Yup, a Mortgage Broker is telling you to get your taxes done. Why? Well, several reasons. The thing to understand is the following. Your mortgage is a huge part (likely the biggest part) of your financial picture and all the other parts of your finances (such as your taxes) effect your mortgage.
So why do you need to get them done ASAP? Let us count the ways.
1 - You may not be able to get a Mortgage with unfiled or unpaid taxes. Sometimes this is not the case, but many times it is. Look at it this way, if someone is lending you hundreds of thousands of dollars they can ask to see whatever they want, and sometimes they want to see your statement of account from the CRA. Your statement of account with the CRA is exactly what it sounds like. It shows/says if/when you filed your taxes last and what you owe. Sometimes they (the bank) want to see your NOA (notice of assessment), which is basically your receipt from your tax filing, and you don’t get a receipt unless you file. Would you want to lend someone money who either hasn’t done there taxes or owes the CRA money? Didn’t think so. Sometimes this comes up kinda last minute and all of a sudden you are rushing to get your taxes done to get your mortgage to close on time or to save the deal from completely falling apart, or you are taking a rate of 10% from a Private Lender that doesn’t care about your taxes, and sometimes even they want to see your taxes. Either way…. not cool… especially for you.
2- It gets it out of the way. Now I know I sound like your mom here (or dad as in my case), but it’s true. To put it into context relative to your mortgage think of it like this. You are going to either be getting a bill or a cheque, whatever it may be you want to have that settled before you enter into a massive financial commitment such as a mortgage. That $2000 dollar return could be the extra down payment you need to afford the home you want. Conversely, a $2000 bill coming unexpectedly could be disastrous to your finances at the wrong time. The unexpected is bad, especially if you are in the market for a new or renewed mortgage. If you are not in the market for a new or renewed mortgage you should still get it done because that would make your mom and dad happy.
3- You can do a better job of it when you have more time. I can hear you saying “what the heck are you talking about? I don’t do them I take them somewhere to get done”. What I mean is that you can take the time to find every write off you can, every loophole and every advantage. Now for some people this won’t really apply, but for others it can be the difference between a bill and a refund. Do you have daycare receipts? Repairs to rental properties? Employment expenses out of pocket? Any donation receipts? Better yet, did you have time to discuss your taxes with your accountant before they were filed? Remember, your accountant is going to file your taxes based on what you give him. If you drop off a T4 3 days before they are due don’t expect him/her to call you asking for write off receipts when they are working 14 hour days to get all the procrastinator's taxes done. Get to the front of the line and you’ll get front of the line service.
On a separate but related note, for the most part you get what you pay for with accountants in my experience. Spend a little extra and build a long term relationship with an accountant who knows you and your spouse’s situation. There are lots of things they (accountants) can do to help you if they have been doing your taxes year after year. Saving a few hundred bucks and doing them online on the cheapest app is a bad idea, plain and simple. Especially if you have anything more than one T4. Not to mention the mess you are going to be in when your Mortgage Broker wants to see your last 2 years T4’s, NOA’s, and statement of account. If you have the same long standing accountant all that info is one email away. Here is a link to one of the many good accountants in Westman https://wlbuck.com/
4- You can find the sweet spot for how much to contribute to your RRSP account. If you had made 80K in a year and deposited 10k into your RRSP account you only have to pay tax on 70k, if you made 100k and deposited 3K into your RRSP account you pay taxes on 97K, etc, etc. Finding the sweet spot means contributing that perfect amount to knock yourself down a bracket (or 2 if possible). Now a lot of the time this won’t matter because people don’t have cash sitting around to do this with, but sometimes they do. If you get them done early you can discuss this with your accountant and decide what is best. Sometimes not contributing is the way to go, if you had a lower earning year you’re better off to save it in a non-registered account for next year. Maybe the great year you had makes borrowing funds just to contribute a viable option, you won’t know unless you get them done early. This is especially important if you are self employed or in any line of work that does not have regular paycheques. Your write-offs and your income (and your spouse’s) are all going to come in to play here. The RRSP contribution deadline is the beginning of March, get your taxes done in January that way you can make your contribution in February.
One important thing to note while we are on the topic of RRSP’s. If you are saving for a down payment on home it is likely a good idea to NOT put that money into an RRSP if you plan on taking it out for a down payment. Your TFSA is a much better spot for it, and in some cases your savings account is also a better spot. You can take RRSP funds out for down payment, but it’s not as cut and dried as one would like. That topic is an entire other blog, anyone out there wanting that info can email or call me anytime though. Bottom line is this…. you can’t make an informed RRSP decision without all the data, so get the data. Meaning get your taxes done early.
So to recap, you need to get your taxes done ASAP because….
1 - Not having them done can ruin your chances of acquiring a mortgage
2- Knowing the results ASAP can have a huge effect on other financial decisions (such as you mortgage)
3- You can do a better job of filing the most beneficial return
4- You can make an informed RRSP contribution decision
I could keep preaching, but I need to get to work on getting my taxes together for my accountant. As with most things in my life, I have learned this lesson the hard way. You don’t have too.
That about covers it, thanks for your time, I hope you enjoyed the read.
Centum Mortgage Professional