10 common tax mistakes to avoid

03/02/20 • 3 min

Stages | Simple advice to help you win financially

10 common tax mistakes to avoid

Every year, thousands of Canadians make errors when they prepare their income tax returns. These may go unnoticed — or they could result in an unexpected payment or penalty. Play it safe and avoid these common errors.

Filing late. Be sure to file by April 30. If you owe taxes, you’ll pay a late-filing penalty of 5% of the tax owing plus 1% for each month you’re overdue, up to 12 months. You’ll also pay interest on the amount owing, plus on the late-filing penalty, starting May 1.
Ignoring your partner. If you’re in a common-law relationship, you’re required to file as a couple. This can often be to your advantage.
Lacking documentation. You may not need to provide certain slips or receipts with your return, but you do need to have them. Make sure they’re complete and ready to provide to the government if requested.
Claiming moving expenses. If you’ve relocated your home to take a new job, run a business at a new location, or attend full-time post-secondary school, and are moving 40 km or more, you can claim a wide range of related expenses. However, if your new employer paid for them, you can’t claim those amounts as deductions on your tax return — and you’ll need to claim them as income.
Claiming twice. Like moving expenses, there are other expenses you can’t claim if you’ve already been reimbursed. For example, if medical costs have been paid for by your insurer, you can only submit the remaining, unpaid amount as medical expenses.
Mistaken medical expenses. Be sure to consult the list of approved medical expenses. Items that people often try to claim but which aren’t eligible include health plan premiums, gym memberships, birth control, blood pressure monitors, supplements or vitamins (even if prescribed by your doctor) and personal response systems.
Misusing “other deductions.” This area is intended to capture allowable amounts not deducted elsewhere on your return, such as certain special instances with RRSPs, RRIFs and other types of pension plans. You can’t claim funeral expenses, wedding costs, legal fees or other non-allowable deductions.
Claiming interest expenses on the wrong things. In general, you can only claim interest expenses if they were directly linked to an investment to earn an income. You can’t claim mortgage interest on your principal residence (if you’re not self-employed), for example, but you can claim it on your rental property.
Claiming ineligible tuition fees. You can only claim tuition at recognized institutions.
Not filing at all. In addition to possibly incurring hefty interest charges and penalties, you could be missing out on important tax breaks and the ability to accumulate RRSP contribution room.

At Carte Financial Group we have a team of tax experts to assist with complex situations. If you have any questions, don’t hesitate to contact your Carte Financial Advisor.

10 common tax mistakes to avoid

Filing late. Be sure to file by April 30. If you owe taxes, you’ll pay a late-filing penalty of 5% of the tax owing plus 1% for each month you’re overdue, up to 12 months. You’ll also pay interest on the amount owing, plus on the late-filing penalty, starting May 1.
Ignoring your partner. If you’re in a common-law relationship, you’re required to file as a couple. This can often be to your advantage.
Lacking documentation. You may not need to provide certain slips or receipts with your return, but you do need to have them. Make sure they’re complete and ready to provide to the government if requested.
Claiming moving expenses. If you’ve relocated your home to take a new job, run a business at a new location, or attend full-time post-secondary school, and are moving 40 km or more, you can claim a wide range of related expenses. However, if your new employer paid for them, you can’t claim those amounts as deductions on your tax return — and you’ll need to claim them as income.
Claiming twice. Like moving expenses, there are other expenses you can’t claim if you’ve already been reimbursed. For example, if medical costs have been paid for by your insurer, you can only submit the remaining, unpaid amount as medical expenses.
Mistaken medical expenses. Be sure to consult the list of approved medical expenses. Items that people often try to claim but which aren’t eligible include health plan premiums, gym memberships, birth control, blood pressure monitors, supplements or vitamins (even if prescribed by your doctor) and personal response systems.
Misusing “other deductions.” This area is intended to capture allowable amounts not deducted elsewhere on your return, such as certain special instances with RRSPs, RRIFs and other types of pension plans. You can’t claim funeral expenses, wedding costs, legal fees or other non-allowable deductions.
Claiming interest expenses on the wrong things. In general, you can only claim interest expenses if they were directly linked to an investment to earn an income. You can’t claim mortgage interest on your principal residence (if you’re not self-employed), for example, but you can claim it on your rental property.
Claiming ineligible tuition fees. You can only claim tuition at recognized institutions.
Not filing at all. In addition to possibly incurring hefty interest charges and penalties, you could be missing out on important tax breaks and the ability to accumulate RRSP contribution room.

At Carte Financial Group we have a team of tax experts to assist with complex situations. If you have any questions, don’t hesitate to contact your Carte Financial Advisor.

Previous Episode

Are your client conversations doing all they should?

Are your client conversations doing all they should?

Your ability to provide outstanding, personalized service is limited only by the quality of information you elicit from each client. Therefore, ensuring that you have a well-rounded, honest conversation is critical.

