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5 Expensive Mistakes You Can Make on Your Tax Return in Canada

Did you claim the wrong deduction on your taxes? Or, did you forget to state a job income that you had a T4 for?

Mistakes can cost you a lot, especially when making mistakes in filing tax returns.

Here are some common mistakes you need to look out for a while filing your personal tax return.

1. Failing to report Principal Residence Exemption
The Principal Residence Exemption provides an exemption from tax on any profit gained from the sale of property that is designated as your principal residence.

The sale must be reported on your tax return along with the designation on the second page of Schedule 3. You should also fill sections related to the principal residence in Form T2091.

2. Not Reporting Foreign Properties and Income
If you owned any foreign property with a total cost exceeding $100,000 at any time of the year, you are required to submit Form T1135 along with your tax return by the due date.

Failure to do so will result in a hefty penalty of $25 per day, which is subjected to a maximum of $2500 and a minimum of $100. Further penalties may also be included if the failure to file or errors were made deliberately or due to gross negligence.

3. Filing Taxes Past the Due Date
Delay in paying tax is taken very seriously by Canada Revenue Agency (CRA) and can be charged with a penalty of 5% of the total owing with an additional 1% for every month delayed.

If you have been charged with a late penalty for the past 3 years, you will receive a penalty of 10% of the total owing plus an additional 2% for every month delayed.

4. Not Keeping Your Receipts
Most Canadians file their individual income tax return online and does not require sending receipts for the items you make claims on. However, the CRA could ask you to produce the receipts, and failing to do so may mean that the deduction is disallowed. In turn, you may end up paying more taxes than you thought – and this includes penalties of up to 125% of the amount stated on the receipt.

5. Doing it Yourself
Filing a tax return can be really complex as there are too many rules and messing them up could cost you a lot of money. Approach a professional accountant to gain insights and advice on how to get maximum returns. The investment you make in getting a good accountant will bring a good return.

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