I’m feeling a little taxed with being taxed as of late. Here are some top tax tips to untax you during the dreaded tax season.

1. Become a manic maxer:

A manic maxer is a term I invented to describe those people who contribute to their retirement savings plans (RRSP or 401K) in January, at the beginning of the tax year. If you contribute to your retirement plans in January 2008 for tax year 2008, then you too are a manic maxer. Contributing earlier in the year rather than later has huge tax and retirement advantages, including: earning an additional year of investment growth, getting your tax return sooner, and earlier retirement. Contributing to your RRSP or 401K at the beginning of the tax year just makes good financial sense.

2. Say NO to tax refunds:

I hate tax refunds. To me, a tax refund is a colossal failure. A tax refund means you gave the government an interest free loan for the year. A few years ago my “better half” and I were refunded a combined $8200 for a single tax year. OUCH. As a couple, this is exactly $683.33 less bucks a month we had in our savings accounts, earning interest for us. After doing a bit of research I found an awesome way to stop overpaying my taxes and thus loaning my hard-earned money for free. If you are a lucky Canadian, just fill out form T1213 - Request to Reduce Tax Deductions at Source to stop giving the government an interest free loan. I fill out this form every darn year, and love my “less taxed self” for it.

3. Rethink your refund, don’t squander it:

If you do get a tax refund, stop squandering it on consumer crap and stuff. I hate crap, and so should you. Instead of letting marketers part you with your after tax dollars, consider using it to pay down existing consumer debt or making an extra mortgage payment. If your debt is covered, consider investing your refund in a diversified portfolio of Exchange Traded Funds or Index Funds. Some popular indexing options are ING Streetwise Funds or TD e-Series Funds. When investing in funds, be sure to watch your fees with this handy Portfolio MER Calculator!

4. Max out your retirement plans:

Do you contribute a small fraction of the maximum allowable amount to a retirement plan? Well, I’m happy you contribute something, but not putting in the maximum amount means you pay more tax! To stop getting maximum taxed, try contributing the maximum to your retirement plan. Besides, the longer your money has to compound the better off you are. So stop making excuses and max out that RRSP or 401K today.

5. Shop around for tax software:

Have you been using the same tax software every darn year? Perhaps it’s time to shop around and check out lower priced options. I recently reviewed both Studio Tax and UFile. My preference is with Studio Tax, as the package is free to download (please leave a donation!), is NetFile certified, and is easy to use.

With these five tax tips, may the year be less taxing on you!
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