Tax Myths #2
Last week I wrote the first in a series of columns attempting to clear up common tax filing myths. In the second of this three part series, I am going to look at three more common myths that I hear on a regular basis.
For this week, myth number one is the false belief that CRA has agreed with the information you have submitted in your tax return if they send you back a notice of assessment with no mention of disputing your claims. In truth, CRA generally has three years after the notice of assessment to review your file.
When you submit your return each spring, CRA often does only a quick assessment to fix any mathematical errors and look for general mistakes. This does not mean that they have examined everything in detail and closed that particular case.
Once the busy tax filing season is over, they then have more time to go back and look over files more carefully. Any particular claims that might be a little more “questionable” are not necessarily approved and you could get a call down the road on these issues.
Myth number two is that you don’t need to file a tax return if you don’t make enough money to pay taxes. Unfortunately, you can’t get away that easily and you probably don’t want to.
In addition to being required to file your returns, there may be some real benefits to you for doing so. There are refundable provincial credits, child tax credits, GST credits and many other benefits you could be missing out on. If you don’t file your taxes, you could be giving up on some great assistance programs and miss out on earning RRSP room.
While filing your return may seem like an unpleasant task and a big hassle, once completed these benefits may turn the effort into a much more rewarding one.
A third common myth is that you can’t file your return on time since you are missing a T4 slip. The requirement to file on time is up to you and if you are late, CRA will impose a five per cent penalty. The requirement to provide a T4 slip on time (they must be sent by the end of February) is the responsibility of your employer.
If you don’t have a missing slip by mid-March, contact whoever issued it and ask for a duplicate. If your request goes unanswered, your best bet is to estimate how much you earned and attach a note to your return saying that you were unable to obtain your tax slip and provide the name and address of the person responsible for providing this to you. The CRA can penalize employers who issue slips after the deadline as well.
The above issues are a few of the many tax myths floating around. Canada’s tax rules are complex and ever changing and it is probably time to stop getting tax advice from your family and friends. Seek out the guidance of a financial professional who can make sure your financial plans are as tax efficient as possible.
For those low-income earners who feel they can’t afford professional help, look into CRA’s “Community Volunteer Income Tax Program” for groups that will provide free assistance in each community! Watch for next week’s edition for the third and final column of my common tax myths feature.