Tax season: Common mistakes made by last-minute filers
WATCH ABOVE: Heather Loney has the details on what you need to know about your 2014 tax return.
The deadline for Canadians to file their 2014 personal income tax return is April 30, however recent numbers from the Canada Revenue Agency (CRA) show that millions haven’t filed their return yet.
As of April 6, just over 11 million tax returns had been received and processed by the CRA. Compare that to the nearly 28.3 million returns processed last year, it shows more than half of Canadians are going to file their taxes last-minute, late or not at all.
Experts warn that rushing to get your tax returns in last-minute can lead to costly mistakes (and not filing at all comes with even stiffer penalties – more on that below).
“Even if you want to file your return on April 30, you should look at your paperwork and slips before the last minute to make sure you have everything you need,” said Caroline Battista, senior tax analyst at H&R Block Canada. “Every slip and receipt means less tax you have to pay and you don’t want to pay any more than you really need.”
According to a survey done for H&R Block Canada, Canadians aren’t taking full advantage of all the tax savings available to them.
The survey found:
- Only 8% were planning to claim the Canada Employment Amount (even though anyone with T4 income can claim this amount, said H&R Block)
- 33% were planning to claim charitable donations – down from 37% last year
- 10% planned to claim the Children’s Fitness Tax Credit, which was doubled to $1,000 for the 2014 tax year
- 10% of Canadians were planning to claim the new Family Tax Cut
Battista said in addition to missing out on credits like the ones above, other common errors are made when people rush to get their returns in on time.
Missing new credits
This year saw the introduction to the heavily-debated Family Tax Cut and increases to the Children’s Fitness Tax Credit, but those aren’t the only things new for the 2014 tax year. Every year sees some changes to the tax system, so before you file, you need to do your research.
“There are always changes,” said Battista. “Some years the changes are bigger than others, but there’s always changes. Make sure you’re getting back as much as you can.”
Not reporting all your income
Failure to report all of your income can lead to penalties and interest charges – even if you simply forgot to include a T slip.
According to the CRA, if you fail to report all of your income twice within the last four years, you’ll face federal and provincial penalties. Each penalty is 10 per cent of the amount of income you didn’t report on your 2014 tax return.
There are some cases where the CRA will waive the penalties if you voluntarily fess up.
Not keeping track of your receipts
Even if you file your taxes electronically, you need to keep your receipts. “If the CRA asks for proof and you cannot provide it, you will be reassessed without the credit or deduction,” said Battista.
And when it comes to receipts, make sure you coordinate with your spouse or common-law partner, as you can find greater tax savings, depending on how you file them.
For instance, “medical expenses should be claimed by the lower income spouse, while pooling your charitable donations may lead to bigger tax savings,” said Battista.
If you file your taxes late (assuming you owe tax for 2014) you’ll face a late-filing penalty, amounting to five per cent of the balance owing, plus one per cent of the balance for each month your return is late (to a maximum of 12 months).
If you’re a repeat offender and filed late between 2011 to 2013, the penalty for filing your 2014 return late may reach 10 per cent on your balance owing and two per cent for each month it takes you to file (up to 20 months).
There are circumstances where the CRA will waive the penalty.
Of course, if you don’t owe anything in taxes, there are no penalties – but experts say if you were expecting a refund and didn’t get around to filing, you’re essentially giving the government an interest-free loan.
Not filing at all
The CRA charges interest on any balance owing for the 2014 tax year starting on May 1, 2015.
Even if you aren’t expecting a refund or don’t make any income, there are certain credits and government benefits available, such as the Canada Child Tax Benefit and GST/HST benefit – but you must file a return to be eligible for them.
© 2015 Shaw Media