3 Smart Ways to Make Tax Time Stress-Free

When the new year rolls around, there is one thing you can count on: the upcoming income tax season. If you haven’t prepared beforehand, you might find yourself owing income tax and then scrambling to make the payment. When the pennies don’t add up, you’ll feel the heat. However, tax time doesn’t have to be characterized by sleepless nights and significant stress when you proactively pay your taxes in full and on time.

1. Monthly Deductions from Cheques

In most cases, the Government of Canada requires all employers to deduct various taxes from an employee’s paycheck, including Canada Pension Plan contributions, Employment Insurance contributions and income tax. By making the deductions before you receive your check, managing your taxes is easy, and you won’t have to set anything aside in readiness for tax time. You might get lucky and receive an income tax refund at the end of the year.

2. Contribute to a Tax Savings Account

No one deducts your taxes for you when you are self-employed or working as a contractor. You are responsible for calculating and setting aside your income tax amount, and only becomes a problem if you fail to account for your taxes owed and spend more money than you are entitled to keep. One strategy to ensure you can pay any taxes owed is to set up a payment plan for a tax savings account. By putting a little aside each month, you can better prepare for the expense and avoid CRA debt and interest charges.

3. Save a Percentage of Your Monthly Revenue

You might consider allocating a portion of your monthly revenues to taxes if you are a corporation subject to corporate tax. Again, being proactive and saving money ahead of time makes it easier to pay your taxes-owed in full, reducing problems down the road.

What To Do If You are Struggling to Pay Your Taxes

Unexpected problems can affect your financial situation. Suppose you’ve received a large bill due to a broken basement pipe. Or maybe your roof is twenty years old and is ready for an upgrade. These costs can all eat into savings that might otherwise pay your taxes. When running a small business, any economic shifts can affect your revenue. When profits decline unexpectedly, you may scramble to cover your fixed costs, affecting your ability to pay your taxes.

Defer Your Payment

If you are self-employed or running a business and are struggling to pay your taxes, contacting the CRA for advice that might help you meet your obligations is best. There are options to defer taxes, and while this may help to alleviate your debt in the short term, it may prove more burdensome in the long run.

Payment Arrangement

Setting up a payment arrangement may be a more suitable option for managing your tax debt. To qualify for a payment arrangement, you must show that you have tried to pay your debt in full by borrowing money or reducing expenses. You may also have to disclose your financial records so the CRA can assess your financial position.

By setting up smaller payments you can afford, you can continue making payments until the tax debt and any applicable interest get paid off. Once you have made a payment arrangement with the CRA, it is important that you:

Stay current on your payments
File all returns on time
Stay up to date with all other tax obligations

Your Licensed Insolvency Trustees in Edmonton

Whether you are unable to pay your bills, meet your tax obligations, or owe money to the banks and credit companies, we can help you navigate your financial problems. At Fox-Miles & Associates, we understand how crippling debt can be. Call our licensed insolvency trustees to book your free consultation and take your first step to a better financial situation today.