Tax season isn’t just about filing paperwork—it’s about keeping more of your hard-earned money. But certain simple mistakes could be costing you a lot of money.
Stay with me as I cover 10 common tax filing mistakes to avoid, and at the end, I’ll show you a free CRA tool you can use that helps prevent them by automatically filling in your tax return and helping you claim every deduction available to you.
1. Filing Late (Or Not Filing at All)
Filing your taxes late can be a costly mistake. If you owe taxes, the CRA charges a 5% penalty on the unpaid balance, plus an additional 1% per month until it’s paid. Even if you don’t owe anything, filing late can delay your tax refunds and benefits like the GST/HST credit, Canada Child Benefit (CCB), and Climate Action Incentive Payment.
If you repeatedly file late, penalties can increase. Avoid last-minute stress by setting a reminder well before the April 30 deadline. If you think you’ll owe taxes, file on time—even if you can’t pay right away—to avoid penalties.
2. Forgetting to Report All Income
The CRA has access to your T4s, T5s, and other income records and cross-checks them against your tax return. If you forget to report employment income, rental income, side hustle earnings, investment dividends, you could face penalties and a potential audit. Platforms like Uber, Airbnb, and Etsy now report income directly to the CRA, so unreported earnings can trigger an automatic reassessment.
If you fail to report $500 or more in income on your current tax return and previously missed reporting income in any of the past three years, the CRA may impose a penalty of 10% of the unreported amount—5% federally and 5% provincially or territorially. To avoid these costly penalties, you must make sure all your income sources are accurately reported, otherwise the CRA will come knocking.
To avoid issues, always check your My CRA Account to confirm all tax slips are included before filing. Keeping accurate records of all income sources helps prevent costly tax surprises later.
Remember to stay with me until the end, and I’ll walk you through how using Autofile can simplify your tax filing process for free!
3. Overcontributing to RRSPs or TFSAs
Going over your RRSP or TFSA contribution limit can be costly. Excess RRSP contributions are subject to a 1% monthly penalty until withdrawn, and TFSA overcontributions also incur a 1% penalty per month on the excess amount.
These mistakes often happen when taxpayers don’t track their contribution room carefully. Many people assume the CRA will notify them if they overcontribute to an RRSP or TFSA, and that is wrong! The penalties add up quietly until you realize your mistake
To stay within your limits, track your own contributions rather than relying solely on My CRA Account, as it isn’t always updated in real-time. If you realize you’ve overcontributed, act fast—withdrawing the excess as soon as possible can help minimize penalties and prevent unnecessary tax headaches.
Pro tip: You’re allowed to exceed your RRSP limit by up to $2,000 without incurring penalties. If you’re looking to maximize contributions without crossing the line, you’ve got a small buffer to work with!
4. Missing Out on Deductions & Credits
Many Canadians overlook valuable tax deductions and credits that could reduce their taxable income. Commonly missed deductions include medical expenses, such as prescription drugs, dental treatments, and travel costs for medical care. If you’ve moved for work or school, moving expenses may be deductible.
Union and professional membership dues can also be claimed. Students often forget they can carry forward unused tuition credits or transfer them to a parent or spouse. Reviewing your eligibility for these deductions can lead to a bigger refund. Keep receipts and records for all expenses, as the CRA may request proof.
For a deeper dive into the tax breaks you should be taking advantage of, be sure to check out my blog post on “Tax Deductions You Must Claim in Canada”
5. Claiming Ineligible Write-Offs
The CRA is strict about business and employment deductions, and incorrect claims can lead to audits and penalties. Home office expenses can only be claimed if your workspace meets CRA guidelines (used mainly for work and required by your employer).
- Home Office Expenses: You can only deduct home office costs if your workspace is your primary place of work or used exclusively for work-related activities. Common eligible expenses include utilities, rent, and internet
- Business Expense Write-Offs: Deductions for meals, travel, and vehicle costs must be reasonable, directly related to earning income, and supported by receipts. Personal expenses disguised as business costs can be denied. (BDC Guide)
- Paying Family Members: If you hire a spouse or child, their salary must reflect actual work performed. Unjustified payments may be rejected, and the CRA may reassess your return.
6. Forgetting to Claim Capital Losses
If you’ve sold investments like stocks, ETFs at a loss, you may be able to use those losses to offset capital gains and reduce your tax bill. The CRA allows you to carry forward capital losses indefinitely or apply them to past three years of gains.
