this year.

However, there is still hope to reduce your 2022 income tax liability, especially if you are not a detailed organizer of information.

Today, I will review a few deductions and tax credits people sometimes leave on the table. None of this is cutting edge information; it is just double checking you have claimed all your deductions and credits. In fact, if you read my last blog post On How to Get on Your Accountants Good Side During Tax Season, you may have already assembled much of that information for your accountant and your double checking and digging for receipts will be limited.

Tax Deductions and Tax Credits to Double-Check Completeness

Carrying Charges

Many people borrow to finance their stock market investments, real estate and rental property investments or capital contributions to their professional firms or other possible investments. In many cases, a summary letter of the interest expense paid on your bank loan or line of credit is not provided by the lender and can be easily overlooked.

If you have not received a summary document, see if you can obtain a summary letter from your financial institution. Failing that, ensure you have summarized each interest charge for January to December 2022.

Capital Losses

If you engage an accountant or use tax software to prepare your return, the software will typically keep track of any capital loss carryforwards you have to apply against any capital gains you incur in the year. However, the carryforward information is predicated on accurate historical information being input in the first place.

I have occasionally seen capital losses missed due to improper carryforward information, especially where T1 Adjustments have been filed in prior years in respect of capital gains and losses. To ensure your information is accurate (your accountant will likely do this if they have access to your CRA information) check your 2021 income tax assessment in the explanation section. This section reflects any capital losses carried forward. Alternatively, if you have registered for My Account with the CRA, check the balance online.

Donation Tax Credits

It is very easy to miss a donation receipt. It can be lost in the mail, caught in your email spam or be misplaced. I suggest you quickly scan your monthly bank statement and/or credit card statement to ensure you are not missing any charitable receipt.

Going forward (if you are not doing this already), best practice would suggest you enter each donation you make during the year on an Excel or other spreadsheet and have an additional column that tracks whether your have received the tax receipt for each donation you made. This allows you to follow-up any missing donation tax receipts. 

Medical Tax Credits

Medical receipts are similar to donation receipts. You should again review your bank statement and credit card statement to ensure you are not missing any medical receipts. For health and medical practitioners you use on a consistent basis such as orthodontists, chiropractors, physiotherapists, dentists etc. ask them to print out a summary of paid expenses for 2022 (or for the twelve month period ending in 2022 if you are using that alternative).

If you have a health insurance plan, you should go online and print out all the insurance statements relating to any reimbursements made by the insurance company in 2022. Under most health and dental plans, you will have incurred some portion of the medical or dental cost and that uncovered portion is deductible as a medical credit.

Going forward (if you are not doing this already), best practice would suggest you enter each medical expense you incur during the year on an Excel or other spreadsheet and have an additional column that tracks whether your have received a receipt marked paid for that expense (ensure your receipts reflect your payment made, this will keep the CRA happy). If you have a Health Insurance Plan, I would have an additional column that reflects insurance reimbursements for your medical expense. This ensures you claim all non-reimbursed medical expenses.  

Pension Splitting 

If you are eligible for pension splitting, this could result in significant tax savings. Most tax programs have a function to maximize the pension splitting, but I would ensure the function has been applied and any eligible pension income has been split to your benefit.

Employment and Business Expenses

Employees may receive a T2200s or T2200 from their employers that allow them to deduct home office expenses and other employment expenses. If you are entitled to claim employment expenses, ensure you have received these forms from your employer or request the form, if you are entitled to claim employment deductions.

Once you have the form, go through your expenses for the year to ensure you have captured all your home office, car or other employment expenses you are entitled to claim. It is best practice to record these expenses throughout the year (monthly or quarterly) so you do not miss any expenses or create a 5 hour receipt sorting project at tax time.

If you are self-employed, you will not need a T2200. However, the same advice holds as for business expenses as for employee expenses. Ensure you have captured all your expenses for the year through diligent tracking.

Ontario Staycation

If you are an Ontario resident, don’t forget to assemble your Staycation receipts. Ontario residents can claim 20% of their eligible 2022 accommodation expenses. For example, for a 2022 stay at a hotel, cottage or campground you can claim eligible expenses of up to $1,000 as an individual or $2,000 if you have a spouse, common-law partner or eligible children, to get back up to $200 as an individual or $400 as a family. For Staycation information, see this link.

