Tax season is in full swing, and many Canadians unknowingly make mistakes that reduce their refund or trigger CRA audits. Whether it’s missing a key deduction, filing late, or misreporting income, these errors can cost you hundreds or even thousands of dollars.

With the 2024 tax season underway, there’s still time to correct course and apply these strategies to maximize your refund. In this guide, we’ll highlight the most common tax errors and provide practical solutions to ensure you keep more of your hard-earned money while staying compliant with the CRA.

1. Filing Late and Paying Penalties

One of the biggest tax mistakes is missing the deadline. Late filing leads to penalties, and if you owe taxes, interest starts accumulating immediately.

Solution:

• • Mark your calendar for the April 30, 2025 deadline (June 15 for self-employed, but taxes owed are still due April 30).
  • File early to avoid last-minute stress and ensure a quicker refund.
  • If you can’t pay your tax bill in full, still file on time to avoid late filing penalties, and set up a payment arrangement with the CRA.

2. Forgetting to Report All Income

The CRA receives tax slips from employers, banks, and investment firms. If you forget to report income, they’ll notice—and you may face penalties.

Solution:

• • Use CRA’s My Account to check all T4, T5, and T3 slips before filing.
  • Keep track of freelance or gig economy earnings and report all self-employment income.
  • Don’t forget investment income or rental income

3. Overlooking Deductions and Credits

Many Canadians miss out on valuable tax breaks simply because they don’t know what’s available.

Commonly Overlooked Tax Deductions:

• • Work-from-home expenses: Claim a portion of your rent, utilities, and internet based on the percentage of your home used for work, following CRA’s guidelines
  • Medical expenses: Include dental, vision, prescriptions, and travel for medical care over 40 km away.
  • RRSP contributions: Contributions made before the March 3, 2025, deadline can still reduce your taxable income for the 2024 tax year.
  • Childcare costs: Daycare, after-school child care programs, and summer camps qualify.

Solution:

• • Keep receipts and organize records throughout the year.
  • Speak to a tax professional to ensure you’re claiming everything you’re entitled to.

4. Claiming Ineligible Deductions or Credits

Mistakenly claiming expenses that don’t qualify can lead to audits and penalties. Common errors include:

• • Overstating home office expenses.
  • Claiming personal expenses as business expenses.
  • Deducting medical costs that aren’t eligible.

Solution:

• • Review CRA’s guidelines or consult a CPA before claiming a deduction.
  • Ensure business and personal expenses are clearly separated.

5. Ignoring Tax Installments (For Self-Employed Individuals)

If you owe more than $3,000 in taxes, the CRA may require you to make quarterly tax payments. Ignoring these payments leads to penalties and interest.

Solution:

• • Estimate your tax liability and set aside money for installments
  • Make CRA installment payments on time (March, June, September, and December).

6. Not Taking Advantage of Income Splitting

Many couples and families don’t optimize their tax situation by income splitting, which can reduce their overall tax burden.

Solution:

• • Contribute to a Spousal RRSP to shift taxable income.
  • If retired, pension income splitting can save thousands.
  • Business owners can pay family members who do work for the business a reasonable salary to split income.

7. Not Keeping Proper Documentation

The CRA can request proof of deductions or credits even years after filing. If you don’t have receipts, you may be required to repay claimed amounts.

Solution:

• • Store receipts digitally in a secure location.
  • Keep records for at least six years in case of an audit.
  • Use accounting software to track business and self-employment expenses.

8. Failing to Plan for Next Year

Tax planning isn’t just about filing a return—it’s about making smart financial decisions year-round to minimize taxes.

Solution:

• • Set up monthly RRSP and TFSA contributions for 2025.
  • Track expenses and potential deductions throughout the year.
  • Consult a tax professional early to optimize your tax strategy.

Final Thoughts

Avoiding these common mistakes can save you money, reduce audit risks, and help you get a larger refund. By staying organized and proactive, you can ensure a smoother tax filing process this year.

If you want expert guidance to maximize your tax refund and avoid costly errors, our CPA firm is here to help. Contact us @ tim@reynoldsaccounting.ca or call (905)477-1272 today for a tax consultation and make the most of your 2024 tax season!