Most Common Mistakes Made On Tax Returns


Preparing Your Own Tax Return

The tax rules are ever changing.  If you are not up to date on these rules and changes, you could be cheating yourself out of your hard earned money.  


Tuition, Education and Textbook Amounts

There is a specific form that you must obtain from the university/college as proof that you qualify for these credits.  Most schools do not mail these out these days, and you will need to sign into your student portal to obtain this.  If you are attending a smaller business type school, not all of them qualify for these credits.  the form you will need to ask about is the T2202.  Only up to $5000 of this credit may be transferred to a parent, grandparent or spouse.  In this case, there is a place on the back of the form that MUST be completed to allow this transfer.   



While giving to charities is a good thing to do. Not all charities are registered to be eligible for a tax deduction.  If you are unsure, click here to search on the CRA website to verify the validity of the charity for tax purposes.


Childcare Expenses

Many people have the child's grandparent look after their children.  If they all live under the same roof, this may not be an allowable expense.  There are also many after-school programs that are used as an alternative to after-school daycare that can be allowable as a childcare expense.  Summer day camps may also fall into this category.  The deciding factor is that this allows the parents to earn either employment or self-employed income.  This is an item that you can count on for CRA to require receipts.  If using a home daycare provider, their SIN must be on the receipt. 



Rent is also an item that CRA will require receipts for.  Your name, rental address, dates for which rent paid in that tax year, the amount paid and the landlord's name and contact information must be included on the receipt.  In the absence of such receipt, if you are unable to obtain from the landlord, a copy of your canceled cheque can also be acceptable in some cases.


Self-Employed (Independent Contractor) vs Employee  

It's no secret that being self-employed has its advantages for claiming certain expenses on your taxes.  As well, The person hiring you will have fewer expenses to pay if you are self-employed.  However, in specific fields such as construction, there is a fine line between whether you are truly self-employed.   CRA has a simple 4 question test to determine your status.

·      Do you have control over your wages and hours?

·      Are you responsible for supplying your own tools?.

·      Do you stand to make a profit or have a risk of loss?

·      Are you allowed to have multiple clients?


If the answer is yes to these questions, then you are most definitely self-employed, if the answer is no, then you are technically considered an employee and CRA will deny your business expenses.  Click here for the link to CRA's website for more details on this topic.


Moving Expenses

In order to claim moving expenses, you must be moving a minimum of 40 km closer to your work than your previous address.  Any amounts not paid or reimbursed by your company are claimable against your employment or self-employed income earned while at your new location.  If your expenses are larger than your income (common with self-employed persons), the unused portions are carried forward for future use.  Items not allowable include any work you have done to your old home in order get it ready to place on the market, any work that is required to do as part of your sale contract with the buyer, financial loss if your old home sells for less than you paid for it, any expenses occurring while either job or house hunting at the other end before your move date. 


Line 104 / Tips, Gratuities

Line 104 is reserved for income that is not reported on and T4's or Self-Employed income.  This is for other income such as tips, gratuities, or occasional earnings not shown anywhere else.  This is most commonly used for those in the food/beverage service industry.  Those in food service are required to claim their tips as taxable income.


Caregiver Amount

If you have any you or your spouse's or common-law partner's child or grandchild, or your or your spouse's or common-law partner's brother, sister, nephew, niece, uncle, aunt, parent, or grandparent who was resident in Canada who you lived with you and you supported, you could be eligible for this often missed credit.  All of the following conditions must be met.

·      has been 18 years of age or older at the time he or she lived with you

·      has been dependent on you due to an impairment in physical or mental functions or if he or she is your or your spouse's or common-law partner's parent or grandparent, must be the age of 65 or older

·      There is a maximum net income that the dependent may have.  (For 2012 this was $19,435) 


Self-Employed / Business expenses

Use actual figures (no rounding) from your receipts.  If you have a GST number.  All figures must not include the GST on your tax return as the GST is claimed on your GST return.  If you do not have a GST number, you are allowed to include the GST you paid on eligible expenses.  The rule of thumb that CRA follows for self-employed / business expenses is simple.  Are the expenses reasonable, justifiable, legitimate and do you have your documentation?


Keeping Your Documentation

CRA requires that you keep your records for at least six years.  This means six tax years from the time that you file your taxes.  Keep in mind that you are filing in a later calendar year, so I always recommend seven calendar years from the time that you file just to be safe.  A good rule to follow is, if you don't have the receipt, don't claim the expense.  If you do not have a legible receipt even six years later, CRA has the right to deny the expense. 


Not Filing Low or Nil Income Returns

If you do not file your return as you are under the basic exemption, you may be missing out on valuable credits.  You may be entitled to a refund of the taxes/CPP/EI that was withheld from your paycheques initially.  Also, GST, CCTB payments will be held back if your returns are not filed on time.