 

The above discussion is not tax planning. It is record keeping diligence. As noted above, I suggest you get in the habit of tracking these items throughout the year to avoid missing any deduction or credit at tax-time.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

It’s Personal Tax Time – How to Get on Your Accountant’s Good Side

Many readers of this blog use accountants to prepare their personal income tax returns. You can take three approaches in working with your accountant. You can provide them with:

1. all the detailed information they request
   
   
2. most of the information, without overly exerting yourself
   
   
3. the minimum information, since you pay good fees

From a client perspective, all these approaches are reasonable to some degree. However, as a retired public accountant of 35 or so tax seasons, I suggest you lean towards approach number one, to the greatest extent you can.

I say this for two reasons. The first reason is simply the better organized you are, the more time your accountant can spend dealing with minimizing your taxes. The second reason is that many Canadians invest in mutual funds (T3 slip) and limited partnerships (T5013 slip). Both these investments have March 31st deadlines for issuing the T3’s and T5013’s, so clients often have to wait until late March and early April to receive their slips.

Consequently, your accountant’s workload has likely changed substantially over the last five to seven years, such that 45-60% of the client information comes in after say April 7th. In the good old days, that number was likely only 25-35%.

I am not expecting you to shed too many tears about your accountant’s working conditions given the fees you pay them. I am telling you this because the easier you make it for them to work on your return (rather than chase information), the better it is for you.

So, with the theme of be nice to your accountant, I list below some do's and don'ts for providing your tax season information to your accountant. 

I will start with the things you want to avoid doing.

Tax Season Don'ts

1. Do not hand your accountant all your tax slips in the original envelopes 
   
   
2. Do not send your accountant PDF’s of each tax slip as they arrive. If you prefer to use email or your accountant has a portal (in lieu of paper copies), try to send a first batch of as many initial slips as possible. Then make a list of what you think is missing (such as T3’s, T5013’s, straggler donation slips) and send a second batch all these slips. Once that is done, it is fine to send amended or straggler slips one by one 
   
   
3. Do not provide your prior years tax returns and tax slips to your accountant. All tax programs have prior year information carried forward if required and most accountants have paperless systems of prior years slips if a past tax slip is required for any reason 

Tax Season Do's

1. Provide your accountant any investment, capital gains and foreign reporting information provided by your investment advisor
   
   
2. Have your children download their tuition receipts from their University portal
   
   
3. Ensure your have official donation slips for all your donations. If you only have a confirmation of your payment from the internet, that is not an official receipt and you will need to request an official receipt from the organization. If you want to earn a gold star, summarize the donations for your accountant so they have a total to compare against their total. This is definitely more than expected, but it acts as an excellent check and balance, as I have had many variances over the years and a summary provides a quick way to see if the client’s total was off or the accountants total was off.
     
4. If you made a donation of marketable securities (see this blog for more detail), make a note for your accountant. This is something they will likely pick-up, but it can be missed sometimes as the notation on the donation slip is sometimes small or in a corner somewhere and easy to miss.
   
   
5. For any medical expenses, where possible get one summary receipt, such as for a chiropractor or physio etc. Some pharmacies also provide a yearly summary, so you don’t have to provide 34 individual receipts.  
   
   
6. Still with medical receipts, if you are audited by the CRA, they will want to see a medical receipt that reflects payment. I often received the invoice for medical purchases, but not an invoice reflecting payment. You may need to follow-up with the medical practitioner to request a paid receipt (again, if you have several expenses with the same practitioner, get them to do one summary receipt reflecting the services and reflecting payment for those services)
   
   
7. If you have a line of credit with the bank for investment purposes (especially for professionals to fund their capital entitlement), see if your banker can provide a simple summary letter on the financial institution’s letterhead of the total interest expense for 2022
   
   
8.  If you have rental income, summarize your rental income and expenses for the year. Also provide any invoices for any large repair bills so your accountant can determine whether the expense is currently deductible or must be capitalized.
   
   
9. If you sold your home in 2022, provide your accountant the sale information. Also provide the date you purchased your home and the original cost information (although it may not be needed depending upon the circumstances). The above information must be reported to claim the principal residence exemption, or the exemption may be denied, or a substantial penalty levied.
   
   
10. Let your accountant know if anyone in your family has become a non-resident in the current year.
    
    
11. Review your return before it is filed. You know your affairs better than anyone. Do a quick overview of your return to ensure what you expect to be reported and deducted has been reflected accurately. In most cases everything will check-out, but sometimes things are missed or when reviewing your return, you realize you forgot to inform your accountant about some income or deduction for the year.

The above information will cover off much of your return. Many accountants make this easier by providing a checklist for you to organize your tax information. 

While all this organizing may seem like a lot of work when you are paying someone to prepare your return, you want those dollars spent having your accountant working on minimizing your taxes, not chasing down information.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.