Expert discusses typical errors that lead to clients missing out on credits or deductions
People across the income spectrum continue to make mistakes when filing their tax returns – and it’s costing them dear.
Ahead of the Canada Revenue Agency deadline of April 30 for personal income returns, Lisa Gittens, senior tax professional at H&R Block, said that she encourages the do-it-yourself approach when filing returns. A recent company survey revealed that 44% are opting for the DIY approach.
However, she worries that people are not armed with all the facts and sometimes forget to report all their income. Failure to do so, she said, means they could be missing out on a host of credits or deductions.
One of the most common mistakes is simply jumping the gun and not waiting for T5 or T3 slips, which cover interest earned on mutual funds or dividends received.
At a more granular level, for those working in the hospitality industry, for example, especially students, the importance of keeping a record of supplementary income should not be overlooked.
Gittens said: “If you’re in the hospitality industry, you’ve got your T4 slip and unless your employer has been collecting your tips, you need to record them on your tax return as other income.
“We’ve been talking about this and what we’ve seen over the past two years is Revenue Canada auditing across the board in the hospitality industry and reassessing based on tips not reported. So you need to keep a little log book, record the shift and if you are working at multiple places, record the date, shift and the place.
“If the CRA, for example, says that at that restaurant everyone has an average of $5,000 in tips, you can then pull out your logbook and say, actually, my tips are $1,000.”
For overall income below $11,635, you won’t be taxed on it and Gittens said that, potentially, you could qualify for the working income tax benefit. Other areas where credits can go unclaimed include work-related expensed that you’re not reimbursed for, as well as moving expenses.
Gittens said: “If you are an employee and you are working for an employer and you have to pay for gas or mileage, make sure you have a signed declaration of conditions of employment – it’s called a T2200 – so that you can claim anything that you have to pay out of your pocket.”
She added: “The other thing is if you move to be closer to your job and the distance is 40 kilometres closer to your job, you can claim the moving expense. So whether you put stuff in storage, rented a U-Haul or just loaded up your car and drove, you can make a claim for the kilometres that you drove.”
Another opportunity for deductions that Gittens said is constantly overlooked centres on medical expenses.
She said: “This is one of the things I continually hear clients say I didn’t know I could deduct. If you pay health premiums and they are reported on your T4, they are an expense for you to claim. If you pay health premiums outside of your employer, they are a medical expense that you can claim.
“If you are reimbursed for any part of the expense but not 100% reimbursed, the part you pay out of your pocket is a medical expense. Just keep in mind that the expenses have to total more than 3% of your net income.”
She added: “People don’t bother. Suddenly when you sit down and think about it, you realise you had braces for Johnny and Suzie had to go to the doctor to have that prescription that was over three months. So it’s always good to look at it and make sure you report it on the tax return.
“Here’s the thing, it might not be thousands of dollars but in today’s economy, every $100 counts.”