Avoid These 6 Costly Tax Reporting Mistakes

Avoid These 6 Costly Tax Reporting Mistakes

Filing your income tax return. It’s complicated and mistakes can happen. Here are six common mistakes that Canada Revenue Agency (CRA) will use to impose penalties or demand repayments. You could even pay more tax than necessary.

  1. Missing Documentation
    Start this process in an organized manner for your best shot at success. Gather the required information, reporting slips, receipts (properly dated), and forms you need. With online filing, you may not have to provide documentation with your return. However, if CRA comes calling, you risk having an expense disallowed if you can’t produce them. Always keep 7 years of records available.
  2. Forgetting Allowable Deductions or Credits.
    Want to pay more tax than you have to? It’s easy, by not claiming all the credits and deductions you rightfully deserve. To complicate matters, the government tends to tweak these every year. For a full list, visit this section of the canada.ca site.
  3. Filing Late
    Or not at all. Your filing deadline is April 30th. If you owe taxes, the late-filing penalty of 5% of the tax owing plus 1% for each month you’re overdue plus a few layers of interest charges, can really add up. Plus, if you don’t file, you can miss out on important tax breaks such as accumulating RRSP contribution room.
  4. Did you Forget Someone?
    If you’re married, or in a common-law relationship for 12 months or more, you’re required to file as a couple. This can often be to your advantage, such as pooling or transferring tax credits.
  5. Claiming Ineligible Expenses
    In this category are items such as: moving expenses when a new employer has already claimed them; medical costs that aren’t allowed or were already covered by your insurance (you can claim the portion that wasn’t covered); interest expenses not linked to an investment you made to earn income; mortgage interest on your principal residence (unless you’re self- employed); and tuition fees from an institution that CRA doesn’t recognize.
  6. Using ‘Other Deductions’ for Disallowed Costs
    Such as funerals, weddings and legal fees. This section is for deductions that can’t be reported elsewhere, such as special instances with RRSPs, RRIFs and pension plans.

Boost the success of your financial plan with accurate tax reporting. Ask your Financial Advisor for more tips to help you get it right.

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