Grad and accountant Meagan Schroder offers money-saving tips
Saving money at tax time isn’t a matter of financial sleight of hand, with the accountant playing the role of mathemagician.
“People think that there are all these tricks,” says Meagan Schroder (Bachelor of Business Administration ’08, Accounting ’06, pictured below).
“There’s really not.”
One reason Schroder knows this is because she has been in the business a while. After years as an auditor for Canada Revenue Agency (CRA) and a controller in industry, she cofounded Roth Schroder accounting with business partner Olami Roth in 2014.
Since then, she’s specialized in making other people’s business her business, helping clients and organizations sort out “bookkeeping messes” to set them up for success.
If anything, Schroder sees it as her job to eliminate any mystery that a jumble of numbers can create from one quarter to the next, and during tax season.
Her approach applies to anyone feeling overwhelmed or even powerless when it comes time to file their tax return. As you face the prospect of taking stock financially and laying bare your life in numbers, here are Schroder’s tips for taking the illusion out of the process.
Talk to an accountant
If you’re choosing human interaction versus filing software (Schroder doesn’t rule out the latter for diehard DIYers), pick an accountant who will make time for you.
“The most important thing is that someone is sitting down with you and asking questions,” she says. They’ll make a plan for tackling your taxes based on what you tell them about you and your financial situation.
“They don’t know what they don’t know,” says Schroder. They should endeavour to change that.
Review your year
Before you have that conversation, get reacquainted with your year as an earner, supporter of dependants, and tax payer.
Have you accounted for all sources of income? Did you sell shares that resulted in taxable capital gains? As for benefits, are you eligible for credits (more on that later) based on your role as a provider or care giver? What about as the owner of a small business?
Whatever your situation, Schroder recommends the CRA website as the source for information to maximize your position during tax season.
“I think sometimes things do come as a shock when we’re doing our taxes,” she says. To avoid that, “it’s important to know your tax and financial situation.”
Maximize your deductions
Your income minus your deductions determines how much you pay in taxes. You may have more control over that formula than you think, which could mean a potential tax refund if you end up with more deductions than you owe in taxes.
“If you have the funds and ability to contribute to an RRSP, that’s going to be a great deduction,” says Schroder.
It’s an even better tactic in that you can do it after you’ve been notified of your total income for the year, she adds. RRSP contributions can be made for 60 days into the following year to strategically reduce your earnings.
Other common deductions include those for childcare costs, as well as home office expenses for those who work for their employer from home. For the latter, Schroder advises getting a detailed T2200 form.
Maximize your credits
Unlike deductions, tax credits are non-refundable. “They will never put you in a refund position,” says Schroder. If you owe $10,000 in taxes, she offers as an example, and you have $15,000 in credits, that does not mean a $5,000 refund.
That said, they would still eliminate that $10,000 tax bill.
“Do that research to see if anything does apply to you,” says Schroder. Common credits include post-secondary tuition, donations and some medical expenses. Less commonly used credits cover everything from expenses related to disabilities to some moving expenses.
Track your expenses (and revenue)
If you run a small business or a more casual “side hustle” for extra income, reduce your taxable income by thoroughly accounting for expenses. For example, you can write off a portion of your home as office space, says Schroder. But the most commonly overlooked source of income reduction, she adds, are expenses related to vehicles.
“Any time you’re driving for your business, you should be tracking that.”
Also carefully track revenue throughout the year, Schroder advises. Once you’ve earned $30,000 or more, “you’re required to register [to pay] GST, so now you have another filing obligation.”
Don’t miss that mark. Whether you collected goods and services tax from your clients or not, at that point CRA will be looking for it.
Start preparing for next year
One of the best ways to reduce anxiety around tax time is to be as prepared as possible. Part of knowing your situation is having detailed records of it.
“Clients are always searching everywhere for receipts,” says Schroder. “Let’s just start keeping it in one place.”
As receipts and documents arrive, stash them in a folder that you can hand off to your accountant after that conversation. If you’re operating a business, add a few more folders to separate categories: vehicle, shipping, insurance, utilities and so on.
If you’re not sure if a document is relevant, keep it anyway, says Schroder, and let the professional make the call. It’s a better approach to saving money than the alternative.
“When we’re not organized throughout the year,” she says, “that’s when deductions and credits fall off the table.”