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Tax prep leads Canadians down the paper trail to successful netfiling of income tax returns

By:    Catherine Rahal
From: Vancouver Province, Business Section

Date: Tuesday, March 18, 2003

The better organized you are, the easier the task of tax preparation will be

MONTREAL – By now you should have in hand most, if not all, of the tax slips you will need to file your tax returns for 2002.

Here's a list of some of the tax papers you might have or need:

• If you made a contribution to your registered Retirement Savings Plan (RRSP) even if you waited until the very last minute, you should have received you receipt.

If you contribute on a monthly basis, the contributions you made in January and February can be used for 2002 or 2003, which ever is more beneficial to you (if you'll earn more in 2003, you might want to save it for next year's tax season).

• Another group of tax slips will come from you non-registered mutual-fund holdings. In many cases, you will get a tax skip even if you didn't receive any cash. Mutual funds are structure either as a corporations or trust, with trusts being the more common.

Trust-type mutual funds do not pay taxes on their investment income; instead they pass the tax burden on to you, the unit holder.

In effect, a reinvested distribution has the same effect as if you had received a cheque and sent the same amount of money in to the fund as an additional investment.

• If a fund has distributed capital gains, dividends or interest, you'll see those amounts on your T3 slips.

• If you sold any non-RRSP mutual funds during 2002, you will need to add the capital gains to your taxable income. Only 50 per cent of those gains are taxable. You should find all the information you need on your December 31, 200 account statements from the companies in question.

The statement should indicate the price per unity on the day you sold as well as the average cost per unit.

The average cost is based on the unit prices of your original purchase, any additional contributions and any reinvested distributions (the ones where you received a T3 tax slip without seeing any cash.

• If you have Canada Savings Bonds (CSB), you might have a tax slip for accrued interest.

• If you had any guaranteed investment certificates (GICs) that were cashed in or renewed, you'lll have a statement of earned interest as as well as a T5 tax slip.

• Education expenses produce tax slips as well. If you've got kids in post-secondary school, look for T2202A tax slip.

• Make sure you have accumulated all of the allowable expenses you can deduct. Maybe you have enough out-of-pocket medical expenses to qualify for a credit.

• Charitable contributions should be also represented by tax receipts.

• If you paid someone for a financial-counselling session, or to prepare your taxes, you can deduct those fees as well. Just make sure you have proof.

THE BETTER ORGANIZED, THE EASIER TAX PREP

• Don't forget the safe-deposit-box fee.

• If you have earned income from more than one source, make sure you received all of your T4 employment slips. That can be especialy difficult for students who sometimes work several different jobs over the course of a year.

If, like many others, you are dreading the tax-file prep chore, you might want to look at the benefits of some of the personal-finance software on the market.

(EDITOR'S NOTE: Or seriously check out online tax preparation and NetFiling, which can save you time and money getting your taxes completed and your refund cheque back from the federal government.)

One chartered accountant I know is getting tougher with his clients. He's refusing to organize shoesboxes full of receipts for free. This year, his hourly rate for dog's-breakfast-type files will be $150.

© Copyright 2003 Vancouver Province
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