If it's your first time filing your income taxes, or if you've been tracking all of your claims and deductions for a few years, there are still some mistakes you could make without even realizing it.
Narcity spoke with Georgia Swan, an Ontario-based Tax and Estate Planner with TD Wealth, about some rookie mistakes that some Ontarians could be making on their income tax returns.
Not planning ahead
"My first tip is going to be basically understanding that tax planning has to happen all year, that when you only turn your mind to it in March and April of the year after it's almost too late because there aren't a lot of opportunities to really undertake any kind of tax planning," Swan told Narcity.
So, what exactly does this mean?
Well, according to TD, tax planning can help with cutting down your taxable income as well as help you take advantage of some tax credits and deductions you are eligible to claim!
There are lots of tax credits for just Ontarians alone with some new ones being introduced for next year, like the Staycation tax credit where you can get some money back just for taking a fun trip within the province.
Not educating yourself
A lot of the mistakes that people make on their income taxes all tend to come from the same problem: not educating yourself.
"The first thing I want to say to people is you need to educate yourself," Swan said. "You need to start learning about the tax system a little bit — how it works."
For example, Swan has been practicing income tax law for the last 25 years, and the Income Tax Act is a hefty and ever-changing document with which she constantly has to keep up.
"Every time there's a federal budget, this document changes. So even as tax practitioners, we're constantly having to learn new things," Swan said.
So, if it's your first time filing your taxes, Swan recommends picking up a book first to teach yourself about what you're doing. This is helpful, too, if you're plugging all of your finances into income tax software, so you can understand how the numbers are adding up (or if they're not.)
"If you're going to attempt it yourself and you're going to get a program and actually look at you know, everything you got leads you into the process. Most of those programs, they ask you questions, and based on the questions that you answer, they generate your tax return. Once you get that document, go through it," Swan said.
Or, of course, you can leave it up to the pros, and find yourself an accountant who can help you file your taxes.
Swan noted that the Canadian Revenue Agency is also a useful resource that can answer all of your questions from what's new for the 2021 tax year to who should file their tax returns and more.
On a provincial level, Ontario's Ministry of Finance website breaks down what Ontarians need to know about their tax system.
Not keeping track of all your documents
It's up to you to keep track of all of your records from your T-slips to your charitable donations, and if you're a small business owner, you have to stay on top of all of your transactions (with receipts) too.
One of the easiest places to keep track of all your documents, Swan said, would be through the CRA website, and setting up your own account.
"They will at least have whatever T-slips were actually issued to you. They'll have copies of them because they have to get filed with the CRA at the same time they're sent to you," Swan noted.
But, make sure that all of your T-slips are there, as Swan cautioned the responsibility lies on you to properly report your income.
"If you think something's missing, try to track it down [...] basically the onus is upon you to properly report your income. So, you can't sort of say, 'Well, I didn't get the T-slip, the T-slip was lost in the mail, or I didn't realize there was a T-slip for this'," Swan said.
"That's not a good enough excuse."
Not keeping track of your charitable donations
It's also on you to make sure you keep track of all your charitable donation receipts.
"Oftentimes what I'll see is people will make a charitable donation, for example, and not realize when they just plug the numbers into the computer that not all of that charitable donation could be used in a particular year so it gets carried forward to next year," Swan said.
So, as a result, people won't check to see if they're carrying any balances from earlier tax years and end up leaving these charitable donations "on the table."
"You can only carry forward a charitable donation that's not used for five years," Swan said.
Not realizing all of your sources of income
"However, the other thing that a lot of people I think often make a mistake about is that the Income Tax Act is structured in such a way that there are four main sources of income," Swan said.
There's the income you get from your place of work, if you're self-employed, if you own property — from owning a property to an NFT you've created — and if you have any stocks or investments, known as taxable capital gains or capital losses.
"Within each type of those income, you have the opportunity to take deductions," Swan said.
Not realizing what deductions you can make
There are tons of deductions available to Canadians, but it's up to you to keep track of which ones you can claim.
"Not realizing what deductions you have available to you, depending on the different sources of income that you're receiving can leave thousands of dollars on the table," Swan said, which she added is a reason why sometimes it's best to leave your income taxes up to professionals who can help you realize what to claim.
For example, in Ontario alone, there are so many refundable tax credits Ontarians might be able to cash in on, like the Ontario Jobs Training Credit, the Ontario Child Care Tax Credit, the Political Contribution Tax Credit, and more.
Not accounting for your out-of-country income
If you earn income from outside of Canada, you still have to file it with the feds on top of what other country you're making money in.
"You have to be aware that Canada taxes are worldwide income. So, if you have developed some kind of opportunity from another country, you need to be reporting that income and understanding that, you know, you may have already been taxed on it in the other country but Canada gets a chance to tax as well," Swan said.
So, if you have any foreign income, you'll need to make sure you file your T1135 (a.k.a. the Foreign Income Verification Statement.)
Over-contributing to your RRSP or TFSA
"Some of the easiest mistakes people make early on is over-contributing to your RRSP — accidentally putting more money than you're allowed to in there," Swan said.
For those of you who don't know, an RRSP is your Registered Retirement Savings Plan, whereas your TFSA is your Tax-Free Savings Account, and there is a limited contribution room taxpayers can put in those accounts each year.
"With respect to TFSAs, being careful not to over contribute to that, but also knowing that if you take money out of your TFSA there are certain rules about when you can then put it back in if you're going to contribute again," Swan said, and stressed how important it is to keep up with all of the nuances that comes with this account.
Even though this article breaks down some of the mistakes to look out for when you're filing your taxes, Swan brought up the importance of consistently educating yourself to become more financially literate.
"[..] The Income Tax Act is complicated, it can't be reduced," Swan said.
"While all of this puts things on people's radar, you need to then get advice that's proper for you, that examines all of the facts of your particular situation that looks at all of the circumstances that are available to you in the Income Tax Act."
After all, with every new change to the federal budget, and with every new change to the provincial budget, there are changes to the tax rules, too.
This interview has been condensed and edited for clarity.
