Friday, 13 December 2013

Don’t be a Tax Fool: What You Can and Cannot Claim on Your Return

Every year at tax season, some Canadians try to reduce their tax bills in creative ways and trying to justify tax deductions. For example, one taxpayer tried to argue that trips to Las Vegas should be a medical expense since a doctor had recommended trips to warmer climates would help treat a skin condition. While this reason was rejected, there are cases where unusual deductions were accepted. A farmer was allowed to claim cat and dog food because they were outdoor pets that were acquired to keep wildlife away from his blueberry crop.

Before you start brainstorming potential tax deductions, Cleo Hamel, senior tax analyst with H&R Block Canada busts some common tax myths and provides guidelines to ensure you claim the right credits and deductions:
  • I earned less than $10,000 so I do not have to file a tax return – Even if you did not earn an income, you could be entitled to other credits and benefits that are triggered once you file a tax return. For example, if you turn 19 before April 2015 you could qualify for the quarterly GST/HST amount. If you did earn an income, regardless of how little, you should receive a refund if you had tax withheld.
  • If I receive a tax refund, my return is approved – The Canada Revenue Agency (CRA) will process your return and send you a refund fairly promptly. However, the CRA also has three years in which to review returns and request follow up paperwork. This could result in a Notice of Reassessment with a balance owing. For example, if you claimed moving expenses that were not eligible, the CRA will disallow your claim and send you a tax bill.
  • I work for myself so I can write it off – You are allowed to claim business expenses incurred if you are self-employed and if the expenses are reasonable. If you only have one internet connection and work at home, the CRA will expect there to be some personal use so you cannot claim 100 per cent of expenses. And if you are claiming 100 per cent of your auto expenses, the CRA will most likely ask to review your logbook.
  • Maternity leave income is not taxable – You must report your Employment Insurance (EI) benefits as income. In most cases, Service Canada withholds less than the lowest tax rate so you may have tax obligations at the end of the year.
  • Tips are not considered income – For servers, tips may be as much as 200-400 per cent of their income. Servers and others working in the hospitality industry are required to record and report their tips on their tax return.
  • I don’t need to worry about slips mailed to me at the wrong address You are required to report all sources of income in the year it was earned. The CRA receives copies of all the T slips issued, so if you intentionally or accidentally leave out a T slip, it will inevitably be uncovered by their matching program and result in a reassessment. If this happens twice in a four-year period, you will face a stiff penalty.
  • If I work outside of the country, I do not need to file a tax return – If you are working outside of the country but have substantial residential ties to Canada still, you will be required to file a Canadian tax return. The Canadian tax system is based on residency. If you are emigrating, you should indicate your date of exit on your last tax return.
  • Mortgage interest is a tax deduction – This is only true for self-employed Canadians who work from home. They are allowed to claim a percentage of their mortgage insurance as a business expense.
If you’re unsure of what credits or deductions to claim, you can use an online tax preparation software program like H&R Block Tax Software (, which will guide you through step-by-step tips to identify every possible deduction or credit, calculate your return as you go, and ensure you get your maximum refund. If you need additional support, you can get expert advice by visiting an H&R Block office where a tax professional will review your previous year’s return for free.

*Post written by H&R Block for


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