Five common mistakes that you could easily avoid when filing your tax return: Advice from a North York accounting firm
Soon enough your income taxes will be due and while you may be tempted to rush through the process and get it over with as quickly as possible, it’s best not to file your return hastily. The errors that you could make or omissions that could take place could result in a delay in receiving your refund or even not being granted certain benefits or credits. It may even result in a penalty.
S & P Accounting Services (a North York accounting firm) discusses five common mistakes that you could easily avoid when filing your tax return. They are 1. Failing to file your income tax return, 2. Discarding records once your income tax has been filed, 3. Postponing filing your income tax return because of missing slips, 4. Not notifying CRA of any changes to your personal information, and lastly, 5. Failing to keep a record of the eligible medical expenses you could claim.
We discuss them in more detail below.
1.Failing to file your income tax return
Perhaps you didn’t show income in Canada for 2017 or perhaps your income is tax exempt. Even if you fall under one of these two categories, you are still obligated by law to file your tax return. In fact, you will only receive credits and benefits that you are eligible for if you file your return. Here are some benefits and credits that you may qualify for:
2. Discarding records once income tax return has been filed
Another common mistake that people may make is that once they file their tax return, they discard their records. Records are “organized accounting and financial documents that summarize your transactions” and include the documents to support these transactions. For instance, records include, purchase receipts, income tax returns, sales invoices, contracts, banks statements, canceled cheques, credit card receipts, work orders and all correspondence that supports your transactions. Here is a full list of documents that fall under the category of records.
Keeping these documents is not limited to anyone who runs a business or carries out commercial activity. In fact, anyone who files a tax return is obligated by law to keep their records and supporting documents. Generally speaking, these records must be stored in a secure place for a period of six years from the end of the last tax year they relate to. Whether you decide to store your records as a hard copy or electronically, all records must satisfy the following requirements;
- – be reliable and complete
- – include the information needed to meet your tax obligations and to calculate your credits
- – be supported by documents
- – be kept in English, French, or a combination of these two languages
Keeping your records is vital in case the CRA (Canada Revenue Agency) asks to inspect, audit or examine them. In the event that you are selected for review, all receipts and supporting documents that the CRA requests have to be provided at that time. If they are not provided within the set timeframe, your claim may be reduced or disallowed.
3. Postponing filing income tax return because of missing slips
A third common, yet avoidable mistake that individuals may make is that they delay filing their tax returns because of missing T4s or other information slips. If you cannot find the missing slip(s) by the due date, use your pay stubs or statements to approximate your income and any deductions and credits that you may qualify to claim. Filing your taxes on time will help you avoid penalties.
For the majority of people, their income tax and benefit returns are due on or before April 30, 2018. For self-employed individuals, and their spouses or common-law partners, their returns are due no later than June 15, 2018.1 It’s best to mark these days on your calendar and start filing your taxes as soon as possible. Otherwise, if you owe tax for 2017 and file your tax return past the due date, the CRA will charge you a late-filing penalty. You will be subject to pay 5% of your 2017 balance owing. Additionally, you will also be subject to pay 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
Note that if you are a self-employed person, and have a balance owing for 2017, you have to pay it on or before April 30, 2018. For more information on how to make your payment, see Make a payment.
Also, if you do not file your return on time (see exception to the due date of your return), benefits and credits that you might be eligible for such as Canada child benefit payments, old age security benefit, and other provincial tax credits and benefits payments may be delayed or stopped.
You should have received most of your slips and receipts by the end of February. However, T3, and T5013 slips do not have to be sent before the end of March. If you have not received, or have lost or misplaced a slip from 2017, you have to ask your employer, or the issuer of the slip, for a copy.
Yet, most important, even if certain slips are missing, file your return for 2017 on time.
4. Not notifying CRA of any changes to your personal information
A fourth common mistake people may make is not informing the CRA of changes to their personal information such as whether they are married, divorced, widowed, etc. and/or how many children they have. Changes to your personal information such as your marital status, the number of children in your care, your banking information and your address directly impact your benefit and credit payments. If there has been a change in your life, notify the CRA as soon as possible in order to ensure that you receive the benefits and credits that you qualify for.
5. Failing to keep a record of the eligible expenses you could claim
A final recurring yet avoidable mistake that people may make is that they neglect to keep a record of the expenses that are tax deductible. Generally speaking, you are required to have proper receipts to support all expenses claimed as eligible expenses.
For instance, a proper receipt for medical expenses is one that indicates the purpose of the payment, the date of the payment, the patient for whom the payment was made and if relevant, the specialist (i.e., audiologist, dentist, medical doctor, etc.) who prescribed the purchase or gave the services. A canceled cheque, on the contrary, is not acceptable as a substitute for a proper receipt.
There are many expenses you may be able to claim when completing your income tax return such as child care expenses, employment expenses, medical expenses, education expenses, donations, etc.
Related: For information on eligible medical expenses, see Income Tax Folio S1–F1–C1, Medical Expense Tax Credit.
In order to reduce the taxes that you owe, it is best to keep a record of your receipts and any supporting documents. Receipts and supporting documents for employment expenses should go in a separate file than receipts and supporting documents for medical expenses. This way, when tax season rolls around, you will be able to accurately and efficiently claim your expenses on your income tax return,
In summary, the five common mistakes that you could make on your income tax return are: 1. Failing to file your income tax return, 2. Discarding records once your income tax has been filed, 3. Postponing filing your income tax return because of missing slips, 4. Not notifying CRA of any changes to your personal information, and lastly, 5. Failing to keep a record of the eligible medical expenses you could claim. These common mistakes are completely avoidable and could easily be prevented by keeping your records in an orderly manner and filing your taxes accurately and on time. And finally, making sure to keep all your records in a secure place, will be important in case the CRA wants to review them.
If you need assistance filing your taxes, you may be eligible for help
If you have a simple tax situation then you may be eligible to receive help filing your taxes from a free tax preparation clinic near you.
There are free tax preparation clinics nationwide. Here are several located in different regions of Ontario.
You are not considered to have a simple tax situation if you are:
- – self-employed or have employment expenses
- – have a business or rental income and expenses
- – have capital gains or losses
- – filed for bankruptcy
- – are completing a tax return for a deceased person
If you need assistance with your tax return or have any accounting inquiries, please do not hesitate to contact us at S & P Accounting Services. We are a full-service accounting firm handling taxation, bookkeeping, payroll, and accounting. We happily serve clients in North York, Toronto, Vaughan, Mississauga, Richmond Hill and other cities situated in the GTA.
Polina Presman, CPA, CA
Shani Marzin, CPA, CA
2727 Steeles Ave. W. Suite 300
North York, ON, M3J 3G9
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