Less than two weeks remain until the deadline for filing a 2016 personal income-tax return. If you are rushing to get this done, it's easy to overlook something or make a mistake. Note that since April 30, the normal deadline, falls on a Sunday this year, you have until midnight on Monday, May 1, to file your return, online or by mail with a May 1 postmark.
Here are some situations and opportunities to be aware of before filing your tax return, and afterward:
Ensure the CRA has your current address. If you have failed to receive a notice of assessment or reassessment, or other correspondence from the Canada Revenue Agency -- such as a request for more information to substantiate a claim on a past tax return -- you should confirm that the tax department has your correct address. If this is not the case, any adjustment for which your reply is required may be disallowed due to lack of response, and could result in an additional tax bill and possible penalties and interest for unpaid tax. The easiest way to ensure your contact information is up to date -- and to make any changes to this or other personal information -- is to be registered for the CRA's online My Account.
Note the changes to tax credits, benefits and deductions. For example, the annual 2016 limit you can contribute to a tax-free savings account (TFSA) has been reduced to $5,500, from $10,000 in 2015. The dividend tax credit has been changed in regard to the rate applicable to "other than eligible dividends." The federal tax credit for labour-sponsored venture-capital corporations (LSVCCs) has decreased to 5% and will be eliminated as of the 2017 taxation year. However, the credit for provincially registered LSVCCs has been restored to 15% for 2016 and later years.
Report all your income. You should have received most of your income slips and various receipts -- such as a T4 slip -- by the end of February, and at the latest by the end of March for T3 or T5 investment-income slips. If you have not received, or have lost or misplaced, a slip for the current year, contact the issuer of the slip to receive a new copy. If you are registered for My Account, you can access electronic copies of all information slips that have been filed by the issuer in your name. If you cannot obtain these electronically or as hard copy before the tax deadline, enter estimated amounts on your return. Note that, should your return be selected for review, you must provide all receipts and supporting documents at that time, or risk having a claim reduced or disallowed.
Avoid common tax-filing errors. Typical problem areas include medical expenses (Schedule 1), such as ineligible items and amounts. Only expenses in excess of 3% of your net income can be claimed. However, you may designate any 12-month period that ended during 2016 and claim medical expenses incurred during that time frame -- the idea being to come up with an expense total in excess of the 3% threshold. Another mistake to avoid is claiming credits for post-secondary education tuition and expenses (Schedule 11). These credits must be claimed on the student's income-tax return, not that of the parent or other designated individual.
Make the most of donation credits. Charitable donations made during 2016 or any previously unclaimed donations made during the previous five years can be claimed as a non-refundable tax credit. You may also include donations made by your spouse. Only donations totalling up to 75% of your net income may be claimed. Often donors do not make the most of this credit by not choosing the best year in which to claim the credit, and determining which spouse should claim the credit. For this purpose you can use the CRA's charitable donation tax-credit calculator, accessible through My Account. If you or your spouse have not claimed a donation tax credit in 2008 or later, you can use the first-time donor's super credit for cash donations, but not donations in kind. Note that this is the second-to-last chance you can claim the super credit, since it will be eliminated after the 2017 tax year.
The sale of a principal residence must now be reported. The rules allowing a tax-free transaction haven't changed, but the CRA is aiming to improve compliance in regard to this popular and lucrative capital-gains tax break. If you sold a home during 2016 that you designated as your principal residence, you now must report basic information on Schedule 3 (date of acquisition, proceeds of disposition and description of the property). If the property was not your principal residence during all of the years that you owned it, as in the past you must file Form T2091 (or Form T1255 on behalf of a deceased taxpayer).
Avoid penalties for late filing. If you are certain you don't owe any tax beyond what you've already paid, such as amounts withheld at source, you don't have to file a return by the May 1 deadline. If you have a tax balance owing and do not file your return on time, the CRA will charge you a late-filing penalty. The penalty is 5% of your 2016 balance owing on the due date of your return, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months. Even if you cannot pay your balance owing by the filing deadline, you can avoid the late-filing penalty by getting your return in on time.
Self-employed individuals have until June 15 to file. If you're self-employed (or the spouse or common-law partner of someone who is), you have an extra month and a half to file your return. In this case, the deadline to file your 2016 return is June 15. However, as for other taxpayers, to avoid interest charges you must have paid all taxes owing for 2016 by midnight May 1.
