Whether you are an entrepreneur, a self-employed person or an employee, you must file a tax return for Quebec and another for Canada. Even if you have no income to declare, it is to your advantage to file a tax return in order to benefit from certain refundable tax credits.

You have many tasks to complete during tax season in order to file an accurate and complete tax return. In particular, you need to gather your tax documents related to your earned income and investment income. Keep reading to discover what you need to know about the documentation required for your tax returns.

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How do I prepare my tax return as an individual?

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All individuals residing in Quebec with income must file an income tax return with the governments of Quebec and Canada.

In Quebec and Canada, the taxpayer must provide the necessary proof of income and expenses upon request, as well as calculate the amount of tax to be paid according to the rates in effect. April 30th of each year is the deadline for paying your taxes. It is also the deadline for filing your federal and provincial income tax return for the previous year, or June 30 for businesses and February 28 to pay them.

Accounting is not as boring as it sounds

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Documents to prepare before starting

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Several documents and tax information must be provided to file a tax return:

• Statements, receipts, previous year's assessment notices and social insurance Number (SIN)
• The federal T4 and the provincial RL-1, provided by your employer before the end of February, indicate the annual salary received and the various deductions made (EI, QPP, QPIP, income tax, etc.);
• The T3 and T5 interest and investment statements sent by your bank;
• Employment Insurance and parental income T4E;
• Statement 31, sent by the owner of your dwelling, will be used for the housing credit (only if you have lived in Quebec for more than 18 months);
• The T2202A / Statement 8 for students issued by the educational institution;
• Custodial fee statements;
• Medical expenses paid during the year;
• The first-time homebuyer's statement;
• Charitable or political donations;
• Professional membership fees;
• The cost of artistic and sports activities for children;

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What income should be reported?

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In Quebec, there are different sources of income that you must declare, including

• Employment or business income;
• Pension income;
• Interest income, dividends, capital gains;
• Rental income;
• Employment Insurance (EI) and Quebec Parental Insurance Plan (QPIP) income;
• The Canada Emergency Benefit;
• Income received abroad.

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Federal tax rate in 2021

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The total taxable amount is the sum of the amounts deducted from each income bracket.

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Quebec tax rates in 2021

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What are the additional tax deductions?

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If you feel that the amount of tax withheld from your employment income each month is insufficient, you may request that it be increased. Increasing the amount of tax withheld at source on income subject to tax is possible, especially if you have income beyond employment income such as business income or taxable annuity income such as QPP benefits or Old Age Security pension.

To do so, you must complete one of the following forms:

• Request for additional tax withholding (TP-1017);
• Withholding Tax Return (TP-1015.3).

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How do I prepare my tax return as an entrepreneur?

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In order to prepare a tax return as a self-employed, you need:

1. Know the tax deductions you are entitled to
2. Provide for installments
3. Opting for online reporting and the use of software

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Since business tax returns allow for many additional deductions, it is often recommended that you use the services of a CPA. They will ensure that you have taken into account all the deductions and credits you are entitled to.

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1. Determine what type of tax return you need to file

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The nature of your income and the legal form of your business will influence the type of tax return you file. The rules are different for individuals, corporations and non-profit organizations.

• Your business income is part of your personal tax return. It is reported on the "T1 return" and must be reported by June 15.
• The business income taxes known by the form T2125 (Statement of Business or Professional Activities) must be paid by April 30.

2. File all relevant paperwork properly

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To avoid the stress of tax season overload, you need to prepare and organize your accounting records throughout the year:

• Keep your tax returns from previous years;
• If you have a business, sort your invoices by expense type and your sales receipts by revenue type;
• Document your notices of assessment;
• Organize your transactions so that you can find them according to their period and nature.

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3. Schedule your accounting tasks according to deadlines

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Since corporate tax filing is a process, don't leave tax preparation to deadlines. Set deadlines for each task, such as:

• Obtaining all tax slips in a timely manner
• The mailing of employee forms by the end of February
• Calculation of income and expenses at least every quarter
• Ensure your bookkeeping and scan your vouchers at least every month

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Claim the tax deductions you are entitled to

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You can deduct most of the expenses you incur to earn business income. Don't forget to keep all your invoices to take advantage of these deductions. Don't overlook anything, even small amounts can add up at the end of the year:

• Office supplies;
• Computer equipment, furniture, and other capital expenditures;
• Insurance on business assets;
• Advertising expenses (business cards, social media and search engine ads, etc.);
• Business or industry specific taxes and professional membership fees;
• Expenses for meals and entertainment for a partner, client, or employees;
• Mileage related to business travel;
• Miscellaneous expenses (electricity, internet connection, telephone calls, etc.).

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5. Set aside a reserve for instalments

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If you are required to pay instalments on your business income, you should budget for them to avoid any surprises on the day you have to pay them.

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6. Opt for online reporting and use of software

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To minimise the time spent on filing your taxes, you can access the Canada Revenue Agency and Revenu Québec websites to download and complete the forms. You can also create your tax file and make payments online through these portals.

In addition, in Canada, entrepreneurs tend to use accounting software that allows them to prepare accounting documents and submit returns electronically.

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7. Tax services with Stamped

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If you want to get through tax season with peace of mind, you can trust your company's tax return to our CPA team. Stamped provides you with a collaborative platform that integrates with powerful software such as Xero and Quickbooks Online. Our team combines accounting expertise with artificial intelligence technology.

Arrange a meeting with a CPA

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