Taxes: Watch the details to help avoid financial headaches when filing your return
Craig Wong, The Canadian Press
Published Thursday, April 8, 2021 10:39AM EDT
OTTAWA - The devil is in the details and your income tax return is no exception.
As the filing deadline at the end of the month approaches, experts say paying attention to the details when it comes to your taxes can help avoid headaches down the road.
Small, easily avoidable mistakes could end up costing you if you're not careful.
Josee Cabral, a senior tax specialist at H&R Block, says the government extended tax deadlines last year because of the pandemic, but people need to know the filing deadline is back to normal.
“A lot of people this year, they think there will also be an extension, so they're running late on filing their taxes, but there will not be an extension,” Cabral says.
“Unless there's a major shut down again like we had last year in the month of March, the due date this year is April 30 like every other year.”
Cabral says even if you don't have the cash ready to pay your outstanding tax bill, you should file your return on time otherwise you will have to pay an added late filing penalty.
The 2020 tax year for many Canadians will be different than previous years, with many suffering a drop in income due to the pandemic and millions having received emergency benefits on which they may now owe taxes.
For those lucky enough to have continued to work from home, Cabral says it will be key for them to understand how best to claim their work-from-home deductions, whether it is the special flat rate or itemized method.
Cabral says other common mistakes are missing out on credits and deductions on things such as moving expenses, interest on student loans, donations and medical expenses that can help reduce your tax bill.
“People forget to enter their medical expenses,” she says. “A lot of people say, 'I don't have enough', but if you don't enter them you'll never know if you're capable of getting a credit out of it.”
Cabral says your pharmacy will have a record of your prescription drug spending for the year and that you can ask for it before you start your taxes.
“They print out everything you bought in one year and they put it on one piece of paper. You don't have to keep all those little slips every single time you go to the pharmacy and the dentist does the same thing too,” she says.
It isn't just things related to your income and the deductions that you need to pay attention to.
In an age when many Canadians file their tax return electronically, accidentally using an old mailing address might not seem like a big deal, but it can lead to real problems if Canada Revenue Agency needs to follow up.
CRA spokesperson Paul Murphy says if the agency asks for supporting documentation for things like medical expenses or charitable donation receipts and your address is not up to date you might not receive the letter and you may end up having your tax return reassessed.
“We give you a time limit to respond and if you don't respond on time, we may just assess your return based on the information on file,” he says.
Murphy says you also don't want your notice of assessment - which includes your RRSP contribution limit and income information you might need if you're applying for a mortgage - being sent to the wrong address.
Outdated banking information for direct deposit can also create problems if you're expecting money back.
Murphy says if you've signed up for direct deposit, CRA will keep that information on file and continue to use it until you tell them not to or change it. So if you've changed banks, it is important to make sure CRA knows to use your new account.
“Sometimes people they go without filing sometimes for a period of time and they forget that they signed up for this service and they file their tax return and (a refund) gets deposited into a bank account that's been closed,” he says.
“You can get your money eventually, but it takes some time and you probably don't want that to happen.”
Cabral says the key to avoiding many of the common mistakes and maximizing your tax return is to be organized.
“Not being organized is one of the biggest common mistakes that people do,” she says.
“Have a file, have a folder that you keep for your year's taxes and throughout the year whenever you receive something put it in that folder.”
This report by The Canadian Press was first published April 8, 2021.