It’s not uncommon for people to dread tax season, however pushing the thought of preparing them aside or waiting until the last minute to file can make the process much more painful than it needs to be. Here are seven common mistakes taxpayers often make when scrambling to file their returns.
Reporting Income Incorrectly
It’s very common for taxpayers to make mistakes when reporting their income, whether it be double reporting taxable benefits that are already included on their T4 slip or simply failing to report investment income. Failing to report your income correctly can lead to you being stuck with unwanted penalties and interest charges.
Not Keeping Receipts
Even if you file your returns electronically, you need to keep your receipts. If the CRA requests you to prove an amount that you’ve claimed and you cannot, your return will be re-assessed without that credit or deduction included.
Filing Returns Late
Assuming you have taxes owing, you’ll face a late-filing penalty amounting to 5% of the balance owing, plus 1% of the balance for each month your return is late, to a maximum of 12 months. If you have filed late in previous years, the late-filing penalty is 10% of the balance owing, plus 2% of the balance for each month your return is late.
Overlooking New Credits
The CRA makes changes from year to year, which introduces the risk of not claiming an available credit simply due to the fact that you were unaware of its existence.
Not Filing Capital Losses
Failing to claim capital losses on your return can result in you missing out on thousands of dollars of negated capital gains. If you have no gains during the year, know that capital losses can be carried forward indefinitely to be used in future years.
Not Fixing Errors From Prior Years
If you have anything you forgot to file in the past, you can recover missed tax refunds and credits by filing an adjustment to prior filed returns up to 10 years back in the case of the federal T1. You can even do this online.
Not Claiming Safety Deposit Boxes
Many people miss claiming their safety deposit box. Those missed deductions can add up over time. This is especially true for high-income earners. Investors should also review statements from their financial institutions to make sure interest costs and brokerage fees are claimed as carry costs.