10 Myths about Income Tax Return Filing
Tax season is hectic for people. The internet may be helpful at times but everything you find there isn’t always reliable. There are several rumours, which spread wrong information to avoid any sort of confusion, make sure you consult with a tax accountant to clear any doubts you may have.
We’ve put together a list of the top 10 myths on incometax filing for you!
Myth 1: The income during maternity leave is non-taxable
Canada requires its citizens to report their EI benefits as income. Mostly, Service Canada withholds less than the lowest tax rates, so you can expect tax obligations at the end of the year.
Myth 2: Tips don’t add to income
People in the hospitality industry are required to record and report the sum total of their yearly tips on their tax return. Tips may cover up to 400 per cent of their total income.
Myth 3: RRSP contributions do not need to be reported in case deduction is missed
Even if you do not pay for the contributions that you made for deductions in the year, you’d still have to record them for reference.
Myth 4: Students are given refunds on their tuition fees
If you want to get a tax refund, you need to have overpaid your income tax in the previous tax cycle. If you’re a student with no taxable income, you will not be able to use your education or tuition credits on your tax returns. You would have the option to transfer up to $5k to a spouse, grandparent or parent and they can carry it forward as credits for use in the future year.
Myth 5: People earning less than $10,000 shouldn’t file a tax return
Even if you do not earn more than the personal amount, which is, $11,038 as per 2013, filing a tax return might trigger benefits such as quarterly HST/GST payments. If your tax is withheld, you are eligible to receive a refund.
Myth 6: Business mileage is calculated at a flat rate
Canadians who are self-employed need to keep a record of the auto expenses of their business for overall calculation in the future.
Myth 7: Child support is included in tax deduction
If your agreement is dated before 1st May, 1997, payments in regard to child support are reported in your tax return but they’re not deducted or included in your income.
Myth 8: If you’re working abroad, you don’t need to file for tax returns
The tax system in Canada is based on residency. If you decide to emigrate you should mention your date of exit on your last tax return. If you’re living away from Canada but still have residential ties there, you’d still have to file for tax return in Canada.
Myth 9: Mothers claim childcare expenses first
The spouse with lower income is eligible to claim childcare expenses, be it the father or the mother. Either one of the parents can claim the child tax credit.
Myth 10: Mortgage interest is included in tax deductions
Canadians who are self-employed and work from home are the only ones who can claim a percentage of the mortgage insurance as an expense for their business. You will get the tax benefit of owning a home only when you sell it. A capital gains exemption can be received by every Canadian on the sale of their principal residence.
At Masone and Company, we take care of both your personal and corporate taxes. With accurate planning and preparation, you don’t have to worry about anything. We also provide bookkeeping services. Your satisfaction is of utmost importance to us. Contact us to know more about our services!