That means gathering the information that will allow you to recommend the investments, asset allocations, insurance and other financial products that are appropriate for your client. It also means getting a 360o view of the client’s life — not just their financial situation but their family, their lifestyle, their needs and aspirations. To do this you’ll need to cultivate a trusting relationship. Here are some tips to help you get clients to open up.

Ease into conversations. No one likes to feel interrogated. Start with easy, straightforward questions that feel “low risk” to the client, such as “how long have you lived in your current home?” Or “tell me a bit about your work.”

Ask open-ended questions. A broad question such as “Can you tell me about yourself?” allows the client to steer the conversation.

Establish risk tolerance. Many of your recommendations will hinge on this, so be sure to discuss this early in the conversation.

Confirm risk tolerance. Some people think they’re comfortable with risk (or vice versa) without thinking through what that could look like. Do a double check by asking scenario-based, “how would you feel if...” questions.

Ask how they feel about their investments. This helps you gauge their risk comfort and performance expectations in more concrete terms, as well as finding out whether they are currently meeting their objectives.

Talk holistically about money. Few people aim to save money for its own sake. It matters because of what it allows them to do. Before you can draft a financial plan, it’s critical to first explore what the person needs and wants to do with their money.

Talk about goals. Your job is to both manage the person’s situation today — and get them where they want to be. Since many people aren’t good at imagining themselves in the future, also present more specific questions. For example: “How long do you think you’ll continue to work?” “Would you like to stay in your current home when you retire?” “How will you fill your time in retirement?” “Have you thought about what you’d like to leave your children?”

Talk to the family. Be sure to include your client’s spouse. If you’re working with a husband who takes care of all the finances, be sure to include the wife in discussions to establish trust; 70% of women who are widowed or divorced leave the family advisor. Try to meet with adult children. This also helps ensure transparency, especially when dealing with elderly or aging clients.

Be sure to turn to the many Advisor tools provided by Carte Financial Group to aid your early conversations, such as Care Core for CRM and compliance management and Carte Links content management for client communications.

Next Episode

Get ready, get set — for tax time

Get ready, get set — for tax time

Many people feel overwhelmed at tax time. If your clients do their own taxes and are confused or don’t know where to start, here’s a quick primer to help them file their personal tax return. Hand it out at your next meeting, or fire it off in an email — it’s a great way to remind your clients you’re here to support their financial well being.

Tax time crib notes
• The deadline for filing a tax return is just around the corner: April 30 for personal and June 15 for the self-employed.

• Submit your return on time. If you owe taxes, you’ll pay a late-filing penalty of 5% of the tax owing plus 1% for each month you’re overdue, up to 12 months. You’ll also pay interest on the amount owing, plus on the late-filing penalty, starting May 1. Interest is compounded annually. If you miss more than one year, you’ll pay even more.

• T4 and T5 slips are supposed to be mailed by February 28. Collect all your slips before you start and keep everything in one place. (This will also prepare you in case the Canada Revenue Agency asks you to provide any slips or receipts.) Follow up with financial institutions and other issuers if you believe something is missing.

• If you’re married or living common-law, consult with each other before you file. If you’re working, for example, make sure that the one with the higher income claims certain credits — and make sure you don’t both claim the same thing. If you’re retired and there’s a large difference in income, you could jointly elect to split pension income.

• Check last year’s Notice of Assessment for important information such as RRSP contribution limits and repayments to the Home Buyers’ Plan (HBP) or Lifelong Learning Plan (LLP).

• Gather charitable receipts. You’ll receive a federal tax credit of 15% on the first $200 of donations, and 29% of the remainder. (There’s also a smaller provincial credit.) Consider pooling receipts with a spouse (letting the higher income-earner claim), or carry forward up to five years, if that gets you a higher tax credit. If you’re a first-time donor you may be able to get an additional 25% on the first $1,000 of donations.

• Collect all medical expenses for yourself, your spouse or common-law partner and minor children. You’ll get a tax credit for amounts over 3% of your net income or $2,397, whichever is less. You can make the claim for any 12-month period that ends in the 2019 tax year. (If you’re also claiming for a dependent, you need to use the same 12-month period.) Check which expenses you can claim before you submit.

• Claim RRSP contributions. Deposits made in January or February of this year can be claimed now or carried forward to next year. Check last year’s Notice of Assessment to confirm how much you can claim without penalty.

• Be sure to claim all that you are eligible for if you are a full-time student or graduate of a recognized post-secondary institution, if you paid union dues or certain professional membership fees, if you bought a home last year, if you care for an elderly parent or a family member with a disability.

• Check your return, tax-filing software or the CRA website for complete lists of what is claimable and what is not.

• If using tax filing software, be sure to check over all fields before filing, including auto-filled fields, to ensure all information is correct and up to date.

If you have any questions or your tax situation is more complex than most, don’t hesitate to reach out. At Carte Financial Group we have a team of tax experts to help with complex situations.