Filing your taxes can feel like navigating a minefield, with one wrong move landing you in hot water with the CRA. To help you steer clear of common pitfalls, let’s walk through some of the most common tax filing mistakes Canadians make and how to avoid them.
1. Missing the Filing Deadline
Procrastination can be costly. For most individuals, the tax filing deadline is April 30. Self-employed individuals have until June 15, but any balance owing is still due by April 30. Missing these deadlines can result in penalties and interest charges.
Tip: Mark these dates on your calendar and set reminders to make sure you hit your deadlines. If you’re working with a professional, make sure you get them all the paperwork they need early, to give them time to file your taxes ahead of the deadline.
2. Incorrect Personal Information
Errors in personal details like your Social Insurance Number (SIN), address, or direct deposit information can delay your return or affect benefit payments. Make sure you double-check all personal information before submitting your return. It can be easy to miss small mistakes!
3. Failing to Report All Income
When you file your return, you’ll need to report income from all sources, including:
- Employment income (T4 slips)
- Investment income (T5 slips)
- Side gigs or freelance work
- Rental income
- Foreign income (yeah, the CRA takes a cut even when you’re earning money abroad)
Leaving off any of the above sources of income where you actually had earnings can lead to reassessments or penalties… and remember: the CRA has ways of knowing whether you didn’t file something you should have.
Tip: Keep thorough records of all income sources and make sure they’re accurately reported, just in case you ever get audited. All of your records should be kept for at least six years after which you can shred them.
4. Overlooking Deductions and Credits
With all the complexity around filing your taxes, it’s easy to miss out on valuable deductions and credits, such as:
- Medical expenses (yep, those Invisalign braces count too!)
- Charitable donations
- Education-related credits (this includes adult learning outside of universities and colleges)
- Home office expenses
Skipping these can result in you paying more tax than necessary… which none of us want to see happen. We pay enough as it is!
Tip: Review the CRA’s list of deductions and credits to identify the ones that may apply to your situation.
5. Not Updating Your Marital Status
Changes in marital status can affect your tax situation and eligibility for certain benefits. Failing to update the CRA can result in incorrect benefit payments or missed opportunities.
Tip: Inform the CRA promptly of any changes to your marital status. You can do this in your profile through the online portal.
6. Misreporting Capital Gains and Losses
Forgetting to report stock sales, cryptocurrency transactions, or real estate sales can lead to a CRA audit, and penalties along with it. As if that wasn’t enough pain, unreported capital losses can’t be used to offset future gains.
Tip: Keep detailed records of all investment transactions and report them accurately.
7. Exceeding RRSP Contribution Limits
Contributing more than your allowable Registered Retirement Savings Plan (RRSP) limit can result in penalties (been there, done that – you want to avoid it, trust me). It’s essential to know your contribution room before making deposits.
Tip: Check your RRSP contribution limit on your latest Notice of Assessment or through your CRA My Account.
Wrapping it Up
Tax time can feel intimidating, but it doesn’t have to be. By being aware of the common mistakes people make when filing their taxes, you can help avoid making them yourself. And remember, when in doubt, consult a tax professional, who will know all of this stuff inside-out
