Tax Tip Thursday

There are lots of old wives’ tales and “ideas” around how things go with taxes. I can’t tell you how many times people have said to me “My friend told me…” or “I heard that…”, but most of the time they have heard either a myth or old and outdated tax laws.

Since we are rapidly closing in on the tax deadline, I thought I would dispel a few myths around filing Canadian taxes. These facts could save you a lot of money.

Tax Myth #1:

“I don’t need to file a tax return, because I don’t earn enough money to pay income tax.”

Unfortunately, many Canadians believe this and therefore miss out on potentially thousands of dollars in benefits and credits like the GST/HST credit, the Trillium credits for property tax or rent, and the Canada Child Benefit. People need to file a return to be eligible.

Low-income seniors who receive the Guaranteed Income Supplement need to fill out a return or their GIS will be delayed until they fill out a separate application.

Tax Myth #2: 

“If you don’t have the money to pay your tax bill, there’s no point in filing before the Apr. 30 deadline.”

If you can’t come up with the taxes owing by April 30, file on time anyway and pay later. The Canada Revenue Agency imposes a five per cent penalty for filing late, not for paying late.

Tax Myth #3:

“It’s too late to change your tax return once the Canada Revenue Agency has processed it and sent you your Notice of Assessment.”

In short, you can go back 10 years as long as you have documentation supporting your claim!

Tax Myth #4:

“I don’t need to claim CERB, CESB, CRB, CEBA, CEWS, CERS, HHBRP, THRP Ontario grants, etc. on my tax return”

Wrong. You definitely need to claim all of these. This applies to businesses as well as individuals. If you received rent subsidies or wage subsidies or CEBA loans or Ontario grants as a business, the subsidies and grants have to be recognized as income and the forgivable portion of the CEBA loan also needs to be recognized as income in the year that you received it.

The CERB and CRB are also income to individuals and taxable!

Tax Myth #5:

“I can NOT file my tax return until a missing T-4 slip turns up.”

That is not a great strategy. There are a number of things you can do.

1. Everyone should have a MYCRA account – you can stay on top of anything going on in your CRA account, but you can also get your own T4s, Notices of Assessments, and several other things.
2. You can estimate how much you think you made and put an amount in for those T4s. The CRA will correct your return as long as the T4/T5 was filed by the company.
3. Most tax-preparers, once authorized, can download and access all of your T-slips.
4. You can also file without it and the CRA will correct it, in all likelihood. Just be prepared for the impact on your taxes.

So no excuses for not filing.

Tax Myth #6:

“As a business, I can prepare my books/taxes from my bank and credit card statements.”

Yes, BUT NO.

The only form of acceptable documentation for your expenses is both original receipts from the vendor and your payment receipt. So make sure you have those receipts or contact me about a very simple solution for your business!

And last, but not least…

Tax Myth #7:

“You can often make a deal with the CRA to pay less tax than you owe.”

Not likely.

The bottom line is that you won’t get a break unless you’re facing extreme financial hardship and are on your way to bankruptcy or something close.

Don’t Wait To Get Your Taxes Done!

I am looking forward to everyone coming by and dropping off their tax papers! New clients are welcome! It will be the same great personal service as always. Just book an appointment and come over to the office!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.