Nowadays, it seems like everyone thinks they’re a tax expert. No matter what you say to someone about your taxes, they’ll feel the need to give you their advice about it — whether or not they actually know what they’re talking about. This is how many ill-advised taxes are filed (or not filed) and people get themselves into trouble. Stop listening to the rumours and myths that get spread around during this time of the year.
In fact, there are some myths and rumours about taxes that are so widespread, many people believe them to be fact. Here is our list of the top five tax myths:
Tax Myth #1: "You don't have to report your maternity leave pay. It isn't taxable."
You are absolutely required to report any money you make as income, and this definitely includes employment insurance benefits. For this type of pay, Service Canada will withhold less than the lowest tax rate so you may have to pay money at the end of the year, depending on your income level.
Tax Myth #2: "Your tips don't have to be reported as income."
Once again, this is completely untrue. Servers, hair stylists, drivers, and other individuals who receive tips are required to record and report their tips. In many cases, tips make up more of the wages than the actual pay does, making it unfair for everyone else who has to pay their fair share of taxes. Be sure to keep accurate records of your tips and save money so you can pay tax at the end of the year.
Tax Myth #3: "As a student, you are entitled to receive a refund on your taxes for your tuition."
Tax refunds only come when you overpay your income tax over the year. If a school student doesn't have a job that generates a taxable income, then they cannot use their tuition or educational credits on their tax returns. If they do have a taxable income, then it is best left to the tax professionals to see how to proceed.
In certain cases, students can transfer up to $5,000 to a spouse, grandparent, or parent. Or some students may be able to carry forward their credits to use the next year.
Tax Myth #4: "If you make less than $10,000, you don't have to file a return!"
No matter how much you make, you need to file taxes. You could be entitled to a refund or even benefits such as GST and Canada Child Benefit, and you don't want to leave your money sitting in a government vault somewhere.
Tax Myth #5: "I worked abroad last year, so I don't need to file taxes."
If you are a resident of Canada, you have to pay taxes on your world income. If you are moving out of the country, you need to indicate your date of departure on your tax return, and you will be taxed on your way out. If you have property or a business in Canada but you aren't working there, you should still file taxes. Even non-residents can owe tax money or receive a refund of taxes held in excess of what was truly owed.
For more information or help with your taxes, contact Liberty Tax directly at 1-866-290-2222, or visit a conveniently located Liberty Tax office near you. For real-time updates, follow Liberty Tax on Facebook and Twitter.