Tax Readiness Checklist

The Tax Blog for Smart Canadians

Tips and tricks for Canadian tax filers at every stage of life from UFile's tax expert Gerry Vittoratos

Tax Readiness Checklist

by UFile Team Équipe ImpôtExpert | Jan 13, 2021   Comments:

UFile Blog - Tax readiness checklist

Another year is in the books but unfortunately, 2020 was a particularly challenging one. However, one thing remains constant in our lives: taxes! Let’s get ready for another tax season with the readiness checklist.

The basics: getting organized

Get all your tax documents assembled into one folder, then subdivide your folder into the following groupings:

  • Income slips (T4, T5, T5008, T4A, T4A(OAS), T4A(P), T4RSP, T4RIF, capital gains transaction summary, etc.)
  • Receipts for expenses eligible for tax deductions (RRSP, union or professional dues, childcare, moving expenses, etc.)
  • Receipts for expenses eligible for tax credits (donations, medical expenses, tuition fees, etc.)

You should have a year-round folder to stick any document related to your taxes, especially your receipts for medical expenses and donations, for instance. These are provided to you when you incur the expense or make the donation. As for your official T-slips, you will receive them around February or March of the following year. With a folder ready year-round, you are less likely to miss out on using those receipts when filing your tax return.

It is also highly recommended to have a copy of the previous year’s notice of assessment on hand as it contains the carry-forward amounts you can claim to reduce your tax payable as well as your RRSP contribution limit. You can access your notice of assessment online through the CRA's My Account portal, and for Quebec residents, through Revenu Québec's My Account portal.

Changes in your life

Some changes in your life can have a big effect on your tax return. One of these is a change in your marital status. Marriage occurs in the year when you become legally married to your spouse. Common-law status occurs when you have been living in a conjugal relationship for at least 12 continuous months. A separation occurs when you have been living apart from your spouse or common-law partner for a period of at least 90 days because of a breakdown in the relationship and you have not reconciled. After 90 days, your separation date is the day you started living apart from your spouse. You must report any change in your marital status to the CRA through the RC65 form.

A change in your status (e.g. a separation in the year) or whether you are married or in a common-law relationship can affect specific tax credits such as the spousal amount and the eligible dependant amount.

In the year of separation, you can still claim the spousal amount for your ex-spouse based on their income up until the date of separation. You can also claim the eligible dependant amount if you are the primary caregiver of a child since you were without a spouse at one point in the year. In the year of marriage or common-law status, you can claim the spousal amount since you have a spouse on December 31st, and you can still claim the eligible dependant amount since you were without a spouse at one point in the year. In both scenarios, however, these credits are mutually exclusive so you will have to make a choice.

Keeping with the family theme, remember that with the birth of your child, you will be entitled to the Canada child benefit. In order to receive it, you must file a RC66 form or proceed online through the CRA’s My Account portal.

Another big change in your life would be the sale of your home. Even though this sale is tax free pursuant to the principal residence exemption, you have to report the transaction on your tax return using Schedule 3 and the T2091 form. If you fail to do so, you will incur penalties on your tax return. If you sold your home to move closer to your work place (at least 40 km closer), some of your moving expenses could be deductible on your tax return.

Other notable items

One item that is often overlooked is the requirement to report your foreign assets on your tax return. Through the foreign income verification statement form, you must declare the foreign assets you own with a combined cost above $100,000 CAD. Such assets include cash held in foreign bank accounts, real estate, shares in foreign corporations (NOT in registered accounts such as TFSAs or RRSPs), foreign bonds, etc. Failure to do so exposes you to stiff penalties.

If you are self-employed, you may have paid your income tax in quarterly instalment payments. The instalments paid during the tax year are deductible on your tax return. You can find the amount you paid on your notice of assessment, or through the CRA’s My Account portal (and Revenu Québec’s