As a Canadian, filing your taxes is an important responsibility that you need to take seriously. However, even the most diligent taxpayers can make mistakes on their personal tax returns. In this blog post, we will discuss the 5 common mistakes Canadians make on their personal tax returns and how to avoid them.
Mistake #1: Forgetting to Report All Income
One of the most common mistakes Canadians make on their personal tax returns is forgetting to report all of their income. This includes income from all sources, such as self-employment income, rental income, and investment income. It is important to ensure that you report all of your income to the Canada Revenue Agency (CRA), as failing to do so can result in penalties and interest charges.
Mistake #2: Claiming Ineligible Deductions
Another common mistake Canadians make on their personal tax returns is claiming deductions that they are not eligible for. For example, some taxpayers claim deductions for expenses that are not related to their employment or business, such as personal expenses like clothing or food. It is important to understand which deductions you are eligible for and to keep proper documentation to support your claims.
Mistake #3: Not Keeping Accurate Records
Keeping accurate records is an essential part of filing your personal tax return. Without proper documentation, it can be difficult to support your claims for income and deductions. Make sure to keep receipts, invoices, and other documents that support your income and deductions for at least six years, as the CRA may request them at any time.
Mistake #4: Filing Late or Not Filing at All
Another common mistake Canadians make on their personal tax returns is filing late or not filing at all. Filing your taxes late or not at all can result in penalties and interest charges, which can add up quickly. It is important to file your taxes on time, even if you are unable to pay the full amount owing, as the CRA may be more lenient in setting up a payment plan if you are proactive.
Mistake #5: Not Seeking Professional Help
Filing your personal tax return can be a complex process, and many Canadians may not fully understand the requirements and regulations. Not seeking professional help when needed is another common mistake. Tax professionals, such as accountants, can help you understand the tax laws and regulations and ensure that you are claiming all of the deductions and credits that you are eligible for. They can also help you avoid mistakes that could result in penalties or interest charges.
Filing your personal tax return can be complex, but avoiding these common mistakes can make it easier. Remember to report all of your income, claim only eligible deductions, keep accurate records, file on time, and seek professional help when needed. By doing so, you can avoid penalties, reduce your tax burden, and have peace of mind knowing that you are in compliance with the tax laws and regulations.
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