Here are the 10 common tax mistakes to avoid:
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10 common tax mistakes to avoid
Every year, thousands of Canadians make errors when they prepare their income tax returns. These may go unnoticed — or they could result in an unexpected payment or penalty. Play it safe and avoid these common errors. Here are the 10 common tax mistakes to avoid:
- Filing late. Be sure to file by April 30. If you owe taxes, you’ll pay a late-filing penalty of 5% of the tax owing plus 1% for each month you’re overdue, up to 12 months. You’ll also pay interest on the amount owing, plus on the late-filing penalty, starting May 1.
- Ignoring your partner. If you’re in a common-law relationship, you’re required to file as a couple. This can often be to your advantage.
- Lacking documentation. You may not need to provide certain slips or receipts with your return, but you do need to have them. Make sure they’re complete and ready to provide to the government if requested.
- Claiming moving expenses. If you’ve relocated your home to take a new job, run a business at a new location, or attend full-time post-secondary school, and are moving 40 km or more, you can claim a wide range of related expenses. However, if your new employer paid for them, you can’t claim those amounts as deductions on your tax return — and you’ll need to claim them as income.
- Claiming twice. Like moving expenses, there are other expenses you can’t claim if you’ve already been reimbursed. For example, if medical costs have been paid for by your insurer, you can only submit the remaining, unpaid amount as medical expenses.
- Mistaken medical expenses. Be sure to consult the list of approved medical expenses. Items that people often try to claim but which aren’t eligible include health plan premiums, gym memberships, birth control, blood pressure monitors, supplements or vitamins (even if prescribed by your doctor) and personal response systems.
- Misusing “other deductions.” This area is intended to capture allowable amounts not deducted elsewhere on your return, such as certain special instances with RRSPs, RRIFs and other types of pension plans. You can’t claim funeral expenses, wedding costs, legal fees or other non-allowable deductions.
- Claiming interest expenses on the wrong things. In general, you can only claim interest expenses if they were directly linked to an investment to earn an income. You can’t claim mortgage interest on your principal residence (if you’re not self-employed), for example, but you can claim it on your rental property.
- Claiming ineligible tuition fees. You can only claim tuition at recognized institutions.
- Not filing at all. In addition to possibly incurring hefty interest charges and penalties, you could be missing out on important tax breaks and the ability to accumulate RRSP contribution room.
At Carte Financial Group we have a team of tax experts to assist with complex situations. If you have any questions, don’t hesitate to contact your Carte Financial Advisor.