Tax Tip Thursday

Tax Myths

Since we are rapidly closing on the tax deadline, I thought I would dispel a few myths around taxes.

Every year, I hear the same 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have said to me, “My friend told me…” or “I heard that…” Most of the time, what they heard is just a myth, or is an outdated tax law.

Read these facts below and you could save a lot of money!

Myth 1: Insufficient Income = No Filing

Have you ever heard someone say “I don’t need to file a tax return because I don’t earn enough money to pay taxes”?

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 also need to fill out a return or their GIS will be delayed until they fill out a separate application.

Teenagers who work part-time jobs or have small businesses should also file returns because:

  • they will get back any tax they paid up to $13,000 in income,
  • they could receive sales tax credits,
  • and they can start building up RRSP contribution room.

You need to file taxes every year, no matter how much or how little income you earned!

Myth 2: Don’t File If You Can’t Afford to Pay

The next myth I hear often is that there’s no point in filing by the April 30 deadline if you don’t have enough money to pay the tax bill.

I have been through this many times, and you should always file on time! If you can’t afford the bill, pay it later. The CRA imposes a 5% penalty for late filing, not for late paying!

Myth 3: Notice of Assessment = Too Late to Change My Return

This is not the case! Just because you have received a Notice of Assessment from the CRA does not mean that it is too late to change your tax return. You can go back up to 10 years if you have documentation supporting your claim!

Myth 4: You Don’t Need To Claim CERB/CESB/CEBA/Grants/etc…

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, you have to claim them. 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.

CERB and CRB must be claimed as income by individuals!

Myth 5: I Don’t Have All My T4s So I Can’t File

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

  1. If you do not have a MyCRA Account, get one!
    • You can stay on top of anything that is going on with your CRA account this way, and you can also get your own T4s, Notices of Assessment, and many 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 your T-Slips!
  4. You can also file without the T4 and the CRA will most likely correct it. Just be prepared for the impact on your taxes!

So, no excuses for not filing!

Myth 6: As a Business, I Can Prepare My Books With Bank Statements

Yes, but also no.

The only form of acceptable documentation for your expenses is original receipts from the vendor AND your payment receipt. So make sure you have those receipts! If you do not, contact me and I can help you with a very simple solution.

Myth 7: You Can Make a Deal With the CRA to Pay Less

This one is very, very unlikely. It is possible, but only happens for people facing extreme financial hardship and are on their way to bankruptcy or something close. Do not rely on this one! It is very rare.

Hear some other kind of myth, or need help with something I mentioned above? I am happy to help you out. Give me a call or set up an appointment! New clients always welcome.

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.