1. Claiming RRSP Contributions at the Wrong Time:
The first most common personal tax mistake is claiming RRSP contributions in the wrong period. It’s very important that any contributions made in the first 60 days of 2020 be reported on your 2019 tax return. While you may be thinking, “I don’t want to deduct those RRSP contributions made in the first 60 days of 2020 on my 2019 return,” you still have to report it. And, you have the option to carry forward those deductions if you want, to the subsequent year.
2. Filing Claims without Receipts:
The second of the most common mistakes made on personal tax returns is claiming deductions and credits on your personal tax returns without official receipts. The CRA can ask for those receipts at any time and if you don’t provide them, they will disallow the deductions and credits with charge interest and penalties, in addition to the tax. You’ll be flagged for auditing in future years.
5 most common personal tax mistakes
3. Not Claiming Employment Expense Deduction:
The third mistake to avoid is missing out on employment expense deductions that you are entitled to. By completing form T-2200, called ‘Declaration of Conditions of Employment’, you can deduct employment expenses on your return.
4. The Fourth of Five Common Mistakes Made on Personal Tax Return:
The fourth most common mistake is forgetting to report your income slips on your personal tax return. A lot of times banks, insurance companies, and mutual fund companies don’t issue the T-slips or income slips on time and you may not get it until the end of March or the middle of April.
5. Improper Reporting of Retirement Allowance:
The fifth most common mistake that you need to avoid is improperly reporting the retirement allowance that you received if you were terminated or if you left your job. This is probably the most mishandled of all items that we have seen. When you are receiving your retiring allowance there are two amounts. One is the eligible portion which can be transferred to your RRSP, completely tax-free, without affecting your RRSP limit, and the other is the non-eligible portion. With the non-eligible part of your retirement allowance, you have two options. One, you can take the amount and put it in your bank, wherein tax would be deducted at source. The second option is you can file an election to have it transferred to your RRSP without any tax taken off, to the extent of your RRSP contribution limit.
As these areas are very complex, it’s important that you consult a professional accountancy firm.
For more details and queries, please feel free to contact us at (647) 795-5462 OR email us at info@finnection.ca
Disclaimer: This material is for educational and awareness purposes only. For most of the content in this document, terms and conditions would apply. It is advised to refer to the CRA website or a competent tax/accounting professional before applying any content in a specific situation. Finnection Inc. is not responsible for any unintended consequence as a result of utilizing this information without formal consultation with us.