Not even the taxman can avoid human error but it is a lesson on being thorough at tax time
For those focused on the name of Kate's new baby girl, you may have missed that the tax filing deadline has been extended to May 5th for the second year in a row. Unlike last year's extension which was caused by the Heartbleed Bug, this year's extension can simply blame human error - a memo with the wrong date was released to tax preparers by the Canada Revenue Agency. By the time the mistake was noticed, it was too late to retract it and the CRA decided it was only fair to push the deadline back by five days in order to avoid any confusion.
While the extension is good news for anybody who might have left their tax filing to the last minute, it demonstrates that mistakes can happen fairly easily. If the almighty taxman can miss updating a date on a memo then it's completely fathomable that we might make a few errors when it comes to our taxes. But tax mistakes can be costly.
As a tax professional, I see a lot of simple errors being made. I frequently find myself combing through tax paperwork for things that clients might have missed. One of the most common errors is simply data entry. When you're dealing with different numbers and figures and trying to make sure they're all on the right lines, it's easy to mix some up or put some in the wrong place. An inadvertent typo of entering a seven instead of a one can change the whole outcome of a tax return. This is why I always tell people that if you're going to file your own taxes, it is extremely important that you double check your numbers against the slips. And make sure you understand why you are getting a refund or paying the government when you get to the end of your return.
Errors can also be made when claiming credits and deductions. This applies both to people claiming things they're ineligible for or neglecting to claim things that they can. Canadians often lose out on tax savings because they missed a claim and, on the other end of that spectrum, often end up having to repay money to the government because they claimed something they shouldn't have. For example, a deduction for spousal support is only available to separated or divorced couples. If your spouse is a non-resident and you are sending money to support them, it is not deductible. However, you may qualify you for the spousal amount with the right paperwork.
If you do claim spousal support, the CRA is going to want to see your separation agreement or divorce papers. It is important to do your homework at tax time to familiarize yourself with what's available and to whom. It might sound like you can claim a credit but the tax form is not straightforward.
Everyone wants to legally pay less tax. But taxpayers frequently run into trouble when they are misguided by dubious tax information. For several years, there were charities offering tax receipts for much larger receipts than the actual donation. Their logic was that a $3,000 donation in Canada was worth $10,000 in the country it was going to help. It sounds like it could be possible but as many Canadians found out, the logic was faulty. You can only claim a charitable donation for the amount you actually donated to the charity. If it sounds too good to be true, it probably is. We would all like to find a loophole in the Tax Act but basically, you need to pay tax on your income. There are very few ways to avoid it.
If you're one of the many Canadians who are making the most of the unexpected five extra days of tax season, use your time wisely. Gather all your paperwork and do your due diligence to find out what tax breaks are available to you. If you do owe, you can enjoy five extra days with your money before you hand it over to the government.
It is not often that the taxman gives everyone an extension and I would not recommend getting used to it. I would expect any communication from the CRA next year, will definitely say April 30 is the deadline.
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