Filing tax returns with mistakes can be challenging but it can also be avoided. Whether it’s due to misunderstanding the rules, rushing through the process, or overlooking important details, mistakes on tax returns may result in delays, audits, or penalties. Knowing these common mistakes and avoiding them is important for taxpayers who wish to ensure a smooth filing process.

Your primary goal when preparing your tax return should be accuracy. You should make sure that all income is reported and all the information provided is current and correct. Mistakes like incorrect Social Insurance Number, outdated address, or simple miscalculations can complicate your tax situation and may lead to interactions with the CRA.

In this blog, we will look at some of the most common tax filing/return mistakes that taxpayers make. Let’s get started!

Failing to Report All Sources of Income 

Failing to report all your sources of income can lead to issues with the CRA. You may attract audits, penalties, and interest on unpaid taxes. Not declaring your sources of income is a criminal offense, no matter how small or insignificant. If such income comes from part-time work, freelancing, rental properties, or investments, you should file your taxes for all.

It’s possible you forget to include income from temporary contracts or side jobs, especially if these do not come with an official T4 slip. But the CRA has ways of tracking income through bank transactions and other data, and any discrepancy between your reported income and their records could raise CRA’s eyebrows.

To avoid this mistake, ensure you have detailed records of all your income throughout the year, and you should also check all your income statements, such as T4s, T5s, and any other relevant documents, before filing your tax return. If you are self-employed, own a business, or receive non-traditional income, you may use a professional accountant or tax software that can capture all necessary information.

Not Claiming All Eligible Deductions and Credits

Another mistake you want to avoid is not claiming all eligible deductions and credits. Many taxpayers miss out on valuable tax-saving opportunities because they are either unaware of certain deductions and credits for which they qualify or they find the rules confusing.

Deductions can lower your taxable income, while tax credits will reduce the amount of tax you owe. Common deductions taxpayers overlook are charitable donations, home office expenses for remote workers, medical expenses, etc. Credits includes Canada Child Benefit, education credits, and credits for sustainable energy equipment.

Stay informed about the latest tax changes and benefits. The CRA provides updates on new and existing deductions and credits through their website and official publications.

Submitting Inaccurate or Incomplete Information on Your tax Return

This mistake can lead to delays in processing your return or even attract audits. Ensure your personal details are correct. Your address, Social Insurance Number (SIN), income amounts, etc, should all be correct. This is why you should create time to file your taxes without waiting till the 11th hour. When you rush, you have the tendency of making mistakes. FiIing before time will give you ample time to double-check all entries and correct any mistakes before submitting.  Pay special attention to figures transferred from financial documents and ensure that personal information is current and matches official IDs and documents.

Being accurate is important so the CRA don’t flag your return for further review. Also, making mistakes over and over again may give rise to the CRA paying special attention to your future filings.

Not Filing Your Tax Return on Time

The CRA sets specific deadlines for tax filing, typically April 30th for most individuals, and June 15th for those who are self-employed. Notwithstanding, any taxes owed are still due by April 30th to avoid interest charges.

Time is of the essence when it comes to personal finance. Filing tax is not an exercise you are not sure of whether it will happen in a year or not, it is a constant exercise. Meaning you have a whole year to prepare for filing your tax.

Some of the reasons why people file their taxes late are; procrastination, forgetfulness, confusion about tax obligations, etc. However, when you file late, it signals to the CRA that you are not being compliant and you will pay interests and penalty charges. These penalties could start at 5% of your balance owing, plus 1% of your balance owing for each full month your return is late, for up to 12 months.

To avoid filing late, mark the tax deadlines in your calendar and set reminders as the date approaches.

Ignoring the CRA Requests for Additional Information

When the CRA reaches out with questions or requests documentation to support your tax return, respond promptly. Failing to respond to them can lead to misunderstandings about your tax situation. Ignoring them won’t clear the air about whatever concern they may have. It doesn’t mean they are looking for ways to fault you, they may just need clarity.

The CRA may conclude that you are non-compliant with tax laws if you ignore them, and this can lead to further penalties or legal actions against you.

Always open and read correspondence from the CRA as soon as you receive it. If the CRA requests additional information or documents, gather these as quickly as possible and send them to the CRA promptly.

Bottom Line

It’s tax season, and you should do your best to obey tax laws. You will make the whole process easy for you and the CRA when you do all that is expected of you. If you have high-interest debts that could hinder you from paying your tax, you should seek help. We have debt experts that love to see you smile and see your debt vanish. At EmpireOne Credit, we can assist you in getting rid of your debt. Your debt can be reduced by up to 80%, and interest will stop immediately. Call us at (416) 900-2324 to schedule a free consultation. Being debt-free feels good!