By Ketki Saxena
Investing.com -- Every year, the Canada Revenue Agency (CRA) releases a list of the most common adjustments that they make to taxpayers' returns due to errors. It's important to steer clear of these mistakes to maximize your refund and avoid penalties - that can be as high as 10% of unreported income.
One prevalent mistake is missing slips on your return. The CRA requires you to report any income slips issued, such as T4s or T5s, and failure to do so can result in a penalty of 10% of unreported income if this has happened in one of the past three years. If you're missing a slip, try obtaining it from the issuer or through online services like My Account.
Another error is related to tuition costs for education expenses paid on behalf of children. While parents commonly claim some tuition costs, students must file their own returns and report amounts spent on textbooks and education fees while completing Schedule 11 for transferring funds back to parents properly.
Moving expenses are another area where people often make mistakes when claiming deductions without qualifying reasons, such as starting work at a new location or attending school over 40 kilometers away from home - and that's via the shortest public route.
Another common tax mistake is regarding foreign tax credits. These credits should be carefully calculated using accurate exchange rates when reporting investment income earned outside Canada; use average yearly rates for converting annual earnings but transaction-based gains should convert at current rate values instead.
Another common mistake is the misuse of Line 23200 (Other Deductions) & Line 25600 (Additional Deductions). These are not general categories but are designed specifically for certain types including repaid incomes & legal fees.
Avoiding these common errors can help you maximize your tax return and avoid penalties while keeping more money in your pocket.