Last year, my tax income return yielded a nasty surprise, I owed the government more money that I’d ever owed before. Every single year since I’ve filed, I normally get a refund, except for that one year where I owed $60. In 2019, however, I wound up owing several thousands of dollars. It was a tough pill to swallow since I could have avoided this by just sheltering more of my money into additional RRSP contributions.
After paying the hefty bill, I consulted with a financial advisor as to how I could avoid the same fate from happening in 2020. Her advice was pretty simple, contribute enough into an RRSP so that I wouldn’t get dinged again. My mistake was doing my taxes after the last day in February of 2019. The contribution window for that tax year was over by then and I could prevent anything from happening. The advisor suggested I start doing my taxes as soon as possible, even if I wasn’t planning on filing immediately, just to get a picture of my tax situation.
So, just a few days into 2020, I did my taxes, albeit very roughly. I downloaded a free tax program and gathered all my tax info: last pay stub for 2019, total RRSP contributions for 2019, charitable donations for the year, and interest received for all my savings accounts. Most of the info was accurate and would be the exact numbers for when I file for real. The toughest part was not having my T4 form. I had ballpark that entire form, with its many boxes, some of which I had no idea what their purpose was or how to calculate it. For example, there’s a box for “pensions adjustment”. Even after Googling the term, I had no idea how to calculate it. I just had to guess based on previous years (of which that amount changed for whatever reason).
Using the above best-guess scenario, I let the program crunch the numbers and according to it, I came up with a paltry refund of about $100. Seeing as how that amount is so small and since my numbers aren’t entirely correct, it stands to reason that I might even owe a bit of money but I’m guessing it’s not the thousands like last year. To play it safe, I decided to contribute several thousands more into my RRSP. That should be processed on Monday.
Once my T4 form has been released to me, I’ll redo the calculations again. I believe T4s will be available before the end of February, so I’ll have a final chance to correct things.