This year, Canwest Accounting started meeting with a steady stream of tax filers in late February. It seems many people are eager to beat the April 30 income tax filing deadline set by Canada Revenue Agency (CRA).
One reason for that may be to receive an anticipated tax refund sooner. A 2017 report by Global News stated 64 per cent of Canadian tax filers received a refund, with an average of $1,650 returned to them.
Some filers are eagerly anticipating a sizable tax refund, which naturally leads to the question: What’s the best use of the funds? There’s no simple answer to that question, but Sharlane Bailey, Owner of Canwest Accounting, reminds filers that it’s their money the government has held onto throughout the year without paying them interest on it, and recommends speaking with an accountant or investment adviser about how to best utilize the funds.
A lot of experts will tell you not to go on a shopping spree and spend all the money on material items, like clothing, shoes and furniture. Instead, if you’re carrying debt, especially high-interest credit card debt or loans, pay it off.
Using the money toward a summer vacation is frequently done but be careful not to overspend on that vacation just because you received a refund that’s sitting in your bank account. Treat it the same as any other vacation by creating and sticking to a predetermined budget, so your expenses don’t get away from you.
Practical uses of the refund include putting it toward a home improvement project or renovation that will ultimately increase the value of your home. Is it time to replace your old furnace with a newer, more energy efficient model? Replace and reseal drafty windows? Doing these things can also save you money on your utilities bill in the future and put money back into your pocket.
Some people feel they haven’t missed the money while the government has had it and invest the funds in their (or their children’s) future through a tax-free savings account, registered retirement savings plan (RRSP) or registered education savings plan (RESP). Alternatively, you might want to put it into an emergency fund, especially if you don’t already have one, which can also be held in a tax-free savings account where it earns a higher interest rate than in a savings account.
When asked what she recommends, Bailey says everyone is different, but spending a portion on a family trip somewhere local, like Tofino, and investing in a tax-free savings account is her personal preference.
Bailey reminds everyone that filing their taxes on time is essential, especially if they want to avoid penalties should they owe anything. Canwest Accounting is asking clients to get their paperwork into them by April 16 so they can prepare their income tax forms and file these with CRA by the deadline.
The suggestions and advice provided by Canwest Accounting should not be relied upon in place of professional advice. You are responsible for checking the accuracy of relevant facts and opinions provided.