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Thursday, 28 February 2013

How to avoid costly mistakes when filing your income tax return

Income tax time is in full swing, and the question that remains top of mind for Canadians is how to maximize their refund. What many don't realize is that there are many small details that can be overlooked and end up costing more in the end. The following will show how to avoid making these common but somewhat costly mistakes when filing your annual income tax return.

Organization is key when it comes to planning for tax time. Rosa Iuliano, a chartered accountant with Collins Barrow Ottawa, suggests making a file at the beginning of the year, and filing all receipts, large or small, when they are received. This will ensure nothing is forgotten when it comes time to file. Failing to include income can cost much more than the time it's worth to find the paperwork. The Canada Revenue Agency does perform spot checks, and failing to report income can incur a penalty of as much as 10% of said income. Filing late is another misstep that can cost you big. Filing late causes penalties of 5% of anything that is owed and an additional 1% for each subsequent month until filed. If you fail to file within a three year time frame and were eligible to a refund, your refund can be denied.

Another common mistake many Canadians make is to overlook ways they can use their tax refund to make money. Some of the expenses most commonly overlooked are: charitable donations, out of country medical expenses, moving expenses (when moving at least 40 km closer to your place of work or school), home maintenance costs if your office is in your home, and child care expenses. Consult a tax professional for even more tips, and to make the most of your annual tax refund.

Click here for the full article from the Ottawa Citizen.

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