Tax season is over for many Canadians, but that doesn’t mean financial planning stops there. We sat down with Nicole Ewing, Director of Tax and Estate Planning at TD Wealth, to explore how to make the most of your tax return, deal with outstanding taxes, and plan for a smoother (and potentially more rewarding) tax season next year. Learn how to avoid common pitfalls, utilize registered accounts strategically, and adjust your financial strategy for a changing economic landscape.
What are some effective strategies that Canadians can use to maximize the benefits of their tax returns?
Each individual should consider their goals and circumstances when considering the best approach to maximizing a tax return. For some, paying down high-interest debt will provide the biggest return. For others, using the funds to make contributions to registered accounts will be the best approach – FHSAs, TFSAs, RESPs, and RRSPs each provide valuable tax-preferred treatment and will allow your return to grow even larger to help fund future goals.
Could you explain the options available for individuals who need to arrange a payment plan with the CRA for outstanding taxes?
Individuals may qualify for a payment arrangement which would allow for smaller payments over a period of time. The CRA will generally ask for details of your financial situation to determine your ability to pay. You should be prepared to share information about your assets, income, expenses, and liabilities. Additionally, in situations of severe hardship or circumstances beyond the control of the taxpayer, the CRA may exercise their discretion to cancel or waive penalties and/or interest and/or delay a payment to a later date.
What are some common mistakes people make after receiving their tax returns, and how can they avoid these pitfalls?
The biggest pitfall is not making intentional decisions that align with your goals. Missed opportunities include not paying down high-interest debt, establishing an emergency fund, and maximizing contributions to registered investment accounts, where funds can grow tax-favoured. Ultimately, it’s important for each individual to assess their spending and savings strategies against their short—and long-term goals.
How can Canadians better budget and prepare throughout the year for the next tax season to possibly enhance their refund or reduce their tax liability?
Having a clear understanding of your assets, income sources, liabilities, and expenses, as well as your goals, both short-term and long-term, will help guide your decisions. Utilizing the right registered account for your needs is so important—they have different features and benefits, and using them strategically can make a big difference to your tax outcomes. Grants, credits, deductions, tax deferral, and tax-free withdrawals are all in play.
With interest rates and economic conditions constantly changing, how should Canadians adjust their financial strategies post-tax season to stay financially healthy?
Having a financial plan can help filter out the noise. When you have a clear picture of your financial circumstances and the opportunities available, you can make informed and intentional choices. A sound plan will anticipate changes and factor in different possible future outcomes.
What role does tax planning play in broader financial and estate planning, and why should individuals consider this in their annual financial review?
Tax should never be the sole consideration, but it should always be considered when making financial and estate planning decisions. The kinds of investments you hold and the types of accounts you hold them in can lead to very different outcomes.
Can you provide insights on how new tax regulations introduced in 2024 might impact Canadians and what proactive steps they should consider?
We don’t have legislation yet, so it’s difficult to say anything with certainty. However, changes to the taxation of capital gains could impact people in a variety of ways, including impacts on cash flow expectations, expected after-tax rates of return, and so on. For some people, accelerating the realization of capital gains prior to June 25th could be beneficial, but that’s very much a case-by-case analysis and one that should include other tax and non-tax considerations. For example, accelerating the realization of gains could impact the Alternative Minimum Tax exposure for individuals and trusts and could impact the availability of the Small Business Deduction for private corporations. And there are many other potential impacts.
