Filing taxes can be daunting, especially for those unaware of tax laws and regulations. Individuals and small businesses often make errors on their tax returns, leading to penalties, audits, and additional stress. As a professional accounting company, we have seen many individuals make Common Tax Mistakes, but no worries, they can easily be avoided with proper planning and attention.

This blog will discuss these common Tax Mistakes and help you to understand how to avoid them.

Not Reporting All Income

One of the most common tax mistakes is failing to report all income earned during the tax year. This includes income from various sources such as employment, investments, rental properties, and side hustles. For accurate tax calculations, all payments must be reported to the Canada Revenue Agency (CRA). 

To avoid this mistake, gather all necessary income documentation, including T4s, T5s, and T5018s, before preparing your tax return.

Incorrectly Claiming Deductions And Credits

Another frequent error is claiming deductions or credits you are not eligible for or overlooking those you are entitled to. Tax deductions and credits are designed to lower your taxable income and reduce the tax you owe.

However, each credit or deduction comes with specific eligibility requirements. Failing to meet these requirements can lead to a reassessment of your tax return and potential penalties. 

To avoid this mistake, research the various deductions and credits available, and consult with a professional tax accountant in Calgary if you need clarification on your eligibility.

Filing Late Or Missing Deadlines

Filing your tax return late or missing important deadlines can result in penalties and interest charges. In Canada, the deadline for filing individual tax returns is generally April 30th, while self-employed individuals have until June 15th. However, any balance owing must still be paid by April 30th to avoid interest charges. 

To avoid late filing penalties, ensure you know all relevant deadlines and plan accordingly. If you anticipate being unable to meet the deadline, consider filing for an extension or seeking help from a tax accountant in Calgary.

Inaccurate Personal Information

Providing inaccurate personal information, such as an incorrect Social Insurance Number (SIN), address, or date of birth, can cause delays in processing your tax return and receiving any refunds owed to you. Double-check all personal information on your tax return to ensure accuracy and avoid potential issues.

Not Keeping Proper Records

Maintaining accurate and organized records is essential for a smooth tax filing experience. This includes keeping track of income, expenses, and supporting documents for deductions and credits claimed.

The CRA may request documentation to verify the information on your tax return, and failure to provide this documentation can lead to reassessments and penalties. 

Develop a system for organizing your records throughout the year and keep all relevant documents for at least six years, as the CRA requires.

Filing Paper Returns

While paper tax returns are still an option, they can be more prone to errors and take longer to process. Electronic filing methods, such as NETFILE or EFILE, are more efficient and offer several benefits, including instant confirmation of receipt, faster processing times, and automatic error-checking features. Consider switching to electronic filing to reduce the risk of mistakes and expedite your tax return processing.

Ignoring CRA Correspondence

Ignoring letters or notices from the CRA is a mistake that can result in additional interest and penalties. If you receive correspondence from the CRA, addressing it promptly and taking any required action is essential. If you are unsure how to respond, hiring a professional tax accountant in Calgary for guidance can benefit you.

Not Reviewing Your Tax Return

Before submitting your tax return, take the time to review it for accuracy and completeness carefully. This includes double-checking all income, deductions, credits, and personal information. Identifying and correcting errors before submitting your return can save you time, stress, and potential penalties.

Final words

By avoiding these common tax mistakes and seeking the advice of a trusted Calgary tax accountant, you can minimize the risk of penalties, interest charges, and audits. With careful planning and attention to detail, you can also ensure your tax filing experience is as smooth and stress-free as possible. Remember, it's always better to be proactive and well-prepared when it comes to taxes.

You can get assistance from Debits & Credits if you have any queries regarding taxes, bookkeeping, and accounting.