It’s tax season again and everyone’s uncle, neighbor and postman have advice on how to maximize your return. Don’t listen to the chatter– consult the professionals here at Liu & Associates today! Meanwhile, refer to our myth-busting list below for the hard facts about filing your Canadian taxes in 2016.
1: I earned less than the basic personal amount, so I can skip filing this year.
While yearly income under $11,474 is not taxable, you should still file a return.
2: Once I get my Notice of Assessment, I’m in the clear.
People usually breathe a sigh of relief when they receive a Notice of Assessment, but it is only a brief review of your document’s basic math. CRA has a window of years to follow up on any inconsistent files.
3: Interest on my mortgage is tax deductible.
You do receive a tax credit when you sell your home, but not for any interest paid against an existing mortgage. On exemption is a small percentage for people that operate a business out of their homes.
4: Filing online is risky and flags your account for audits.
Some feel that an online return could put them in a bad position, but it is simply not true. Filing method has no effect on the reasoning behind tax audits. You may be asked to send in supporting documents, but this is a routine verification.
5: There’s no incentive to report tax evaders.
Recently this would have been true, but new legislation in 2014 established a hotline for good Samaritans to report false tax claims. If true, the whistleblower stands to earn 5-15% of the tax collected as a cash reward.
6: Only a child’s mother can claim the corresponding tax credit.
It is the responsibility of the spouse who earns less to claim any children on their return, regardless of gender.
7: I have no taxable income, but I can still cash in my tuition credits.
A student must have taxable income to be able to use tuition credits for a refund. Credits can be held over or transferred to relatives or spouses.
8: My tips and gratuities are not taxable forms of income.
Don’t fall for this common line, especially if you work in the service industry! Tips and gratuities are considered income– they are therefore taxable. You risk fines and other consequences if you fail to report taxable income.
9: Skipping the tax deduction means I don’t have to report RRSP contributions.
Whether or not you intend to use your RRSP contributions as tax deductions, they need to be reported in your annual filing. Failing to do so will be viewed as an inconsistency, raising your risk of audit.
10: The employment insurance I received during maternity leave is not taxable
All employment insurance benefits– regardless of maternity status– are eligible for taxation.