It’s the middle of April, which means you are likely in one of two camps: those who have finished filing their taxes, and those who are postponing the inevitable for as long as humanly possible. Can you guess which camp I’m in?
Whether you’re blissfully spending your refund or are still in the process of collecting all your forms and receipts, it’s always a good idea to ensure that you have the correct information. Friends and neighbours may often be a source of great advice, but when it comes to taxes, it’s best to leave the advice to the experts.
Courtesy of my friends at H&R Block Canada, here are some of the top tax myths. Spoiler alert: cats are not considered dependents for tax purposes. I’m serious.
Myth #1: If I receive a tax refund, my return is approved. The Canada Revenue Agency (CRA) will process your return and send you a refund fairly promptly. However, the CRA also has three years in which to review returns and request follow up paperwork. The review may result in a Notice of Reassessment with a balance owing. For example, if you claimed moving expenses that were not eligible, the CRA will disallow your claim and send you a tax bill.
Myth #2: I earned less than $10,000 so I do not have to file a tax return. Even if you earned no income, you could be entitled to other credits and benefits that are triggered once you file a tax return. For example, if you turn 19 before April 2018 you could qualify for the quarterly GST/HST amount. If you did earn an income, regardless of how little, you should receive a refund if you had tax withheld.
Myth #3 Maternity leave income is not taxable. Congratulations on becoming parents! Amidst the hustle and bustle of feeding, changing and caring for the baby, don’t forget that you are required to report your Employment Insurance (EI) benefits as income. In most cases, Service Canada withholds less than your marginal rate so you may have tax obligations at the end of the year.
Myth #4: My pets are considered my dependents so I can claim their pet food. It depends on if your pet is actually working. Most pets will not qualify. However, there are the odd exceptions. A farmer was once allowed to claim cat and dog food because they were outdoor pets that were acquired to keep wildlife away from their blueberries.
Myth #5: Tips are not considered income. For servers, tips may be as much as 200-400 per cent of their income. Servers and others working in the hospitality industry are required to record and report their tips on their tax return.
You can find more tax myths – busted – and other helpful tax tips here.
If you’ve scanned the list and realize that you’ve committed an error on your return, don’t stress! You can file an adjustment or contact the tax experts at H&R Block Canada, who can help ensure you’ve got the right info.
And if you’ve yet to file your taxes, don’t forget to check out their FREE tax software with a high level of personalization, allowing you to choose the best option for your needs. Simply visit H&R Block Canada’s website where you’ll find a breakdown of what’s included in the package you choose. If you select the FREE option, you can complete your return with step-by-step guidance, have access to the online help centre, take advantage of features like Quick Slip Entry and Past Return Import, and most importantly, file for free. (No hidden costs! Promise!)
Looking for more info? Check out last month’s post for further details about H&R Block’s Online Tax Software.
Come on, friends! It’s time to enjoy #PaybackSeason. If you’re lucky enough to receive a refund, tell me – how are you spending it?
This post is sponsored by H&R Block Canada. The opinions on this blog, as always, are my own.