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Friday, 5 April 2013

Costly tax-filing mistakes to avoid


With April 30th quickly approaching, you should be thinking about filing your income tax return soon, if you haven't already done so. While it can be a cumbersome task for some, it is legally required of all Canadian citizens. This does not mean you should simply rush to get it done: there are several costly errors you should be wary of in order to avoid bringing an audit upon yourself. While some of these errors may be honest mistakes, others may be deliberate attempts at tax evasion. We've warned of insurance claims fraud before, and we'll warn against tax claim fraud too. Here are some common behaviours that may raise red flags for the Canada Revenue Agency investigators:

Not filing at all
Filing taxes is your legal obligation. As with any other legally mandated expectation, there are penalties for breaking this law. If you failed to report an amount on your return for the current year, and you also failed to report an amount on your return for any previous year, you will likely be required to pay a both a federal and provincial penalty for repeated failure to report income. Each of these penalties is ten percent of the amount you failed to report in the most recent year. However, if you voluntarily come forward to admit these omissions to the Canada Revenue Agency, they may consider waiving those penalties. Even so, a twenty percent loss of your income is too substantial too risk. File your taxes.

Omitting some of your income in your report
The Canada Revenue Agency is very adept and finding discrepancies between what you actually made, and what you claim, so be sure to assess this honestly and carefully to avoid misrepresenting your income. Remember to include all income earned from your job, from investments, and from sales if you are a business owner. Take the time to double and triple check this, as reporting inaccurately will most certainly lead to an audit.

Assuming you don't need to file if you live abroad
If you are a Canadian citizen, you must file for taxes in Canada. The only way to be exempt from this is if you live abroad more than six months plus one day for the year in question. However, this exemption is not automatic! If you meet this criteria and want to be exempt from filing, you must submit an application for non-resident status. In this application, you will be asked about properties and official documents that may be considered “significant ties” to Canada. If you have several of these significant ties, you may not qualify.

Claiming loss on your home-based business every year
This is one of the surest ways to raise suspicion. In fact, it is assumed that a small business which loses money sixty percent or more of the years you file is automatically considered suspicious, and is very likely to be investigated.

Hiding income you have from abroad
Legally, you are entitled to have accounts in other parts of the world. However, you must declare them, as well as any income earned on them.

You have heard us wax cautionary about insurance claim fraud—and to be certain, it will cost you. However, the last type of fraud you want to find yourself accused of is tax fraud. Be smart: file carefully, honestly, and on time.

1 comment:

  1. I am facing same this type of problems. Last Sunday i was make a tax assignment. Unfortunately the assignment not balanced. Plz help me in that case .
    Personal Tax Accountants in Toronto

    ReplyDelete