Business & Investment

Canada Revenue Agency: Avoid these three mistakes when filing your 2020 income tax return

Fiscal 2020 is over and unlike last year, the Canada Revenue Agency (CRA) does not extend the 2021 income tax filing deadline. It takes time, so it is advisable to read about taxes and collect supplementary documents. The deadline for paying income tax in 2020 April 30th, CRA recommends submitting returns as early as the end of February. There are three common mistakes that slow down the entire tax process.

Do not submit income tax return because you do not have income

Many Canadians do not file an income tax return if they do not have labor income. However, they may forget to explain the money you earned from investing with your spouse or splitting your income. The CRA provides low-income and middle-income earners with many refundable benefits, so you need to file a tax return without having to work.

For example, a single person over the age of 19 can receive an average Goods and Services Tax (GST) credit of $ 296 up to $ 451. You can also get $ 1,381 in Canada Workers Benefit (CWB). For both credits, the annual net income should be less than $ 47,527 and $ 24,573, respectively. In addition, parents can receive a children’s allowance, and those aged 65 and over can receive an old-age security (OAS) pension.

Simply submit your return and you will receive all of the above cash benefits.

Do not report income from all sources

The CRA pointed out that another common mistake Canadians make when filing tax returns is to list only labor income. There are tips, chips, income from part-time jobs, dividends, investment income, and other income like taxable benefits like the Canadian Pension Plan (CPP). This year, Canada Emergency Response Benefit (CERB), Canada Recovery Allowance (CRB), and other taxable COVID-19 allowances will be added.

Be sure to add these benefits to your taxable income in 2020. If you take full advantage of CERB and Canada Emergency Response Benefits (CRB), you will need to add $ 19,500 to your taxable income in 2020 ($ 14,000 from CERB and $ 5,400 from CRB after tax).

Claim the wrong deduction or miss a qualified tax deduction

The third most common mistake is a missing or misunderstood tax deduction. The CRA offers many tax credits and credits, depending on age, income, marital status, and number of children. There are tax deductions such as basic individual amount, pension income amount, age amount, and caregiver amount.

In addition, the CRA introduced three new tax deductions in 2021. New digital subscription credits, Canadian training credits, and home office expense deductions.You can learn about these tax credits at me Tax plan 101 series.

Grow your investment in a tax-effective way

With the right information, you can significantly reduce your tax claims and get some tax-exempt cash benefits. The CRA also offers another way to increase return on investment in a tax-effective way. You can donate $ 6,000 to your Duty Free Savings Account (TFSA). This donation is taxable, but income from these investments is not taxable.

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Canada Revenue Agency: Avoid these three mistakes when filing your 2020 income tax return

https://www.fool.ca/2021/01/27/canada-revenue-agency-avoid-these-3-mistakes-while-filing-your-2020-income-tax/ Canada Revenue Agency: Avoid these three mistakes when filing your 2020 income tax return

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