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Top tips for getting the most out of your 2005 income tax return

Okay, no need to beat around the bush. Let's jump right into six clever tax filing tips that will save you money, potential time in prison, and the need to lick a bad tasting stamp this tax season. Here we go.

File on time.

It's no secret that you normally have until April 30 each year to file your tax return. This year, that date falls on a Saturday, so the deadline is extended to May 2.

If you don't file on time, you'll owe a penalty equal to 5 per cent of any tax balance due, plus 1 per cent a month (to a maximum of 12 per cent) for each month your return remains outstanding. Also, interest will start to accrue for any unpaid balance owing. Your deadline, and your spouse's, is extended to June 15 if either of you has self-employment activities to report.

File form T1-ADJ.

When you prepare your return, be sure to compare this year's return with last year's. This simple task can highlight mistakes you might have made last year. Next, you can correct a mistake by filing Form T1-ADJ, T1 Adjustment Request, available from the Canada Revenue Agency's website at You might get a few more dollars back by filing this form

File form T1A.

If you can't fully apply your capital losses against capital gains in 2004 because you haven't got sufficient capital gains, you can carry those excess losses back, up to three years, to apply against capital gains reported in the past. You have the choice as to the year(s) to which you carry those losses back, but it generally makes sense to carry them back to the earliest year first. Use form T1A, due with your tax return, to carry losses back.

File form GST 370.

Employees and partners who deduct expenses related to their work may be entitled to claim a rebate of the goods and services tax paid on those expenses. Claim this rebate by filing form GST 370 with your tax return. This rebate is taxable in the year you receive it. So, your 2004 rebate will be taxable to you in 2005. Not all employees and partners will be entitled to this rebate (your employer must be registered for GST for you to qualify, for example). Speak to your employer if you're unsure of your eligibility.

File U.S. tax forms.

Even though you're living in Canada, you may have to file a tax return in the United States. This will be the case if you're a U.S. citizen, or where you had certain types of transactions in 2004 -- most notably the sale of U.S. real estate. Filing a U.S. tax return (form 1040 for U.S. citizens, or form 1040NR for non-resident aliens) may allow you to recover some taxes that might have been withheld and remitted to the Internal Revenue Service on your behalf. Withholding taxes on gambling winnings may also be recoverable this way.

File electronically.

There are some real benefits to filing your tax return electronically. Consider these.

1. Your filing process is simplified because you don't have to attach a ton of slips and schedules to a paper tax return.

2. You can expect your refund sooner if you're getting a refund.

3. You'll reduce the possibility of math and data entry errors.

4. You'll start the three-year statute-barred clock ticking sooner (your return typically becomes untouchable by the CRA after three years).

5. You'll save the gas to get to the post office to mail a paper return.

Tim Cestnick, FCA, CPA, CFP, TEP is a tax specialist and author of Winning the Tax Game 2005 and The Tax Freedom Zone

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