With the tax filing deadline of April 30 right around the corner, millions of Canada will file their taxes this year. Today it’s easier than ever to file your own taxes thanks to tax prep software. If you’re a salaried employee, filing your tax return can be a breeze – when done right. Making just one mistake on your tax return can prove costly. Not only could you miss out on tax credits and deductions you’re entitled to, you could face interest and penalties from the Canada Revenue Agency (CRA). Let’s take a look at some of the common tax filing mistakes and how to avoid them.
Mistake #1: Being disorganized
There’s no worse time to be disorganized than tax time. Today it’s harder than ever to keep track of your tax slips. Some tax slips are sent by mail, others are sent electronically by email. It’s enough to drive a taxpayer up the wall! To avoid missing a tax slip and facing a reassessment and possibly interest and penalties, it’s important to stay organized. Before starting your taxes, compare your tax slips from this year to last year. If you’re missing any tax slips, track them down before completing your return.
Mistake #2: Not filing on time
If you have a balance owing to the CRA, make sure to file your tax return by April 30. Failure to file your taxes results in a hefty 5 percent penalty charge, plus 1 percent per month. Even if you don’t have a balance owing, it’s still a good idea to file on or before the deadline. The sooner you file your tax return, the sooner you’ll get your refund. Even if you don’t have any income, it’s still a good idea to file your tax return. Failing to file your return means your family may not receive tax credits or deductions they’re entitled to.
Mistake #3: Not taking full advantage of tax credits and deductions
If you have a spouse and you made donations or paid medical expenses in 2015, be sure to take full advantage of your tax credits. When you have a spouse, it makes sense to combine your claims to maximize your tax credit. With donations, you get a non-refundable tax credit worth 15 percent on the first $200 of donations, rising to 29 percent for donations above $200. If you’re claiming medical expense, you can claim medical expense above the $2,011 limit or 3 percent of your net income. In this case, it makes sense for the lower income spouse to claim all the medical expenses.
Mistake #4: Not keeping up to speed on tax changes
With each passing year brings changes in the tax law. It’s important to stay up to speed on any of these changes that may affect your tax return. The last thing you want to do is over-contribute to your Tax-Free Savings account and face a costly penalty (we’ll talk more about tax changes in next week’s blog).
These are just a few of the tax filing mistakes you can make. If you need help navigating tax changes, feel free to contact our office. We can take a closer look at your tax return to make sure you’re claiming all the tax credits and deductions you’re entitled to.