Common Mistakes to Avoid on Your Personal Tax Return (T1)

Personal Tax Mistakes in Canada

Tax season can be a stressful time for many Canadians. With so many rules and regulations to follow, it’s easy to make mistakes when filing your taxes. However, making mistakes on your tax return can lead to penalties and interest charges from the Canada Revenue Agency (CRA). To help you avoid these costly errors, we’ve put together a list of common tax mistakes to avoid in Canada. From missing important deductions to forgetting to report income from multiple sources, our blog post will cover some of the most common tax mistakes people make when filing their taxes in Canada.

Under-reporting income

One common mistake is failing to report all sources of income. while reporting regular job income it’s easy to overlook additional income earned from side jobs This can include income from part-time or freelance work, investment income, or even income earned from a rental property or other sources while reporting regular job income.

However, it’s essential to report all income accurately to avoid complications during an audit. To stay on top of things, it’s crucial to ensure that every income source is included in your tax returns.

Missing Expenses and Deductions

The second most common mistake we’ve observed is the failure to identify all eligible expenses and deductions. This frequently happens when people overlook employment-related expenses that can be written off through their employers, or when sole proprietors neglect to report specific expenses such as vehicle usage or home office expenses.

It’s essential to ensure that you claim all eligible deductions and expenses correctly, as missing out on these could result in missed savings and a higher tax bill.

Claiming incorrect deductions and credits

Many Canadians make mistakes in claiming potential deductions and credits to reduce their tax liability. For example, medical, childcare, and certain employment expenses can be claimed as deductions. Credit such as the Canada Child Benefit and the GST/HST credit can significantly reduce your tax. Researching and understanding the eligible deductions and credits is important to maximize your tax savings.

Not keeping track of receipts and expenses

Another common mistake is failing to keep track of receipts and expenses. Many tax credits and deductions require you to provide proof of the expenses you’re claiming. Without receipts or other documentation, you won’t be able to claim these credits and deductions, potentially resulting in a higher tax bill. To avoid this mistake, make sure to keep track of all your receipts and expenses throughout the year, and organize them by category to make filing your taxes easier. If needed, review the CRA’s requirements for record keeping ensuring you maintain your documentation for the appropriate amount of time.

Claiming ineligible expenses

While it’s important to claim all eligible expenses, it’s equally important to avoid claiming expenses that aren’t eligible. Common examples of ineligible expenses include personal expenses, such as clothing or groceries, or expenses related to non-deductible interest on loans. Claiming these expenses can trigger an audit from the CRA and result in penalties and interest charges. To avoid this mistake, make sure to review the eligibility criteria for each deduction or credit before claiming it on your tax return.

Not Updating Information With CRA

Another crucial mistake that we often come across is failing to update personal information with the Canada Revenue Agency (CRA).

This may seem trivial, but it’s of utmost importance as the CRA uses the provided information to mail your Notice of Assessments, and in case of any audit or request for additional information, they would send it to the last known address. Keeping your information up-to-date, including your phone numbers, marital status, and address, is essential to ensure timely and accurate communication with the CRA.

Neglecting to update your correct information can have consequences for the benefits you receive from the government, making this mistake even more critical to avoid.

Missing Out on Key Forms

An incredibly significant mistake that taxpayers in Canada often make is missing out on critical filing forms. For instance, you own property outside of Canada worth more than a hundred thousand dollars, which can include stock investments or real estate.

In that case, there are separate filing requirements that must be met, and failure to do so can result in hefty penalties. For instance, the T1135 form has a penalty of up to $2500 per year.

Other common examples of missing key filing forms include incorrect filing of forms when selling your principal residence, which can result in high penalties.

Therefore, it’s crucial to ensure that you file all the required forms and provide all necessary information accurately when filing your tax return to avoid such penalties.

Ignoring tax planning opportunities

One of the biggest mistakes Canadians make is ignoring tax planning opportunities. Ignoring these opportunities can result in a higher tax bill than necessary. To avoid this mistake, consider speaking with a professional tax accountant to help you identify tax planning opportunities that apply to your specific situation.

Not fixing your mistakes

One of the biggest mistakes that you can make is not going back and correcting mistakes that you made before.

If you notice that you’ve made an error that could affect your return, don’t panic. Wait until you get your notice of assessment because, after receiving it, you can make a request to adjust your T1 return through your online account or by mail. The CRA will process your request and then respond to let you know whether they’ve accepted or rejected the change.

If you have neglected previous filings and CRA payments, you also have the power to remedy this problem. You have a maximum of ten years to file a return and receive a tax refund from the CRA so, if you didn’t file for your taxes 9 years ago, you still have a chance to do so.

It’s better to deal with your back taxes than to ignore them. Otherwise, the CRA could take action against you. They could enact strategies like wage garnishment, account freezing and the right of offset in an effort to collect what you owe them.

Not Asking for Help

If you’re not sure how to file your taxes and you’re worried about making mistakes that will send the CRA after you, don’t panic. You’re not obligated to complete this process all on your own and can ask for help.

Getting some professional guidance will help you avoid any major mistakes when it comes to income calculation, benefit claims and more. It will also remove some of the stress of filing off your shoulders.

Not filing at all or not filing on time

Procrastination is a common mistake that can lead to errors and stress during tax season. Gathering all the necessary documents and information takes time to ensure timely and accurate tax returns. It is advisable to start organizing your documents early and maintain a system throughout the year to ensure a smooth tax filing process.

Failing to file your tax return on time can result in penalties and interest charges from the CRA. A late filing can hinder your ability to prepare an effective repayment plan.

The deadline to file your tax return in Canada is April 30th, unless you or your spouse or common-law partner is self-employed, in which case the deadline is June 15th. However, if you owe taxes, you must pay them by April 30th to avoid interest charges. Overall, to avoid penalties and interest charges, make sure to file your tax return on time and pay any taxes owed by the deadline.

Get Tax Expert Help for A Stress-Free Tax-Filing Experience In Canada

Taxes can be tricky, no matter where you are in the world. But when it comes to filing for taxes in Canada, taxpayers often make common mistakes without realizing them. That’s why having an expert tax accountant on your side can make all the difference!

If you have any questions about your taxes or need assistance with filing, consider reaching out to Filing Taxes tax professional for guidance at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step toward proper management of your finances.

Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.

Written By:
Salman Rundhawa
Salman Rundhawa is the founder of Filing Taxes. Salman provides valuable tax planning, accounting, and income tax preparation services in Toronto, Mississauga, Oakville, and Hamilton.

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