Correct your errors before the CRA contacts you
The very last line of your tax return is literally a line. Your signature on that line attests that, to the best of your knowledge, the information above it is correct, complete and fully discloses all your income. You are warned that it is a serious offence to make a false return. It's enough to make you take a deep swallow before you sign--or digitally submit--the form. It's a wonder anyone signs at all.
The fact is, though, people do make mistakes on their tax returns, both in their favour and in the government's favour. If you discover you've missed a credit or deduction, you can go back 10 years and file adjustments to recover your over-payment. If you've accidentally shorted the government, it is best you let the Canada Revenue Agency (CRA) know before it uncovers the error. If you do so under the Voluntary Disclosure Program, any penalties you would otherwise be subject to will be waived.
For most people, it is not about an elaborate plan to defraud the government. The tax code is complex. Numbers can be added incorrectly or you may mistakenly claim a deduction. An income slip can easily be forgotten when you have multiples coming in, or you have moved and it does not arrive at all.
Tax-filing mistakes are often discovered by the CRA during slip-matching season. Returns are filed in April, they are assessed and refunds issued. But in the fall, the CRA painstakingly matches every tax document in its possession against the returns of every Canadian via their SIN. If you've neglected to report documented income, your return is reassessed. This can mean a bigger tax bill, interest or even penalties on outstanding taxes.
The CRA also often requests more information to verify you are claiming credits correctly. It is a random process but some claims attract more attention than others. According to the most recent statistics from the CRA, employment expenses, moving expenses and public transit passes are three of the most commonly adjusted claims for both paper and electronic filers. Rounding out the top five are amounts for infirm dependants older than 18 and the disability supports deduction.
If you are planning to claim one of the commonly adjusted tax breaks, there are ways to make the CRA happy:
- Keep your receipts: Make sure you retain the original receipts if you are claiming employment or moving expenses, as well as public transit passes. Even if you file electronically, you can expect the CRA to send you a letter requesting your supporting paperwork. If you cannot produce original receipts then your claim will be denied. Credit card statements are not sufficient, because they do not state what was purchased. Was it gas or bubble gum? Remember, every piece of paper represents less tax you need to pay, so keep your paperwork handy.
- Know what you can claim: You need a signed T2200 Form -- Declaration of Conditions of Employment in order to claim your employment expenses, and receipts need to be attached to it. And just because something is required for your work, it may not be covered by the T2200. For example, work books and uniforms do not necessarily qualify as employment expenses. And if you use your cell phone occasionally for work, you cannot claim it unless it is part of your job contract.
- Claim it correctly: You can only claim moving expenses against income earned in your new location. So if you moved in the second part of the year, you may not have enough income to deduct all your expenses. You are allowed to carry forward your moving expenses if you cannot use them all in the same year.
Canadian taxes are based on an honest declaration of your worldwide income. If you have to ask yourself, "Should I include this income on my tax return?" you probably should. And if you miss something, go back and make the correction. No one wants to pay more tax than is absolutely required, so don't miss a thing.
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