Canadians had to pay over $1 billion in additional taxes in fiscal 2012 alone, mostly because what they reported on their tax returns didn't match the dollar amounts provided by employers, financial institutions and other sources, according to CRA. As well, the tax agency rejected almost one in every five tax credit and deduction claims that year.
In addition to collecting additional taxes, the CRA will charge interest, currently at a rate of 5% on any overdue tax amounts, Golombek points out. You fail to file a return by the deadline or under-report income repeatedly you may also have to pay a penalty.
Golombek has some tips to avoid costly errors:
- Double-check that you've included all income from all sources;
- Compare information on tax slips to investment statements or other supporting documents to ensure accuracy;
- If you're missing information, do your best to get it; estimate amounts when information doesn't arrive in time to file;
- Report all RRSP contributions, even if you're going to claim the deduction in a later year;
- Determine if you are eligible for a deduction or credit before you claim it;
- Make sure your current address is on file with employers, financial institutions and the CRA so that you receive all tax slips and correspondence;
- Be punctual - file your return by the deadline, which is April 30, 2014 for most taxpayers, and respond to any direct CRA correspondence within the required timeframe.