Avoid These Tax Mistakes
Hello All,
In my last newsletter, we talked about getting ready for your taxes. This time, I thought it would be useful to highlight some common mistakes, made by both individuals and small business/self employed owners, so that you can try to avoid them:
Individual Tax Return Mistakes
Missing the 2025 Tax Filing Deadline – The personal tax deadline is April 30 (June 15 for self-employed, but taxes are still due April 30). Late filing leads to penalties if you owe money, which are a complete waste of your hard earned money, if at all avoidable.
Incorrect Marital Status Reporting – Your tax situation changes based on your marital status. If you’re newly married, divorced, or in a common-law relationship, you need to update this with the CRA, as it affects tax credits and benefits like the GST/HST credit or Canada Child Benefit.
Failing to Report All Income – Forgetting to include gig work, freelance income, rental income, investment income (T5, T4A, etc.), or tips can trigger CRA reassessments which in addition to being costly can be a huge headache.
Overlooking Tax Slips – Missing T4s, T5s, RRSP contribution receipts, or other slips that are sent directly to the CRA can result in discrepancies. Since CRA has access to this information, there can be additional penalties for failing to report these.
Misreporting Capital Gains and Losses – Forgetting to report stock sales, cryptocurrency transactions, or real estate sales can lead to CRA audits.
Additionally, if you have capital losses, these should be reported as they can be used to reduce capital gains in future (or previous) years by using loss carryforwards or loss carrybacks.
Incorrectly Claiming RRSP Contributions – RRSP contributions made in the first 60 days of the year need to be reported in the correct tax year which can either be 2024 or 2025.
Also, contributions over your limit result in penalties so it is important to make sure that you know your contribution limit, which is available on your CRA notices of assessment.
Not Reporting Foreign Assets or Income – If you own foreign property over $100,000 or earn foreign income, you must report it. CRA penalties for not filing T1135 can be severe.
Not Having Official Receipts for Donations - only contributions to Canadian charities accompanied by official donation receipts can be claimed. In some situations, you can claim donations to US charities, if you have US source income.
Claiming Medical Expenses That Don't Qualify - CRA has a comprehensive list of medical expenses that can be claimed. For example, massage therapy cannot be claimed in Quebec. Also, make sure you have receipts in case of audit.
Not Claiming Tuition and Education Credits - if you are a student at an eligible educational institution, you will receive a specific tax credit form referred to as the T2202. Make sure you have this form and claim it, even if you have no other sources of income as it can be carried forward and claimed in future years. You can also transfer it to a parent/spouse.
Not Claiming Union or Professional Dues – Certain union fees or professional membership dues are deductible but often go unclaimed because people misplace their receipts.
Self-Employed (T2125) Mistakes:
If you are self employed or have an unincorporated small business, gig or freelancer income, this must be reported on Schedule T2125 of the personal tax return (T1). Some common mistakes here:
Mixing Personal and Business Expenses – Claiming personal expenses (e.g., personal vehicle use, non-business meals) as business deductions.
Overstating (or Not Claming) Home Office Deductions – Not using a reasonable percentage for home office expenses or incorrectly calculating the business-use portion.
Incorrectly Deducting Vehicle Expenses – Not tracking business mileage properly or claiming 100% of gas and maintenance when there’s personal use.
Not Claiming All Business Expenses – Missing deductions like professional fees, bank fees, or office supplies.
Not Charging GST/HST When Required – If you earn over $30,000 in a 12-month period (calculated on a 4 quarter basis), you must register and charge GST/HST.
Note that the GST/HST and QST return is completely separate from the income tax return.
Not Keeping Proper Records – Lack of receipts and documentation can lead to denied deductions if audited. Make sure you also have a profit and loss statement from your software or spreadsheet to back up the amounts entered into the tax software.
Not Applying Capital Cost Allowance (CCA) Properly – Large purchases like computers, vehicles, or equipment must be depreciated over time rather than deducted fully in one year, Mistakes here can raise red flags with CRA.
Forgetting About Installment Payments or Not Being Prepared for Taxes – If you’re required to pay tax installments and don’t, CRA charges interest on missed payments.
For most people, taxes are fairly straightforward. However, it's important to be aware of taxable events—both on the income side as well as deductions/credits—so you don’t miss opportunities to reduce your taxes or unintentionally trigger a CRA audit.
Check out my resources for tax season section below for books, masterclasses and courses to help you with your self employed/business taxes.
Related content
Article: 16 common tax mistakes that small business make: In this article I discuss some common mistakes and how to avoid them.
No new videos this week, but some older videos to help with tax season:
Video: 5 common GST/HST Mistakes
Video: How to Prepare for Your Tax Bill
Video Playlist: Help with your Small Business/Self Employed Taxes
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Maximizing Tax Deductions Masterclass – Learn how to maximize your tax deductions, avoid costly mistakes, and confidently claim expenses in my Small Business Guide to Maximizing Tax Deductions Masterclass—so you can keep more of your hard-earned money! Learn More
GST/HST Made Simple Course – A comprehensive, yet simple review of what every small business/self employed owner needs to know about registering, calculating and filing your sales tax. Learn More
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