Do This Today to Save Yourself Next Tax Return

Do This Today to Save Yourself Next Tax Return

How many loud sighs (and thrown objects) does it take to complete your income tax return?

Or are you a T4-oriented individual, finishing your income taxes in a few minutes with no additional paperwork required?

If so: I envy you. That type is rare!

Each year I spend countless weeks trudging through my receipts and mileage, getting everything organised and entered into my accounting program. (I know I am not alone and really should start a support group.)

And even though I prepare my return with care, and advise my income tax clients on what I would like to see them bring to a meeting, there are always hiccups.

So rather than throw another tea cosy at the wall - or something harder - let's look at an area that I feel is often overlooked, and could make that trip to the tax preparer a more straightforward task and save you lost tax dollars.

Mileage tracking.

I hate it. It is my nemesis. Every year mileage tracking and I have a huge fight, and I always end up losing.

But, whatever your feelings on the subject, tracking your business mileage is a must. 

I cannot recall the countless times I have been trained, and re-trained, for income tax preparation. Every teacher I have had somehow has managed to have worked with the CRA at one point in time during their career. 

The first piece of advice they extend about tracking mileage is to always have a mileage log. The type of mileage log is irrelevant, but having one is the key to saving yourself a world of anxiety and stress. The reason they say this is that CRA auditors know that most of us are lax in the area of mileage tracking, so it is the easiest piece to pick out when they start the audit.

So let's fix this!

If you are filing a T2125 (a self-employed business statement), you’ll definitely need to keep a mileage log.

I track mine on my calendar appointment card, and then print my calendar to a PDF for my tax file in case I am audited by the CRA.

There are many phone apps that have come on the market this past year that allow you to track your mileage easily, and I have heard nothing but good things about [[QuickBooks Self-Employed]]. It will track your mileage as you move through your daily appointments, which can be a bonus. All you need to do is to enter all of your appointments ☺ 

On the topic of income tax return, I’ve collected some good wisdom from the colleagues I network with. Here are three easy tips you can implement now to make life easier for yourself:

  1. Be very wary about subscription-based phone apps. 
    Many are displaying themselves as "free" when there is a monthly fee associated with the app. If you have your account tied to iTunes, and a credit card is associated with it, then there may be charges showing up that you did not expect. 
  2. Make sure you don’t miss mileage attached to supply pickups.
    These are far more trackable items in your business day than client appointments. Whenever you run out to pick up toner, paper or batteries, remember to log those trips on your calendar. These things matter.
  3. Make sure to track mileage for training and networking.
    Remember, if you are leaving your office, home or business based to attend a training session or meet up with someone to network, those are viable expenses for your business!

Just think about these the next time you pay your income tax bill. And if you have any additional questions, talk to me.