Six Mistakes To Avoid During Tax Season

Tax season is a stressful and busy time of year for most Canadians. Sometimes, this can cause us to make mistakes when filing our tax returns. While some of these mistakes may seem minor and can easily be made by even the most organized individuals, making them can be detrimental to the outcome of your return.

To ensure you optimize your return and benefits, and to help keep you organized and on top of your tax planning, we wanted to share 6 common mistakes that people make during this time of year and ways to avoid making them.

1. Filing Your Taxes Late

Most people procrastinate at some point in their life and many choose tax season to do so. While it may not seem critical to file your return on time, the cost of late filing can add up quickly.

If you have a balance owing but fail to file your return on time, the CRA can charge a late-filing penalty. The penalty is currently 5% of your balance owing, as of the date the return was due, plus 1% for each full month that your return is late, up to a maximum of 12 months.

2. Not Filing Your Taxes At All

This mistake is often made by individuals who have modest or low incomes, such as students who are attending college or university. Maybe they know they are getting a refund and do not feel that there is a rush to file, or perhaps they are just dislike doing taxes. Whatever the reason, it is not a good idea. Even if you have no income to report, you still need to file your income tax and benefit return.

In doing so, you can ensure that you take full advantage of the benefits, credits and other opportunities available to you including the Canada child benefit, the goods and services tax/harmonized sales tax (GST/HST) credit or provincial programs.

Similarly, to transfer credits, such as tuition, education and textbook amounts, the transferor must file their return.

3. Forgetting to Report Income

Before filing your income taxes, be sure you have included all of the income you earned. This may seem like an obvious step, but sometimes slips, such as T4 slips, go missing or are never delivered and are quickly forgotten about.

Most of your tax slips should have been sent to you by end of February. If you never received them, or have misplaced your 2016 tax slip(s), you have two options:

1. Register with My Account and see if you have access to electronic copies of your slips
2. Contact the issuer to request a new copy

If you are still unable to retrieve the information, file your taxes with the information you have and estimate the remainder. This should be a last resort, but it is better than not filing at all.

If you have already filed your income tax return and forgot to report income, you can use My Account or you can file a Form T1-ADJ, T1 Adjustment Request by mailing ending it to your tax centre.

4. Making a False Claim

Sometimes we make a claim that is not allowed. This is often done in error and is usually due to changing programs or taxpayers misinterpreting legislation and documents. Common claims, that are not allowed or are incorrectly claimed, which leads to an adjustment by the CRA, are:

• funeral expenses
• wedding expenses
• loans to family members
• a loss on the sale of a home designated as a principle residence
• northern resident deductions
• medical expenses
• tuition fees

The best way to ensure that the amounts claimed are allowed is to meet with a tax professional. They will not only help you prepare your current taxes properly and effectively, they will help you plan for future returns to help you optimize your tax liability.  

5. Forgotten Tax Credits, Benefits, And Deductions

There are a wide variety of tax credits and deductions as well as provincial and federal benefit programs that may apply to your unique situation. The problem is that these tax credits, benefits and deductions, along with your personal situation, are always changing  and it can be hard to keep track of what you can and cannot claim from year to year.

The CRA has online resources to help you learn about available credits but we always recommend seeing a tax specialist to ensure that you are taking full advantage of the opportunities available to you.  

6. Bad Record Keeping

It is very important that you maintain proper records, in all areas of life, but especially income taxes. If the CRA chooses to audit your income tax return. You will need to support your claims with proper documentation. Be sure that you keep your tax records and documents in a safe place and keep them for at least six years after you file your return.

Without sufficient documentation and support, the CRA will be quick to adjust your return.

For more information about tax planning and how to best incorporate it into your estate, contact us today!