A Guide for Teenagers
As tax season approaches many teenagers and young adults will be filing their taxes for the first time. This task can seem daunting if you aren’t sure where to start, but it doesn’t have to be. There are a variety of resources available to you including your parents and the Canada Revenue Agency (CRA). Many tax experts recommend taking a proactive and hands on approach to your taxes and fill out your first tax form yourself as opposed to hiring someone or having your parents do it. Filing your taxes is one of the first significant financial documents many people encounter and becomes one of the most important financial documents they will deal with.
To help first time tax filers the CRA offers a free online course on their website entitled Learning About Taxes. It takes approximately 90 minutes to complete and covers the basics of the tax system and walks you through how to file a simple tax return online. Though it has become easier for first time tax filers to file their taxes correctly because of the multitude of information and resources available it has also become more complex. The past few years has seen an increase in the number of tax credits that need to be taken into account.
Many financial advisors suggest parents help their children learn about taxes by discussing their own taxes with them. This makes the process less intimidating and offers real life examples. Teenagers should file a tax return regardless of age or income so that they can stock up on unused RRSP room that can be utilized years down the road. Even teenagers that are self employed with jobs like babysitting, shoveling snow or mowing lawns should be filing tax returns. University students that are not working should also file tax returns so that they can utilize a number of tax credits such as textbook credits ($65 for each month of qualified enrollment or $20 per month for part time students) and so they can transfer any unused tuition or education credits to their parents.
One of the most important things to remember when preparing to file your taxes is to save all your receipts. The CRA still expects you to be able to produce them even if you file online. Items such as transit passes and collage or university documents should be kept in a safe place.
Filing a tax return, and receiving a tax refund, also teaches teenagers and young adults how to budget their money. Instead of spending it on things you don’t need many financial advisors recommend putting the money towards student loans or credit card debt. If you’re fortunate enough not to have either of those then consider saving it for post secondary education, investing in your RRSP or putting it aside in a “Rainy Day” fund for emergencies.
Tim Lacroix of CGY Mortgage has been helping Calgarians manage their finances for years. To find out how he can help you call today at 403.648.1541 and visit timlacroix.com.