With tax season around the corner, it’s important to avoid common tax mistakes that can end up costing you a lot of money. Filing taxes can be complicated and overwhelming, but with the right information and consulting an experienced professional accountant at Tangs Accounting to review your books to ensure accuracy and financial efficiency, you can avoid costly tax reporting mistakes.
Here are some tax mistakes to avoid to ensure that your taxes are filed correctly.
Not Keeping Accurate Records
One of the biggest tax mistakes that individuals and businesses make is not keeping accurate records. It’s essential to keep track of all financial transactions throughout the year, including receipts, invoices, and bank statements. Failure to keep accurate records can result in missed deductions, inaccurate tax filings, and increased scrutiny from the Canada Revenue Agency (CRA).
Failing to Report All Your Income
Another common tax mistake is not accurately reporting income. This can occur if you have multiple sources of income, such as rental income or income from a side business. It’s important to report all income accurately, as failure to do so can result in fines and penalties that are a lot more expensive than the tax expense.
Missing Deadlines
Missing tax deadlines is a common mistake that can result in significant penalties and interest charges. It’s important to be aware of all tax deadlines, including the deadline for filing taxes and the deadline for paying taxes owed. Filing taxes late can result in a penalty of up to 5% of the amount owed, plus an additional 1% for each month the return is late, up to a maximum of 12 months.
Not Taking Advantage of Deductions and Credits
Another common tax mistake is not benefitting from all available deductions and credits. The Canadian tax system offers a range of deductions and credits that can reduce your tax bill significantly. For example, you can claim deductions for charitable donations, medical expenses, and business expenses. It’s important to speak to an accountant to ensure that you’re taking advantage of all available deductions and credits.
Ignoring Changes to Tax Laws
Tax laws are constantly changing, and it’s important to stay up-to-date with any changes that could affect your tax filings. Ignoring changes to tax laws can result in missed deductions, inaccurate filings, and penalties.
Not Hiring a Professional
Filing taxes can be complicated, and it’s important to seek the advice of a professional accountant. An accountant can ensure that your taxes are filed accurately and can help you avoid costly mistakes. Additionally, hiring an accountant can help reduce the stress associated with tax season, allowing you to focus on other important areas of your business or personal life.
Not Paying Taxes Owed
Finally, failing to pay taxes owed is a common mistake that can result in significant penalties and interest charges. If you’re unable to pay your taxes, it’s important to speak to an accountant or the CRA to discuss payment options.
The Bottom Line
Filing taxes can be a complicated process, but by avoiding common tax mistakes, you can ensure that your taxes are filed accurately and on time – which saves you a lot more time and money in the long run.