Today is April 30th or tax d-day for all those earning an income in Canada.  Employees have taxes taken off at the source by their employers.  The payroll deductions should make it so that you don’t have any extra to pay on this day.  However, sometimes the payroll deductions aren’t perfect or you have other sources of income that cause you to owe more than you’ve paid in during the year.  If you’re facing a tax bill due today, then here are some tips to ensure that it doesn’t happen to you next April 30th!

HAVE MORE TAX DEDUCTED - If you have more than one job, ensure that both employers aren’t including the personal basic tax exemption in their payroll tax deductions for you otherwise you’ll always end up with a bill. If you have other sources of income, such as investment income, you are likely to end up with a tax bill so you could request that your main employer take off extra tax to compensate for that.

CONTRIBUTE TO A RRSP – As part of your retirement savings, you might be contributing to an RRSP.  Even if an RRSP isn’t your chosen retirement savings vehicle, consider contributing to a registered retirement savings plan (RRSP) so that the tax deduction will eliminate your tax bill.

MAKE YOUR INVESTMENTS TAX-FREE – The tax-free savings plan (TFSA) was introduced in 2009 by the Canadian government.  It allows those over 18 to contribute $5000 per year and the investment growth, whether it is interest, capital gains, or dividends, is not taxable.  Any withdrawals from a TFSA are also tax free.  So if you faced paying a tax bill because income from investments, you might want to move your investments into a TFSA.  A word of warning though, you may be forced to pay tax on the growth when you move the investments over.

ENSURE YOU’RE USING ALL YOUR TAX CREDITS – There are many tax credits that are available out there.  One common tax credit is the one for medical expenses incurred.  Once you cross the deductible of 3% of net income, you receive a credit for what you’ve paid for your medical expenses.  One medical expense that often gets forgotten is premiums paid into a private or group extended health and dental plan.  You cannot deduct for premiums paid into group life, disability, or critical illness premiums.  For example, if your monthly premium into your group benefits plan is $100 with $5 for life insurance and $10 for disability coverage, you could include $85 a month into your medical expenses.

This is just some basic advice that you might want to take into consideration to prevent a tax bill in 2011.  You should consult with your financial advisor or your accountant to see whether these tips would be effective for you.