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Canadians procrastinating on taxes and it could cost them

Canada Revenue Agency

Well, the eaves have been cleaned, the baseboards scrubbed and that nagging armpit hole in your favourite cardigan is all stitched up. Then there’s those four leaked Game of Throne episodes – obviously you’ve made time to binge watch them. Yep, nothing else to do right? I mean, certainly not taxes. This early? There are still a couple weeks to deadline and well, there’s cutlery to reorganize in the drawer and is that painting off kilter? It looks off-kilter.

Besides, no one else seems to be in a hurry. According to the Canada Revenue Agency’s latest figures, as of April 6 only 11 million returns have been processed – which isn’t even half of the 28.2 million returns filled last year.

But procrastination, as endorphin releasing as it can be, can inhibit your ability to get your proverbial “stuff” together in time. The result, says Kirby Dickson, a tax professional at H&R Block in Toronto, is often skipped over tax credits and missed deductions.

“The sooner you get your stuff in, the better,” says Dickson adding that while employers are required to have T4 slips to employees in February, even the outliers like paperwork from investments and other slips should have trickled in by now.

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But Dickson says Canadian tax filers should use the wiggle-room left in the month to make sure no income form is going overlooked.

“I think mostly people forget slips primarily from their work or from school – those are two big ones,” she says. “I find particularly if you’ve got several jobs or are job hopping, you may forget a T4 and unfortunately the penalties are very, very high if you don’t file all of your income twice in a four year period.”

How high? Twenty per cent of whatever income you don’t report she says.

“It can be pretty bad if you don’t have all your T-slips together,” she adds.

Overlooked credits

But just having the paperwork in hand still doesn’t stop filers from overlooking credits. Especially when there’s a new Family Tax Cut credit and bolstered Children’s Fitness Credit this year.

Announced in October 2014, the Family Tax Cut is a form of income splitting which allows families with two incomes and at least one child under 18 living at home, to transfer up to $50,000 from the higher income spouse to the lower one.

In some cases where there’s a disparity between income brackets – families where one of the partners stays at home while the other works are a fit for the new for the new income splitting feature – the Family Tax Cut can bring the high income earner into a lower tax bracket and save up to $2,000.

But according to a survey by H&R Block Canada, only 10 per cent of Canadians plan to claim the Family Tax Cut.

The survey also found only 10 per cent plan to claim the Children’s Fitness Tax Credit, despite it being doubled to $1,000 for 2014.

“I don’t find enough people are claiming the fitness credits mostly because they don’t have their receipts together,” adds Dickson. “It’s really important particularly if you have children to make sure you have all your receipts for soccer, gymnastics, ballet, etc…”

She also recommends pooling together receipts for medical expenses or charitable donations while you’re digging into the stacks for those fitness credit receipts.

“The charitable donations aren’t as serious because you do have five years to claim those but it’s really nice – particularly if you (donated) more than $200 – to claim them on the lower income spouse’s return,” adds Dickson.

According to the survey, 33 per cent of Canadians were planning to claim charitable donations.

And then there are those who procrastinate so long (and apparently stop reading the news) that they miss the deadline and don’t bother filing. It’s something Dickson advises against.

“Human nature is what it is, people think – oh, well if I owe I don’t want to file because they’ll know,” says Dickson. “Well, Revenue Canada is going to find out if you owe anyway and (not filing) is the worst thing to do because you’ll end up incurring unnecessary penalties – five per cent – on top of what you already owe.”