Tuesday, April 20, 2010

Income Tax Myths

I don’t normally do much with the many marketing emails I receive, but UFile sent a good list of common myths about income taxes. Enjoy.

If I make a mistake on my tax return, the CRA will correct it for me.

FALSE. The Canada Revenue Agency will correct mathematical errors and add income that you may have missed on your return. However, if you miss credits or deductions, or if you do not transfer amounts to your best advantage, the CRA is not obliged to correct the return.

I should get a tax refund every year.

FALSE. Getting a tax refund means that you have been effectively lending the government your money. This is especially true when your refund is a result of year-long RRSP contributions or childcare expenses. These are items that can be taken into consideration by your employer when calculating deductions at source. Some of us prefer this kind of "forced savings" with a payoff in the spring, but it is important to understand the source of these funds.

Once I get my refund, I am free and clear.

FALSE. The Canada Revenue Agency will initially assess your return without receipts or supporting documents. However, they have the right to review your return, ask for documents and look for errors such as unreported income or miscalculated transfers. If you are asked for supporting documents, do not delay sending them to the CRA to avoid re-assessment.

If I make a mistake or forget something on my return, I should file a new one.

FALSE. If you have made a mistake on your tax return, the best way to inform the CRA is by using a T1 Adjustment (T1-ADJ). It is easy to prepare in UFile. Simply select it from the Interview setup section and complete the form, which shows which line needs to be adjusted, the previous amount and the corrected amount. Add a handwritten explanation for the change and print and mail in the form.

All NETFILE-certified tax software is of the same quality.

This is FALSE. The CRA testing for NETFILE does not grade the quality of the software but rather its ability to create a .tax file that can be read by its systems. Certain criteria must be met, but these do not apply to user-friendliness or the ability to find deductions to get the best possible result.

1 comment:

  1. You mean a government agency doesn't care about me?!?