At tax time, many of us anticipate the possibility of receiving a refund or benefit payments, while others may find themselves overwhelmed by the process.
The Canada Revenue Agency (CRA) has shared some of the most common mistakes it sees at tax time. Avoiding these can save you time and help make the tax-filing process as simple as possible.
To help you navigate tax season effectively this year, here are five common mistakes to avoid.
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Not Reporting All Your Income
One of the most critical aspects of filing your taxes accurately is reporting all sources of income. It's easy to overlook income streams that may not seem obvious at first. Here are a few examples to consider:
- Tips and gratuities
- Income from side jobs or businesses
- Earnings from the platform economy (e.g., ridesharing, gig work, online sales)
- Foreign income, including investments held outside Canada
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Not Keeping Personal Information Up to Date
Changes in personal information such as address, phone number, marital status, or dependents can significantly impact your tax benefits and credits. Ensure that your details are current by updating them online through My Account. Keeping this information up to date helps prevent payment delays and ensures you receive the benefits you're entitled to.
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Claiming Personal Expenses
While deductions and credits can help reduce your tax burden, not all expenses are eligible for claims. Avoid claiming expenses such as funeral or wedding costs, loans to family members, or losses on the sale of personal-use property. Incorrect claims may lead to adjustments in your tax return, accompanied by interest charges and penalties. Refer to the CRA's guidelines on deductions, credits, and expenses to determine what qualifies.
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Writing Partial Payment Amounts on Paper Returns
For those filing paper tax returns, refrain from writing partial payment amounts directly on the return. Payments made with your tax return are automatically applied to your balance owing and noted as "payment on filing" in your assessment notice. If you're unable to pay the full balance, consider setting up a payment arrangement to manage your debt effectively.
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Not Supporting Income and Expenses with Documentation
Maintaining accurate records of income and expenses is crucial for supporting your tax return. Keep receipts, T4 slips, bank statements, and other relevant documents handy to substantiate your claims. These records may be requested in the event of a tax return review, streamlining the process and reducing potential delays.
Bonus Tip: How to Correct Errors on Your Tax Return
Even with careful planning, mistakes can happen. Fortunately, the CRA provides options to amend your tax return if needed. Utilize services like Change My Return, ReFILE, or submit changes by mail to rectify any errors promptly.
Happy filing!
