As you begin to think about tax preparation, here’s some insight to prevent your tax season from continuing beyond April 30.
These are the more common claims reviewed by Canada Revenue Agency (CRA) and the typical taxpayer errors associated with them … and tips to avoid them.
Medical expenses because this claim can add up to big bucks, especially since it’s grouped as a family and can include dependants outside of the home.
Make sure slips identify specifics and receipts are dated and marked paid. If partially paid by a benefits program, the portion you paid must be clear.
Medicaments – vitamins, supplements, and the like – are not deductible even if prescribed by a medical professional.
Moving expenses because some things aren’t deductible which seem logical to deduct. Ineligible expenses claimed in error include mail forwarding, repairs to the old or new home, and job and house hunting trips.
Any employer reimbursement reduces the claim by that amount, so report it.
The claim cannot exceed the income earned that year at the new location. Carry forward the amount in excess of the income.
Donations because so many worthy organizations issue slips to donors but not all can be claimed. CRA checks for official tax receipt status, even on the smallest of gift value.
Tuition and education because these slips have to be official tax receipts or the expense cannot be claimed. Back in 2012, CRA became more inclusive as to what qualifies with almost all of these claims now reported on a T2202a. If not on this form, then the slip must state official tax receipt.
This claim is transferable and two common errors occur. It can’t be claimed by a parent if the student has not filed a return. The student must sign the T2202a permitting the transfer. An unsigned form leads to a denied claim by CRA.
RRSP contributions because people don’t realize they have to report investments made in the first 60 days of the current calendar year on the tax return currently due. So, a February 2015 RRSP investment has to be reported on the 2014 return and if not used, carried forward to next year’s tax prep.
There’s no trick to avoid these reviews, after all they’re random, right?
The best defense is to accurately do your T1 return. The second defense is to set-up for a quick, clean and painless review if it does happen. Deal with the review in a very timely manner. CRA gives 30 days and seldom will extend this. Fail to answer in 30 days, a re-assessment is automatic and a T1 adjustment is required to reinstate.
Finally, if engaging a professional preparer to do your taxes, it’s fair to ask if they are your first line of support in the case of a review, or are you on your own? If they do help, is it free or do they charge?
Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.net.