It’s that time of year again when you have to complete all your financial and tax paperwork and fill out your tax forms. Do you want to maximize your tax savings and avoid the most common mistakes that occur when filing your tax returns? Or you’ve already filed your tax return and just realized a mistake you made while doing so. Here at Webtax Online, don’t worry, we have noted down some of the mistakes you may make when filing your tax return or how to fix them.
Filing a tax return may not be as simple as it seems. It’s a complicated process and it’s easy to make a mistake when returning goods. In some cases, your mistake could result in a higher tax burden than you expected or the cancellation of your tax benefits. Sometimes a mistake in your tax return can lead to penalties or other charges.
Below is a list of the most common errors in tax returns. However, if you’ve already made one of these mistakes, we’ve also included how to correct that mistake once you’ve submitted your return.
Common mistakes businesses and individuals make while filing taxes:
1. Forgetting about deductions or credits
It’s hard to keep track of the income tax credits and deductions you may be eligible for from year to year, especially as the government changes tax rules and offers subsidies and relief based on the pandemic situation. It’s a good idea to find a tax Accountant in Toronto and consult with one to see the specific deductions and credits that apply to you. Sometimes new deductions and tax credits are added and some are removed. Some of the tax credits and deductions that are often overlooked are:
- the Non-repayable tax credit for interest paid on student loans
- Tax deduction for a trade union or professional fees
- $5,000 non-refundable tax credit for individuals who purchased an eligible home in the past year and have not lived in there or their spouse’s home in the past four years
- A tax deduction for all work-related expenses that you paid for yourself.
Using good tax software helps avoid this mistake by asking you a series of questions to determine if you’re eligible for one of over 400 tax deductions and credits. At Webtax Online, our Professional Accountant near me ensure that none of the deductions or credits that apply to you are lost or overlooked and can help provide you with the greatest possible tax relief.
2. Claiming Ineligible Expenses
On the other hand, some may make the mistake of claiming tax credits or deductions that do not exist. According to the CRA, people often misstate their moving costs. Taxpayers who move at least 25 miles (40 km) closer to a new workplace or study full-time in a post-secondary program are eligible to deduct various moving expenses which include transportation and storage, travel, connection and disconnection of the service, and rental cancellation fees. However, some include ineligible expenses such as repairs or mail forwarding costs. Some students apply for a student loan tax credit for the interest paid on personal loans, student loans, or student loans abroad, which are also ineligible expenses.
3. How to get rid of receipts and receipts
As online tax filing becomes more popular, taxpayers aren’t required to send in all of the slips and receipts with their returns, so they don’t keep them safe and handy. This often becomes a problem because the CRA often requires you to see receipts for certain items such as childcare expenses, gifts, tuition, etc.
Individuals are required to keep records for seven years, and the CRA only accepts receipts that include the date of payment. If you do not provide these documents, the request will be rejected. At Webtax Online, our Professional tax Accountant in Toronto, we have one of the best accounting software that helps you upload a copy of your receipt so you always have a digital copy even if you lose your hard copy.
4. Incorrect declaration of marital status
If you have been living together for at least 12 months, or you live together and share a child (by birth or adoption), the CRA considers you cohabiting and you must declare this in your tax return. It is important that you declare your marital status correctly in order to be eligible for certain benefits such as the GST/HST Tax Credit, and the Canada Child Benefit, both of which are based on the combined income of the spouses. If you are applying as a single person, you may have to return some of the money you receive. However, spouses can combine or transfer some of their tax credits. It can streamline your claims for medical bills, charitable donations, pension sharing, and other credits when married couples prepare their tax returns at the same time.
5. Neglecting to transfer unused tax credits to other family members
Tax credits can be transferred to the spouse of an individual who does not have sufficient income or taxes. For example, an unused $5,000 in tuition can be passed on to a parent or grandparent. At Webtax Online, our Professional tax Accountant in Toronto can provide you with tax planning information and tax advice.
6. Missing the tax deadline
During the Covid pandemic, the 2019 tax filing deadline was extended but returned to normal. Failure to submit your tax return on time can lead to the following:
- You will not get your refund on time
- This could delay the payment of benefits
- You may have to pay interest or a penalty
7. You don’t realize that some benefits are taxable
Emergency government aid during the pandemic has helped many businesses stay afloat during tough times. However, any benefits received must be reported on your tax return as they are taxable as income tax has not been withheld at source.
8. Ignoring mistakes you’ve made in previous tax returns
If you have already made one or more of these errors in your previous returns, you can correct them rather than ignore them.
If you are unable to take care of all due diligence by yourself, consider getting in touch with an accountant near me or a tax accountant near me who can help.