Tuesday, April 20, 2010
Tax Time Myths and Mistakes
Thank you to John Scholl B. Mathematics, CGA, Consultant - Investors Group Financial Services Inc. for the following article. None of us want to think of Taxes this time of year, but that is what is first and formost on all our minds right now. We are all digging around for those receipts and making sure our calculations are correct. Panic sets in and we all want to make sure we file on time.
Some of the information below may appear simple, but it's the simple things that we tend to forget.
Managing Your Money
Organize your shoebox – common tax time myths and mistakes
It might be a shoebox or a big file folder or even a paper bag from your grocery store. It’s the place where you stash all the receipts, tax slips and other stuff that you think you’re going to need come tax time. And when you pull all of that out it can become … very confusing.
Tax Time Myths
I don’t have any income so I don’t have to file. You should always file a tax return so you can claim the GST/HST credit, the Canada Child Tax Benefit, and other tax credits and deductions that may result in a refund.
I’m too young to file. Young people should file a return even if their income is under the $10,320 basic personal exemption to get back tax withheld at source, to add to Registered Retirement Savings Plan (RRSP) contribution room, to trigger a GST/HST credit (if turning 19 in the next year), or to prove they have no income if applying for federal/provincial loans and bursaries.
My spouse can claim the child tax benefit for both of us. Each spouse has to file to get this credit.
I e-file my return so I don’t have to worry about receipts. Whether you e-file or send in a paper return, you must keep all supporting documentation in case the Canada Revenue Agency (CRA) asks for it, otherwise your claim can be rejected.
Tax Time Mistakes
Failure to file by deadline. If you are paying taxes, you will face a late filing penalty of 5% plus 1% for each month your return is late, up to 12 months. You will also lose the option of lowering taxes through income-splitting.
Incorrect calculations. According to the CRA, tax return math mistakes are very common. You could end up paying more than you owe.
Failure to file a caregiver’s claim. You can make this claim as a parent taking care of a disabled child or your aging parents.
Claiming invalid expenses on employment income. You can claim only those expenses actually related to your job, such as automobile or home office expenses. Other expenses –dry cleaning, for example – do not qualify.
Not reporting a common law relationship (including same sex couples). You must file as a common law couple to receive the same treatment as married couples.
Not being aware of new credits. For example, the Home Renovation and First Time Home Buyers’ credits are new this year.
Your personal ‘shoebox’ can take many forms. A professional advisor can help you sort it all out to your best financial advantage at tax time and for all the times of your life.
John Scholl B. Mathematics, CGA, Consultant - Investors Group Financial Services Inc.
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