Some important points on personal income tax returns
We know, you just get over the dreaded 2009 income tax returns business, what a relief, why talk about it any more. Well, maybe this is just the perfect time to review what you did while it is still fresh on you mind, so you can better prepared for next year.
- Get organized through the year – keep all your tax related documentation and receipts in one place, you do not need to separate them all.
- Do not procrastinate: give yourselves ample time to collect information so you would not be rushing the process which can result in unfortunate errors.
- Know what is allowable: keep in mind the deductions CRA allows like a) public transit fee, b) children’s fitness program, c) medical expenses, d) donation receipts, e) RRSP slips, f) tuition fee, just to name a few. Collect them all through the year, some of them may come to you regularly, some of them will come to you early next year. When you get organized, you will not have to worry about looking for them at the last minute and miss on your eligible deductions.
- Do not omit income: do not miss T3, T4, & T5 – in fact, any kind of T forms should not be forgotten, no matter how small and insignificant you think they are. CRA imposes a huge penalty on missing T form if you commit the offense within three years. They could be up to 50% or more as related to the income you received but fail to report.
- Make sure your deductions are eligible with proper documentation: the returns were accepted as filed with income tax refund deposited on your bank, the end of the story. No, usually in July, CRA starts to ask for whatever receipts they see fit. The 2009 Home Renovation Tax Credit would most likely one of the items you get request for. If you do not send in receipts or documentation as requested within the time frame, you will be reassessed resulting in a tax liability.
- Canada Revenue will correct your mistake when you miss reporting income, but they do not know if you miss deductions: some common omissions a) did not record rent or property tax – this allow low income individuals to get some real money without having to pay at all, b) missing tuition receipts from attending university, most of the universities do not send the T2202 to the students, students have to retrieve through the internet for the forms. Students typically have no or little income, but many do not realize education amount of up to $5,000.00 can be transferred to parents or spouse. The balance
- Prior year eligible receipts not used: do not file with the current year, you need to amend to the appropriate years while the expenses incurred.
- Income splitting: certain taxpayers get to split income. Business owners can split income by paying their family member/members for tasks that have to be done by other worker/workers. Eligible pensioners can split income with spouse but needs to submit form T1032 with their returns. CPP pensioners can choose to split pension income with spouse if it is advantageous to them, but they need to apply to Service Canada.