Many taxpayers confused by process
TORONTO — Many people could be losing out on money owed to them by the Canada Revenue Agency because they don’t understand how to maximize their tax refunds.
Close to half of Canadian taxpayers say they don’t feel confident in how to claim tax credits and benefits to get the biggest refund possible, according to a new survey from tax preparer H&R Block Canada Inc. Half are also clueless about whether they’ll be getting money back in the first place, with only a third putting funds aside in case they owe.
At the same time, many have come to rely on their tax refunds to help make ends meet, especially as a higher cost of living has come home to roost this year. Almost half are counting on a refund to give them some much-needed extra cash and the top ways people plan to deploy the funds include paying down debt, tackling bills and buying day-to-day necessities.
Canadians have good reason to be confused about their tax refunds, given the sheer number of credits and benefits available to them, H&R Block said.
“With more than 400 available tax credits and benefits — and new and evolving credits and benefits every year — it’s not surprising that the majority of Canadians don’t feel confident they’re able to maximize their tax refunds,” Tannick Lemay, tax expert at H&R Block Canada, said in a news release.
That lack of confidence also stretches into a failure to understand the basics of how tax season works. Some admit to not even knowing the start date for when the CRA accepts income tax forms or the deadline to file.
Many also admit to being clueless about how tax deductions work on their paycheques. One in three Canadians don’t know how much tax should be taken off their pay and 35 per cent wouldn’t know if their employer made a mistake. Overall, less than a third review their pay stubs regularly to ensure there are no errors.
T4 slips also get little love from taxpayers, H&R Block said. Just 48 per cent say they look the form over to catch potential mistakes on tax deductions, insurance and pension contributions.
Canadians’ lack of tax knowledge is leading to a sense of “tax anxiety” among many, H&R Block said, with 16 per cent worrying throughout the year that they’re destined for a surprise bill from the CRA because not enough tax has been taken off their paycheques.
The antidote to such anxiety is knowledge and H&R Block is calling on taxpayers to take steps to learn about paycheque deductions and how their taxes are calculated.
“It’s empowering to have the right conversations with the right people to better understand your pay and tax situation,” Lemay said.