Here are some common myths about our personal tax system:
Myth: The CRA completely agrees with the information you submitted in your return if it sends you back a Notice of Assessment that agrees to what you filed.
A Notice of Assessment is just the result of a quick assessment that will have fixed any mistakes you may have made. But it doesn’t mean that the CRA has examined and OK’d everything you’ve submitted.
The CRA has three years after the Notice of Assessment is sent to review your file.
Myth: The person whose name or social insurance number is on the tax slip is the person who must report the interest in a joint account.
Not necessarily. Income earned in joint accounts must be reported by the person who earned the money.
Myth: I should have refused that pay raise because it will bump me into a higher tax bracket.
Absolutely not, you should never turn down more income as you will always be better off than you would have been. You only pay the tax at the rate for that bracket. If you earn a few dollars more, it is only on those extra dollars that you pay the higher tax rate, not on any of the previous dollars.
For example, if you earned $45,282 all of your earnings are taxed at 15%. If you earned another $100 then only the $100 would be taxed at 20.5% the other $45,282 would still be taxed at 15%. (This is federal tax only and provincial tax rates would be in addition to this.)
Federal tax brackets for the 2016 tax year:
- Up to $45,282 — 15%
- $45,282-$90,563 — Tax rate 20.5%
- $90,563-$140,388 — Tax rate 26%
- $140,388-$200,000 — Tax rate 29%
- Over $200,000 — Tax rate 33%
Myth: If you file your taxes online, your odds of being audited increase.
Since it’s not possible to file paper receipts or tax slips online, the Canada Revenue Agency does sometimes ask people who file online to send in supporting documents. But the CRA says this is just “routine verification” and not an audit.
“When the CRA flags a file for audit, the criteria are broad, complex and not based on filing method,” the agency says.
If you would like more information or have any questions, feel free to contact us at 780.466.6204, or click here to send us an email.