Taxes are a hot topic for many of us. Income taxes, sales taxes, property taxes—it seems like they are everywhere. In this post, we will take a look at some common misconceptions about tax laws and debunk them with the truth. Let’s get started!
Myth #1: You do not have to be concerned about information slips being sent to the wrong address.
You are responsible for your information slips, regardless of where they are transmitted. you will incur penalties and your return will be audited if you miss reporting your information slips twice in four years.
If you relocate, make sure you notify the CRA as soon as possible to avoid missing information slips. By creating a CRA My Account, you can access all of your information slips online.
Myth #2: You do not have to file a tax return if you earned less than $10,000.
Even if you have not earned much this year (or none at all), you should still file a tax return. When you file your tax return, you have access to a variety of federal and provincial benefits. Some of which are the:
- Basic personal amount – is one of the non-refundable tax credits that any Canadian resident can claim on their tax return. This number fluctuates from year to year to keep up with inflation.
- Provincial Basic Personal amount – The amount of this tax credit you will get is determined by the province or territory you live in.
- Canada Employment Amount – If you reported employment income for the year, you can receive this non-refundable tax credit. This amount is intended to assist Canadians with work-related expenses such as uniforms, home computers, and work-related materials. you will need to report income from a T4 slip as well to be eligible for this credit.
- Federal benefit such as Canada Child Benefit, GST/HST Tax Credit
- Provincial Benefits like BC Recovery Benefit (British Columbia resident), Ontario Trillium Benefit (Ontario Residents)
- Lower the taxes you owe through payroll deductions which includes Canada Pension Plan (CPP).
- Filing your return may also build your future RRSP Contribution room.
Myth #3: You do not need to submit a Canadian return if you worked outside of Canada.
You will need to file a Canadian return if you went to school or worked outside of the country but have strong residence ties to Canada (such as a home, spouse, or dependents).
If you have a lot of secondary residential ties, you may need to submit a Canadian return even if you do not have any significant ties. Secondary ties will be determined on below details
- Personal property in Canada (for example, a car, furniture, etc.);
- Social ties (for example, memberships in recreational or religious organizations in Canada);
- Bank accounts or credit cards issued in Canada;
- A Canadian driver’s license;
- A Canadian passport; or
- Health insurance with a Canadian province or territory.
Each individual’s case is different and residential ties are determined on these documents so contact your accountant to know more.
Myth #4: If you worked for yourself, you can deduct whatever.
You might be eligible to deduct part of your business expenses from your taxes. These charges must, however, be relevant to your job, therefore you will not be able to claim personal expenses. For example, even if you needed to look good for your business, you cannot claim the cost of dry cleaning or hair styling items that you used for yourself.
Myth #5: If you obtain a refund or a Notice of Assessment (NOA) after filing, it guarantees the government will not contact you again regarding this return.
Many Canadians assume that after they file their tax return, they are free to care about taxes for another year. However, this is not the case. In fact, a submitted return might be audited by the Canada Revenue Agency (CRA) several times to ensure that it is accurate.
Keep all of your records for at least 5-6 years — CRA can ask to see them at any time if your return is chosen for a thorough review. If the government examines your return, you may receive a Notice of Reassessment, which details any changes to your refund or the amount of taxes you owe.
We hope you enjoyed this look at some of the most common misconceptions about tax. Have any more questions? Reach out to our team, who are ready and waiting to help you with all your tax questions and concerns, no matter how big or small. What is next for us here at IDM benefits professional? Stay tuned!
