8 Common Tax Mistakes
8. Not Filing on Time
While taxpayers might naturally be tempted to wait a few weeks after the deadline before filing, that decision could cost them. The Canada Revenue Agency charges interest (compounded daily), starting from when payment is due until the payment is received. In addition to charging interest, the CRA also charges a penalty for filing late (5 percent of the amount owed plus 1 percent for each month or partial month the return is late filed). Depending on the amount someone owes and how long he or she waits to pay, interest and penalties can mount up in a hurry. The CRA notes that people who wait until the last minute to file typically make more mistakes on their return. The late-filing of returns can also result in delays of various benefits such as Child Tax Benefit, HST benefit, Universal Child Care Benefits and the Working Income Tax benefit.
7. Missing or Incorrect Information
Quite often missed or incorrect information can cause delays in your tax return being processed(incorrect or illegible SIN or birth date). File electronically, The advantages to e-filing are Faster refunds, improved accuracy, paperless, ease of mind and ease of payment.
6. Math Errors
Math errors are a common mistake found on tax returns that are prepared by hand. Tax software will do most of the math for you. Of course, if you accidentally enter the wrong numbers in the first place, your tax software won't be able to help you out.
5. Falling Behind on the Latest Tax News
Keeping up with the latest changes to the tax code can be quite a challenge, but you can miss out on some major opportunities if you fall too far out of the loop. The easiest way to get this information is through the CRA Web site, www.cra-arc.gc.ca/menu-e.html. Looking through some of the agency's resources can be time very well spent. You can also talk to tax professionals about your situation.
4. Not Keeping a Copy of Your Return
Most people don't need to worry about tax fraud investigations and unreported income. Still, definitely get a copy of your return, particularly if you enlist the help of a tax professional. Your previous tax returns will help you to see trends in your income taxes and to prepare your tax returns in the future.
3. Faking Your Death (and Other Dirty Tricks)
Granted, faking your own death may not strictly fall under a list of "common" tax mistakes, Faking your own death is hardly the only way to commit tax fraud. Hiding money offshore and abusing charity donations also fall into the category of fraud and can land you in serious trouble. The Canada Revenue Agency maintains a search-able list of Canadian charities.
Use the Charities Listings to:
- confirm whether a charity is registered under the Income Tax Act and is therefore eligible to issue official donation receipts for income tax purposes;
- view a charity’s information return;
- learn more about a charity's financial information (assets, liabilities, income, and expenditures);
- learn more about the activities of a registered charity; and
- find out how to contact a charity.
2. Missing a Tax Break
Up until now, most of the mistakes on our list were the sort that result in penalties and hassles. Missing tax credits and deductions can sting in a different way, since you can end up paying way too much when you file.
1. Not Filing at All
Even if you don't have the funds to pay your tax liability at the moment, the CRA encourages everyone to file their return. Once the return has been assessed a payment arrangement can be made with CRA. While you will still be charged interest you will have successfully avoided late-filing penalties. The failure to file tax returns will also result in termination of various benefits such as Child Tax Benefit, HST benefit, Universal Child Care Benefits and the Working Income Tax benefit.