Many investors forget to claim these losses and end up paying more taxes than necessary. Keep track of your investment transactions and report losses in the same year they occur. If you don’t have gains this year, filing them for future use can still be a valuable tax-saving strategy down the road.
7. Not Reporting Foreign Assets or Crypto
If you hold over $100,000 in foreign assets, including stocks, real estate, or offshore bank accounts, you must file a T1135 Foreign Asset Disclosure form. Failure to do so can lead to hefty penalties. Cryptocurrency is also on the CRA’s radar, and unreported gains from selling or trading crypto could result in a tax audit.
Many people mistakenly believe crypto transactions are always anonymous, but some crypto exchanges now report transactions to the CRA. To stay compliant, keep detailed records of foreign assets and crypto trades, report all taxable gains, and make sure you’re following the correct tax rules.
8. Overlooking Income Splitting Opportunities
Income splitting can significantly reduce your household’s overall tax burden, but many Canadians fail to take advantage of it.
Spousal RRSP contributions allow the higher-earning spouse to contribute to the lower-earning spouse’s RRSP, leading to tax savings in retirement. Retirees can also split up to 50% of eligible pension income, lowering their combined tax bill.
Accounts like the TFSA and FHSA are excellent for income splitting since they aren’t subject to income attribution rules, allowing spouses or family members to contribute and grow investments tax-free.
If you’re curious about income splitting, check out our guide on 7 powerful income-splitting strategies to legally reduce your tax bill.
📩 Get your free guide—link is here:
https://blueprintfinancial.ca/income-splitting-strategies-download/
9. Failing to Pay Installments If Required
If you owe more than $3,000 in taxes ($1,800 in Quebec), the CRA may require you to make quarterly tax installment payments. These most often apply to self-employed individuals, landlords, investors, and high-income earners (such as some commissioned salesmen) who don’t have enough tax deducted at source. Missing these payments can lead to interest charges and penalties.
The CRA charges compound daily interest on unpaid amounts, making it an expensive mistake. If you’re required to make installments, set reminders and budget accordingly. Paying your installments on time can prevent unnecessary interest costs and help you avoid a large lump-sum tax bill in April.
Interest Charges:
The CRA charges compound daily interest on late or insufficient installment payments, based on the prescribed interest rate, which can change quarterly. Interest is calculated from the installment due date until the balance is paid.
Penalty Charges:
You may also face a penalty if your installment interest charges for the year exceed $1,000. The penalty is calculated as 50% of the amount by which your installment interest exceeds the greater of $1,000 or 25% of the installment interest you would have paid if no installments were made.
Recommendation:
To avoid these charges, ensure you make timely and sufficient installment payments. Setting reminders and budgeting accordingly can help prevent unnecessary interest costs and large lump-sum tax bills.
10. Ignoring Tax Planning Until April
Tax planning shouldn’t start when you file your return—it should be a year-round process. Many tax-saving strategies, like contributing to a FHSA, making charitable donations, and capital loss harvesting, need to be completed before December 31 to count for that tax year.
Waiting until April means missing out on deductions and scrambling to organize documents. Business owners and investors should also plan for capital gains, tax-efficient withdrawals, and income splitting throughout the year. Set up a tax review before year-end to optimize your strategy, reduce your tax bill, and avoid last-minute surprises when filing your return.
Reduce Mistakes and Errors Automatically
Thanks to a handy tool called: Auto-Fill My Return (AFR), and it’s built right into NETFILE-certified tax software like TurboTax and Wealthsimple Tax. Here’s how it works:
- Instantly Pull Your Tax Slips
- When you log into your CRA My Account, you can connect it to your tax software. AFR will automatically import all your T4s, T5s, RRSP contributions, and other tax slips directly from the CRA.
- Prevents Audit Triggers
- One of the biggest mistakes people make is forgetting to report income—maybe a second job, a dividend payment, or a side hustle. The CRA already has this info, so if you miss something, they’ll catch it and may reassess your return. AFR ensures everything matches what the CRA expects.
- Saves You Time & Finds Missed Credits
- No more scrambling to find paperwork or worrying about typos—AFR pulls the data for you. It also helps you find missed credits and claim every deduction possible.
How to Use It:
- Simply log into your CRA My Account before filing, connect your tax software, and import your tax slips with one click. That’s it. No manual entry, no mistakes.
Tax mistakes can be expensive—but the good news? They’re completely avoidable with the right guidance. At Blueprint Financial, our expert team is here to help you optimize your tax strategy and keep more of your hard-earned money through smart, personalized planning.
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