Tax season is a time when stress levels can hit a peak.

Many people wait until the deadline to file their taxes, so the process can get harried and hectic. Filing taxes also includes the monotonous task of organizing items, like transportation or medical receipts, and sometimes that paperwork can get lost.

If you are not on top of your finances, there's the added stress of not knowing whether you’ll owe the government or not, and if so, how much you’ll have to pay.

Jessica Bohn, Investment Specialist, Servus Credit Union/Credential Asset Management Inc., says the key to alleviating stress around tax season is to be proactive rather than reactive. A big part of this is working with your advisor to put a financial plan in place that offers a year-round perspective to your finances.

“Tax season is one of those things no one likes,” Jessica says. “You're not prepared and then you go into panic mode. It’s in the back of your mind year-round.”

Jessica’s laughing when she says that, but tax-season panic is something many of us can relate to. Jessica says when the members she works with are stressed about their taxes, putting together a plan helps make tax season less of a grind on their nerves.

An illustration of things related to the tax season. From left to right, a calculator, a paper clip holding some receipts, a tax folder with budget, a tablet computer with a clock showing on the screen, a pen, an indoor plant.

Here are her top seven ways to minimize stress over taxes:

1. Talk to your spouse/partner

“A lot of times couples don’t like talking about money with each other,” Jessica says. “It’s really important that, when you're getting ready for tax time, you're talking to your spouse or partner so both of you are on the same page.”

An advisor can help you communicate about your finances.

2. Have a monthly budget

You need to get a handle on how much money you're spending and how much is coming in. That way, you’ll know how much to save every year, including how much you'll need to put toward taxes.

“Get on budget and stay on top of it,” Jessica says.

An advisor can help you figure out approximately what tax bracket you'll be in. Jessica sends her members a budget document to help keep track.

3. Have a file folder for all your receipts and paperwork

Get one of those file folders with multiple compartments to sort your receipts. It beats rustling through a large pile of loose receipts and documents every year.

“It only takes a few more minutes,” Jessica says. “That means a lot of headaches will go away. You are stressing needlessly about trying to find things.”

If you’re not sure what you can claim, keep all your receipts and get advice on how to claim all of your entitlements.

“It makes your life a lot easier, being able to just grab the folder and bring it to the accountant,” Jessica says. “As opposed to, ‘oh gosh, where did we put that?’ ”

4. Better yet, go paperless

You might find it easier to say goodbye to file folders and filing cabinets. Keeping a digital archive of expenses can be far simpler, especially when you need to find a specific document or receipt.

5. Don’t procrastinate

A lot of people leave the prep work and the filing of taxes until the last few days before the deadline. When you're in a rush, you're more likely to make mistakes, such as missing a deduction. There are penalties to filing late if you owe taxes, so you want to give yourself plenty of time before April 30 rolls around.

6. Do your taxes in the right environment

It helps you to concentrate if you do your taxes in an office environment, as opposed to the kitchen or dining room table, or in front of the TV. Do the tax work in an area where you won't have distractions.

7. Work with an advisor

“We can help you with your budget,” Jessica says. “We can help you come up with ideas about savings so you don’t all of a sudden have a big tax hit at the end of the year. We'll help keep you on track as well.”

A huge tax bill is the worst surprise. Preparing for tax season early with your advisor, and setting out a plan, eliminates the uncertainty.

“Maybe at the end of the year you're getting $2,000 back, as opposed to owing $2,000,” she says. “No one really wants to owe the government money.”

Another thing an advisor can help you with is using your tax refund wisely, so your money works harder for you. Some strategies include opening a tax-free savings account (TFSA), registered retirement savings plan (RRSP) or a cashable guaranteed investment certificate (GIC) — which allows you to earn interest over a period of time and has the flexibility of letting you cash out after that term.

“If the government is going to pay you, put it into the most tax-efficient option available!” Jessica says.

Jessica had one member, an oil industry worker in his late 20s who was making a six-figure salary but had no strategy for how to minimize taxes he owed. He had paid quite a bit in taxes the previous year, so Jessica suggested he invest $300/paycheque into an RRSP. It was an amount that he didn’t really miss.

“It was simple and by the end he really minimized his taxable income,” Jessica says. "You don't have to put away extensive amounts of money to make tax time less stressful.

Mutual funds and related financial planning services are offered through Credential Asset Management Inc. Financial planning services are only available from advisors who hold a financial planning accreditation through applicable regulatory authorities. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete and it should not be considered personal taxation advice. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax related matters.


Originally posted on January 20, 2020.