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The deadline to file your taxes may feel like it’s far away, but experts say that not getting started early is one of the biggest mistakes Canadians make at tax season.
Without that extra time, you might make other common missteps, they say, such as missing tax credits or overlooking important deadlines.
Here are some of the pitfalls experts say you should watch out for as the April 30 deadline approaches.
Not being organized
The biggest mistake leading up to tax time is not being organized, said Alim Dhanji, a senior wealth advisor at Assante Financial Management Ltd.
“A lot of people, they wait till the last minute to file their taxes and then they’re kind of scrambling for information that might not be available at their fingertips,” he said. “And that can lead to a lot of stress.”
The April 30 deadline to file comes fast, said Dhanji, so it’s important to get all the documents you need in advance, like tax slips, bank statements or medical receipts. Use a checklist to make sure you don’t miss anything, he advised, and don’t forget to check for new credits or deductions that might require additional documentation.
This advice still applies if you have a professional doing your taxes, added Dhanji.
“The last thing you want to do is give them a shoebox full of information, because they’re going to have to go and sort through what you have, what you might not have sent to them. And the more time they spend doing that, the higher and higher your bill becomes.”
Self-employed people need to be even more organized year-round, said Dhanji, noting that the deadline to file is slightly later at June 15 for those filers — but the deadline to pay any outstanding balance is still April 30.
Misunderstanding/overlooking deadlines
Speaking of those deadlines, many people misunderstand them, said Stefanie Ricchio, a CPA and spokesperson for TurboTax Canada.
Because the deadline to pay and file your taxes is the same day (at least for regular filers), people leaving filing to the last minute may be penalized if they’re unable to pay their balance the same day, she said.
“This year, the CRA has raised the interest rate to 10 per cent. And so that starts to accrue May 1,” said Ricchio.
There’s also the deadline for contributions to your RRSP, she added, which comes earlier than the deadline to file your taxes — and takes some people by surprise.
Missing tax credits, not keeping records or reporting foreign income
Many filers miss tax credits that could help them save, or don’t realize that their spouse may be able to claim some credits for them, said Dhanji. For example, he said medical expenses not covered by insurance should be claimed by the spouse with a lower income in order to maximize the benefit.
“There might be other tax credits, when you’re filing together, that can be claimed on one spouse as opposed to the other, that can really benefit you from a tax perspective,” Dhanji said.
Students with tuition tax credits they can’t claim right away should consider transferring up to $5,000 of those credits to a spouse, parent or grandparent so they can get the benefit sooner, he added.
In addition to missing credits, many filers don’t realize that they have to report foreign investments valued at over $100,000, said Dhanji.
They also don’t realize that they should keep their tax documents for several years after filing, he said. On the government’s website, it says you should keep them for six years.
Not hiring a professional if you need one
If your taxes are more complex, such as if you’re self-employed, or you’ve got credits and deductions to split, hiring a professional may be the best way to maximize your return and ensure you don’t miss anything, said Dhanji.
“It may cost you a little bit to work with a professional but the amount of savings should be able to outweigh what you pay for their services,” he said.
However, don’t assume that a tax professional can magically erase a big tax bill, added Ricchio.
Underestimating the tax impact of big life changes
Another thing many people underestimate is the impact a big life change can have on their tax filing, said Ricchio, whether that’s getting married, moving or starting a side hustle.
Sometimes taxes become an afterthought when you’re dealing with big changes, but they really should be top of mind, she said.
These big changes can affect credits and deductions, she said, and some of them need to be reported to the CRA promptly.
One error many people make when starting to earn self-employment income is thinking that if they didn’t make any money — such as in their first year of business — they don’t need to report it, said Ricchio. But that’s not the case, and in fact that situation might actually reduce your taxes, she said.
If you’re filing taxes after a big life change, that’s a good time to hire a professional to make sure you don’t miss anything, said Ricchio.
“You have to know what your limitations are, and when it’s time to go the expert route.”
This report by The Canadian Press was first published March 21, 2024.
Rosa Saba, The Canadian Press