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The most common tax-filing mistakes and how to avoid them

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The tax deadline is looming, but if you have yet to submit your returns, this is your chance to make sure they are error-free. Mistakes can be costly and could also put you on Canada Revenue Agency’s (CRA) audit radar.

If this is your first time filing a return, or the first time reporting a new business or rental, getting professional guidance will allow you to file on your own with more confidence in the future.

One of the biggest mistakes you can make is failing to fully report your income. Maybe you forgot to include a contract job, a bank account that was earning interest, or perhaps a T4 or T5 slip was overlooked. When CRA finds the error, you could be on the hook for a 5 per cent penalty on the amount that was left out.

When CRA flags an issue, it is “imperative that you respond within the 30 days of receiving that letter,” says Lisa Gittens, a senior tax professional at H&R Block. This allows the agency to assess whether the problem was just a calculation error, an oversight, or deliberate.

“When you fail to respond to Revenue Canada, we don’t think of this as a tax mistake, but it is a big mistake,” said Gittens. “You’re also setting yourself up for potential audits, and additional assessments for the same or similar situation in future years.”

Other key errors Canadians make include missing out on deductions and credits, and not having the receipts to back up expenses, should CRA decide to check. Any reasonable expense incurred to help earn income is tax deductible - but only if the receipt exists.

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Similar to when income is not properly reported, if you can’t produce the receipt during an audit, it also puts you on the agency’s radar to check your returns again in the future, while the expense in question would also be removed.

Bottom line: No receipt? Don’t claim the expense.

But what about the big mistakes that could’ve saved you some money or minimize filing delays?

Sometimes, it’s the smaller details, such as forgetting to update your address, your marital status, or letting them know you have a new baby, that can cause the biggest headaches. Whether you do it with a simple phone call, through your account on CRA’s website, or by mail, keeping these types of information up-to-date will eliminate filing delays and ensure credits and deductions you are entitled to are flagged on your return, Gittens said.

When you forget to update your address with CRA, for example, you will get a Netfile error when you submit your returns online. And if you are married, preparing your individual returns at the same time can be helpful when it comes to calculating whether spousal credit can be transferred from one spouse to another.

Another item Canadians still forget to claim are health expenses. Any part of any treatment or device prescribed by a medical provider - from hearing aids to medical marijuana - that was not reimbursed by your insurance can be claimed on your return, as long as the total either exceeds $2,302 or three percent of your net income.

“I feel like we talk a lot about it, but when I help my clients, it’s still something where they go, ‘oh shoot, I should’ve kept my medical bills’,”, Gittens said, adding that clients also don’t realize that private health premiums can also be added to that total.

If you’ve already filed your return but realize you’ve made a mistake it is not too late to fix it. Corrections and updates can be made to the specific line item in question through online software, directly on the CRA website, or by filling out a paper T1-ADJ form. You can go back and make adjustments to any return filed in the past 10 years.

While there are no guarantees, finding a mistake before CRA potentially helps you avoid paying interest on those mistakes. If you wait for the agency to find the error, you could be on the hook for the interest owed.

Finally, if you do owe money, pay the balance on or before April 30th. CRA imposes a five percent late filing penalty, with a one percent interest added to every month the payment is late up to a maximum of 12 months.

“Take your time with your return, double check your math, verify your credits,” said Gittens.

“This is your tax return and it will affect your credits that you’re getting as an individual or a family. It could potentially affect your pension down the road, it could affect your ability to get a loan...You want to make sure your tax returns have been filed, you’re up to date, and those filings are accurate and complete.”

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