In preparing their own income tax returns, people often make errors. Every tax accountant has seen a lot of them. They range from simple calculation mistakes to failure to take full advantage of available deductions and tax credits.
The most frequent errors are mechanical, including mistakes in addition and subtraction and taking numbers from slips incorrectly.
“It sounds like a simple thing to do and you wonder how it could go wrong, but we see it a lot, and with elderly people in particular,” says John Klein, a Hamilton, Ontario certified general accountant and financial planner who helps hundreds of individuals each year with their tax returns.
Canada Customs and Revenue Agency (CCRA) also puts mechanical mistakes at the top of its list of tax return errors published on its web site at www.ccra.gc.ca.
In Mr. Klein’s experience, the next most frequent errors that cost people money are the following:
· Failure to optimize deductions for medical and charitable donations, which usually means grouping family expenses together for one individual to claim. For medical deductions, failure to have them claimed by the lowest income earner.
· If there are children in post-secondary education, failure to transfer tuition and education deductions to a parent.
· Unclaimed employment or business expenses. Commission sales or self-employed people often don’t claim all the deductions they are entitled to, including home office expenses. And they also usually don’t claim the GST credit for these and other expenses.
· Failure to properly claim the dividend tax credit on domestic and foreign dividend income.
· Over-contributions for Employment Insurance and Canada and Quebec Pension Plans, although CCRA’s computer usually catches this.
· Failure to claim all medical and disability expenses. People are not always familiar with what is deductible.
· Workman’s compensation and social benefits are usually correctly entered as income but people often don’t claim the corresponding deduction for them.
· Failure to report or properly treat foreign pensions.
· Not properly calculating the GST and provincial and territorial tax credits.
CCRA cites some of the above errors as well as the following:
· Forgetting to indicate pension adjustments. This affects unused registered retirement savings plan deduction room for the next year.
· Entering the wrong amounts for contributions and overpayments to the Canada and Quebec Pension Plans and Employment Insurance.
· Claiming incorrect amounts as RRSP contributions.
· Forgetting to claim the basic personal deduction, or claiming the spouse or common-law partner deduction incorrectly.
· Not claiming, or incorrectly claiming, a deduction for being 65 or older.
Anyone with the willingness to spend the time should be able to prepare his or her return by following CCRA’s income tax guide and the free advice that can be found on the Internet. For example, the Certified General Accountants (CGA) of Ontario web site at www.cga-ontario.org has a Personal Tax Planning Guide containing a variety of tax tips.
Using tax preparation software could also help those who have trouble doing math.
However, if you don’t have the patience, or if you’re not sure you’re doing the right things, it may be wise to consult a tax accountant. Aside from what the accountant can save you this year, he or she may find mistakes from previous years that could be corrected for your benefit.
It is best to seek out a qualified professional. CGA of Ontario’s web site has a referral service, listing CGA certified accountants in the various cities and towns of the province. For those seeking a referral service outside of Ontario, the national CGA web site at www.cga-canada.org has links to the CGA web sites for other provinces.
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©2003 Wayne Cheveldayoff