Tax season: Best of times, worst of times

For most of us, tax return season is regarded with disdain. And when it arrives, we react by trying to get it over with as quickly as possible. My message this tax season: view your tax return preparation a little more positively consider it an ideal opportunity to improve your personal finances, now and for the rest of your life.

View April as a time to meet two separate challenges: The first is to get last year’s return done as effectively as possible; minimize your tax payments for the year, and get the form filed by the end of the month. Second, use the annual return exercise to improve your personal tax and financial management.

Canadians are terribly overtaxed. For years, federal politicians have used the deficit as an excuse to raise taxes, resulting in Canada being almost the most heavily taxed major industrial country in the world. In my own case, taxes cost me far more than shelter or food or transportation probably more than all of those things combined.

If you think the federal government is spending your tax money wisely you can just carry on and pay what they ask. But if you are as ticked off as I am particularly as the recent Federal Budget was balanced y gave little or no reduction in our excessive taxes you may decide to take matters into your own hands.

I emphasize that tax minimization should be done within the law. I do not advocate tax evasion, which can land you in serious trouble. However, I do advocate tax avoidance which means arranging your personal affairs within the law to pay the least tax possible.

One of the first issues to consider is whether you can do all your tax planning and management in a satisfactory manner or whether to seek professional help. You can have your tax return prepared by a chartered accountant or other tax professional and ask for advice on any tax planning opportunities that come to light in the process. Many people take this approach, and it is a fairly efficient one; beware, however, that tax return preparation season is a hectic time for accountants and time may not allow adequate attention.

Another approach is to take overall responsibility and do the tax form preparation yourself with added advice on particular matters from another source. There are many excellent specialized books and articles available at tax time that can give you ideas to research. Articles by tax practitioners in financial publications will likely have more detail.

Some people prefer to do their own tax returns simply because they learn so much in the process about how the tax system affects their personal finances. The process certainly helps you with your personal finance planning and management. Others avoid doing their own tax returns because they are afraid of making mistakes that either result in their paying more than they should or exposing them to risk of penalties or prosecution from Revenue authorities. These are valid concerns the former more likely than the latter.

One thing you can count on: If you pay too little tax you will hear from Revenue Canada, but if you have paid too much you won’t get a refund unless you ask for it and explain why. Revenue Canada’s mission is to maximize tax collections, not to look out for your best interests. In most cases they will be fair but only if you take the initiative. In a few situations, they will not, and you will get fair treatment only by going to court an exercise that exposes Revenue Canada’s true stripes to collect every cent they can.

My April Taxletter for Investors deals more thoroughly with personal tax planning and tax return preparation. For a copy, send $5 to cover printing and mailing to: Donald I. Beach & Associates, Inc., 2555 Highway 7, Greenwood, Ont., L0H 1H0.