Accounting firm

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.

Here is a list of individuals and organizations that need to keep records.

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,

Summary

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.

Markham

Mississauga

North York

Richmond Hill

Thornhill

Toronto

Vaughan

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

T- 416-371-6017

F- 416-667-0404

Shani Marzin, CPA, CA

T- 416-731-9031

F- 416-667-0404

S&P Accounting Services LLP

2727 Steeles Ave. W. Suite 300

North York, ON, M3J 3G9

www.spaccountingservices.ca

Disclaimer:

We strive to ensure all information on our site is accurate and up to date. However, the contents of the site are naturally subject to change from time to time. That means, we can’t always guarantee the accuracy of all information on the site. YOU ARE RESPONSIBLE FOR CHECKING THE ACCURACY OF RELEVANT FACTS AND OPINIONS GIVEN ON THE SITE BEFORE ENTERING INTO ANY COMMITMENT BASED UPON THEM.

This post was written by Biz Source, a content creation company and is for illustration purposes only. For professional advice, please contact S & P Accounting Services.

How to budget wisely – top five tips from an accounting firm

S & P Accounting Services is an accounting firm situated in the Greater Toronto Area. A common question that our clients ask us is how could I budget wisely?

Overall, the top five tips that we recommend to our clients are:

1. Spend less than you earn. 

This is easier said than done, yet if you follow through with this, you could be well on your way to paying off debts, saving for your retirement, getting your hands on that next generation Macbook or buying that beautiful home you dreamed of.

2. Create a monthly budget and adhere to it.

In order to know how much money is coming in and out each month, it is essential to devise a budget. There are different smartphone apps that make it easy to track your expenditure such as, Mint.com, YNAB, or Freshbooks. Conversely, you could simply create a monthly budget on excel spreadsheet for free.

Creating a monthly budget could definitely be an eye opener for you.  It will allow you to see how much money you are spending on those sushi outings with friends or daily Starbucks fixes and may propel you to want to change your spending habits.

3. Pay with cash instead of credit cards.

A good way to reduce your spending is to pay your daily expenses with real cash instead of credit cards. Cash offers a real tangible experience. When you run out of cash in your wallet, you no longer have any more money to spend. “You see this and process it.” On the contrary, with credit cards, “it seems like it would be easier for someone to purchase more because a card, while tangible, does not represent actual money. It’s just a piece of plastic, and a shopper does not see the result of their expenditure for almost a month.”1


One well-documented study conducted by Dun & Bradstreet found that people spend 12-18% more when purchasing with credit cards instead of cash. McDonald’s reports that when customers purchase with credit cards, the average ticket is $7 as opposed to $4.50 with cash. Therefore, we advise that it is best to keep cash rather than credit cards in your wallet.2

4. Stick to your grocery list and brown bag your lunch.

Having a grocery list will save you money and time. Have you ever rushed to the grocery store two days in a row simply because you forgot that one important staple on your first trip to the grocery store?  Or have you ever gone to the grocery store wandering aimlessly through the aisles, with little knowledge of what you have in your pantry and fridge and ended up buying multiples of the same product?

Having a grocery list will remind you what you need to buy and will ensure that you are purchasing food you know you will eat. Unfortunately, people throw away too much money on food because they purchase it and never eat it, or it gets moldy or rotten. Purchasing food that you intend to consume because it’s on your grocery list will help minimize wasted food.

A good way to create a grocery list is to first create your meal plan for the week.  After completing your meal plan, write down the necessary ingredients on your grocery list. Make sure to take note of what you already have in your fridge and pantry in order to avoid buying duplicate items.

One meal planning app worth checking is Today’s Parent Mealtime. It could help you create a weekly meal plan from thousands of family-friendly recipes and then create a grocery list that you could email to family members so that you are all on board with what’s needed.

We also recommend that you brown bag your lunch. This will save you hundreds or even thousands of dollars per year and as an added bonus it is usually healthier to eat a homemade meal.

5. Don’t buy on impulse.

Consumer psychologist, Ian Zimmerman, Ph.D., points out that “impulse buying is related to anxiety and unhappiness…The impulse buyer may feel unhappy and may think that being seen with an expensive new purchase will bring respect and happiness. This perceived road to happiness motivates the impulse buyer to go shopping…likes [a] product, and experiences pleasure at the thought of being able to purchase it immediately and go home with it.”3

Therefore, when you are down in the ruts, don’t use shopping as a therapy to give you a quick pick me upper. Instead try to find different avenues to deal with frustrations, boredom, and fatigue such as meditation, exercising, writing, drawing which are all practically free. One technique that could help you avoid impulse shopping is doing deep breathing exercises. You are window shopping with no intention of buying anything and you see those new Nike shoes and want them like now…”Take a breath and try this instead: Tell yourself you can buy it, but not until next month. By then, you’ll either have enough saved up or you’ll decide you don’t like it that much after all. Even better, if you wait it may be on sale! Problem solved.”4

In the same vein, when you go grocery shopping, stick to the items on your grocery list and never shop hungry.

Related: What motivates impulse buying

In conclusion, in order to budget wisely and help achieve your financial goals, it is well worth it to follow these five tips: 1. spend less than you earn, 2. create a monthly budget and adhere to it, 3. pay with cash instead of credit cards, 4. stick to your grocery list and brown bag your lunch, and 5. don’t buy on impulse.

Sources:

https://www.nerdwallet.com/blog/credit-cards/credit-cards-make-you-spend-more/

http://www.businessinsider.com/studies-help-explain-why-credit-cards-make-us-spend-more-2014-7

https://www.psychologytoday.com/blog/sold/201207/what-motivates-impulse-buying

https://www.everydollar.com/blog/8-steps-to-help-you-stick-to-your-budget

 


About S & P Accounting Services

S & P Accounting Services is a professional accounting firm situated in North York, Ontario. We are chartered accountants with extensive experience with audit, review, tax and bookkeeping. We strive to operate in accordance with our principles of quality, professionalism, and integrity and are dedicated to excellent service.  We aim to ensure that our clients receive the highest quality of financial, tax and accounting services and advice. We happily serve clients in Toronto, North York, Mississauga, Vaughan, Richmond Hill and in other cities in the GTA.

If you have any questions or inquiries about our accounting services, please contact S & P Accounting Services.

S&P Accounting Services LLP
2727 Steeles Ave. W. Suite 300
North York, ON, M3J 3G9
www.spaccountingservices.ca

Disclaimer: We strive to ensure all information on our site is accurate and up to date. However, the contents of the site are naturally subject to change from time to time. That means, we can’t always guarantee the accuracy of all information on the site. YOU ARE RESPONSIBLE FOR CHECKING THE ACCURACY OF RELEVANT FACTS AND OPINIONS GIVEN ON THE SITE BEFORE ENTERING INTO ANY COMMITMENT BASED UPON THEM.

This post was written by Biz Source, a content creation company and is for illustration purposes only. For professional advice, please contact S & P Accounting Services.