Tax Season Advice: 5 Things To Avoid
Tax season: 5 costly mistakes to avoid this year
NOT FILING AT ALL
If you didn’t make a single dime during the tax year, failing to file a tax return will only lead to more money being left on the table.
“One of the most common mistakes is not filing because you don’t think you have enough income, or you didn’t have an income at all,” Lisa Gittens, senior tax professional at H&R Block, told CTVNews.ca by phone earlier this month.
“As long as you are living in Canada you should be filing.”
According to Gittens, students, young adults, stay-at-home parents and the unemployed are the most prone to this mistake, which prevents them from claiming certain tax credits and benefits that all Canadians are entitled to, regardless of their income bracket.
This includes the Canada child benefit, the universal child care benefit, and the GST/HST credit, and provincial credits like the Climate Action Incentive. Keep in mind that both parents must file a tax return in order to receive the Canada child benefit.
You can also claim things like medical expenses, educational expenses, and child care expenses if you didn’t make any income. And, as Gittens notes, the more expenses you can write off, the greater chance you’ll get a refund.
Gittens notes that it’s especially important for students to file their returns in order to build credit with the CRA.
“Many students don’t file because they have no income, but once they graduate and start earning income, they have no credit with the CRA,” she explained.
NOT CLAIMING MEDICAL EXPENSES
Medical expenses not covered by provincial health services or benefits plans are another commonly neglected area, especially for low- and middle-income Canadians.
“When your medical expenses are high in comparison to your income you get a medical expense supplement that refunds a portion of the medical expenses you claimed,” said Gittens.
This type of expense can include eye exams, dental expenses not covered by insurance, medical supplies and travel expenses. This year, certain cannabis products are now considered eligible for the medical expense tax credit, if you have a prescription.
From your total medical expenses, the eligible amount is 3 per cent of your income or the set maximum for the tax year ($2,352), which ever is less.
For future tax years, Gittens recommends completing all of your miscellaneous medical exams and yearly check-ups towards the end of the year to capitalize on the return and make it easier to organize your receipts.
“When you get all of those eye exams and dental exams taken care of at the end of the year the receipts are all there for you to claim on your taxes,” she said.
MISREPORTING INCOME FROM YOUR SIDE JOB
Whether you are making extra money by driving an Uber, hosting people at your Airbnb, or earning a little side cash online, you want to make sure you are recording those earnings as self-employed income.
“You’ll want to be sure that you’re also contributing to the Canada Pension Plan based on those earnings,” notes Gittens.
If you plan on claiming any expenses related to that income (i.e. expenses related to your vehicle, house, or travel expenses), make sure that you have the receipts to back it up.
MISSING INVESTMENT INCOME
Before filing, make note of your investment streams and make sure you have received a statement for each of them. These annual statements should show the total income you earned during the tax year and the total expenses incurred, such as investment advisor feeds (which are deductible).
“Income sometimes gets missed because people don’t understand how much they’ve earned on their investments each year,” Armando Minicucci, tax specialist at Grant Thornton, told CTVNews.ca by phone.
“This is generally the most common area where individual tax payers are reassessed.”
FILING TOO EARLY
The early bird doesn’t always get the worm, especially when it comes to taxes.
“Those early filers who are hoping to get their refunds right away tend to miss certain documents, whether it be T4’s from their employers or investment slips from the bank,” Michael Davis, senior tax specialist at H&R Block, told CTVNews.ca by phone.
Not only could this cause you to make an amendment to your return, it could put you at risk of incurring penalties for misreporting your income if you make a habit of it.
“If you fail to report the same kind of income in back-to-back years it could result in penalties,” said Davis.
Due to all the recent events, tax filing deadlines have been EXTENDED
You can log into your MY CRA ACCOUNT and find out more information HERE
SOURCE: CTV NEWS