Money & Career
5 mistakes to avoid while scrambling to file your taxes at the last minute
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Money & Career
5 mistakes to avoid while scrambling to file your taxes at the last minute
For many Canadians, tax-filing season is already in the rearview mirror. They began mentally preparing for tax time during the depths of winter, pulling out receipts, making sure their T4s were on the way, and filing well ahead of the April 30 deadline. For the rest of us — and we are many — the scramble is just about to begin.
According to the Canada Revenue Agency, nearly 9 percent of tax filers missed the deadline last year. The numbers of those who just squeaked in on time aren't tracked, but you can bet it's a sizeable group as well.
And while not all late filers have balances owing, scrambling at the last minute can lead to missed credits, forgotten income, and mistakes that may lead to an inconvenient reassessment.
"Easter weekend seems to be the trigger," says Maria Severino, a tax partner at Collins Barrow. "People think ‘Easter weekend, I guess I really need to do my taxes.' But this year Easter weekend is late. It can end up costing them tax dollars."
Whether you do your taxes yourself or use an accountant, here are five mistakes to avoid while rushing to get your return in on time.
1. Missing out on tax credits
Despite plenty of information on the CRA website, surveys routinely show that Canadians often miss out on many tax credits. Doing so can knock hundreds or even thousands from your tax return.
While the child care tax credit is well known for anyone with young children, there are several other credits that can add up to big (missed) savings. These include the Canada employment amount, which allows anyone with employment income to claim up to $1,161, as well as the children's fitness credit and transit credits.
Many people aren't aware that medical expenses, including private insurance premiums, are tax deductible, and there's a property tax credit for low-to-moderate income homeowners and renters.
There are also several deductions available for taxpayers with dependents. And remember that credits are often transferable between family members. For instance, students that don't max out their tuition and education amount can transfer the unused portion to their parents.
2. Bad receipt management
A common pitfall of the tax procrastinator is realizing too late that you're going to have to come up with a paper trail for your income and tax credits.
With receipts often sent electronically, the days of the folder full of slips is long gone. But you still have to dig through your email to find them, or failing that, figure out who to contact to get replacements. This can take time.
"Getting your return prepared (ahead of time) means you have time to look and see if you need searching for receipts," says Lisa Gittens, a tax expert at H&R Block.
And while misplacing an old transit pass can cost you a small deduction, the larger problem is forgetting income sources, such as investment income, which could lead to a penalty from the CRA.
3. Not taking advantage of your retirement status
While income splitting is dead, pension income splitting is not. Older or retired tax filers will want to take the time to make sure they're taking advantage of the options available to minimize their tax burden.
For those aged 65 or older, the age amount allows a claim up to $7,125. And recipients of provincial government pensions may have options to reduce clawbacks, by making use of pension splitting or tax-free savings accounts.
4. Missing out on homebuyers' goodies
Anyone buying a first home in a Canadian city these days probably needs all the help they can get. Happily, first-time buyers can claim up to $5,000 on a first-home purchase.
And if you used the RRSP homebuyers plan, you have to start paying that back. This can involve a bit of financial gymnastics in determining which RRSP contributions you want to claim to reduce your taxes and which you want to use to pay back your plan balance.
5. Forcing your accountant to scramble
In the scramble of tax season, most people probably don't spare a thought for the pressure on their accountant or tax preparer. After all, taxes are their job.
But bringing in your files at the last minute just raises the likelihood that they may miss something or not make the deadline. In fact, most offices have a cutoff beyond which they don't guarantee an on-time filing.
Severino says handing your accountant your return in the last week of April is a situation best avoided.
"You're always better off to be planning and doing things early," she says.
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