Common Tax Filing Mistakes Newcomers to Canada

Tax is a complicated thing. For newcomers to Canada, tax filing can be a tricky and daunting task. Making mistakes when filing your taxes in Canada is not just a hassle but also costly.

If you don’t want to encounter tax problems in Canada, this article will explore the tax filing mistakes you should avoid.

Mistake 1: Not reporting all your income

A common tax filing mistake is failing to report all your income. You should file all income streams on your tax return, not just what you earn from your employment. Here are other sources of income you should report to the Canada Revenue Agency (CRA):

• Tips and gratuities earned from working as a server in a cafe or restaurant
• Rental income from renting out your home on Airbnb or renting out your secondary property
• Income from streaming platforms such as Twitch, TikTok, and YouTube
• Income from the sale of investments such as stocks, bonds, cryptocurrencies, and precious metals
• Profit from online platforms in the gig economy
• Profit from running an online business or side hustle
• Certain types of scholarships, bursaries, or fellowships

• Foreign income

Mistake 2: Not updating your personal information

Your personal information, such as your address, contact number, marital status, and children you care for, must be updated in the CRA. If there are changes, make sure that you update your profile right away through your CRA My Account If you don’t ensure the accuracy of your information, you can miss out on certain government benefits and credits and avoid delayed payments.

Mistake 3: Missing out on expenses and deductions

Another common mistake is failing to identify all eligible expenses and deductions. This can happen if you overlook employment-related expenses that can be written off through your employer or if you are a sole proprietor and you did not report expenses such as home office costs and vehicle usage. You can refer to CRA’s all deductions, credits, and expenses page and make sure which expenses you can claim when filing your taxes.

If you do not claim all these deductions and expenses, you will miss out on savings and have a higher tax bill to pay.

Mistake 4: Not retaining your support documents

If you want to claim expenses, do not toss your proof in the trash after filing. Ensure that the documents that prove that you incurred the expenses you deducted are with you, as the CRA may require you to provide copies of these documents for review. These documents include medical expenses, childcare, professional dues, charitable donations, and employment-related costs. You should also have a backup copy of your income-related tax slips, such as T4s, T4As, and T5s.

The CRA recommends retaining your tax slips, receipts, and other supporting documents for six years in case of a review or audit.

Mistake 5: Making calculation errors

No one is perfect, and if you are calculating your taxable income manually, it is best to double-check your calculations or use tax preparation software to avoid errors. If you are too busy to calculate your taxes, you can also seek professional help.

Mistake 6: Filing taxes too early

Filing taxes early might seem advantageous. However, rushing to file your return may bring more problems, especially if you fail to gather and organize your paperwork. When fixing your taxes, follow the tax filing guide in Canada to ensure you don’t miss out on any process or document you need.

When you file prematurely, you may also overlook valuable tax deductions that can lower your tax liability.

Mistake 7: Filing your taxes late

Waiting until the last minute before filing your taxes is stressful, and this attitude can result in filing your taxes late. If you don’t file your taxes on time, you will be penalized with a 5% fee on the amount owed, plus 1% monthly (up to 12 months). You will also lose your eligibility for refunds and benefits such as GST/HST credits and Canada Workers Benefit, to name a few.

To avoid this mistake, it is best to remember the important deadlines set by the RA for tax filing. Generally, the tax filing deadline for most taxpayers falls on April 30. For self-employed, you have until June 15. However, if you owe CRA money, make sure that you pay the amount in full by April 30 to avoid interest charges.

Mistake 8: Failing to sign the tax return

Before you submit your tax return, ensure you have affixed your signature and date on your documents. If this is unsigned, your tax return is invalid.

Mistake 9: Not setting aside money to pay for your taxes

Setting aside a budget to pay your taxes will save you from the stress of scraping together the funds to pay your taxes. When you set aside the required amount to pay off your tax liabilities, you won’t miss the payment deadline and avoid interest charges.

Fixing Errors on Your Tax Returns

If you have made an error on your tax return after filing it, you can make corrections to your return. Wait for your notice of assessment (NOA) before correcting mistakes in your tax return. After receiving it, sign into your CRA My Account and tap “Change my return” to submit your request for an adjustment. You can also use the same tax software you used to file your return to complete your alteration.

Conclusion

Now that you know what mistakes to avoid when filing your taxes in Canada, we hope that your tax filing process will be smooth.

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