As Canadians begin filing their 2025 income tax returns, experts say understanding deadlines, reporting all income, and keeping proper documentation can help taxpayers avoid costly mistakes.

Radio NL spoke with Chris Sinclaire, a partner with BDO. He says the first step during tax season is knowing whether you need to file and when your return is due.

“Anyone who worked in Canada and owes tax, or wants to claim a refund, must file a tax return,” Sinclaire said.

Know the key tax deadlines

For most Canadians, the deadline to file their 2025 return is April 30, 2026.

Self-employed individuals have a later deadline of June 15, but there’s an important catch.

“Even though self-employed people have until June 15 to file, interest on taxes owed still begins on April 30,” Sinclaire explained. “So if you expect to owe, filing earlier can help limit interest.”

Missing the filing deadline can become expensive quickly. The Canada Revenue Agency applies a 5% penalty on the balance owing, plus an additional 1% month for up to 12 months.

For example, someone who owes $5,000 and files a year late could see their bill increase by about $850 in penalties.

Tax filing is also tied to eligibility for several government benefits, including Employment Insurance, pensions, and child benefits, meaning filing late could delay payments.

Common tax mistakes Canadians still make

Sinclaire says the biggest mistake people make each year is simply not filing their return on time.

Beyond missed deadlines, several other errors are common.

“One of the most frequent issues is claiming expenses that aren’t eligible, or failing to claim deductions people actually qualify for,” he said.

Medical expenses not covered by provincial health plans or workplace benefit plans are often overlooked.

Another frequent mistake is failing to report all income, particularly from investments or side jobs.

“People sometimes forget to download investment slips or report interest and dividend income,” Sinclaire said. “And with more people working side hustles or in the gig economy, that income must also be reported.”

He also stresses the importance of keeping documentation.

“If you plan to claim expenses to reduce your income, you need receipts to support them in case you’re asked to provide proof.”

Understanding deductions and credits

Knowing the difference between deductions and credits can help taxpayers maximize savings.

“Deductions reduce your taxable income — the amount of income used to calculate tax,” Sinclaire said. “Credits, on the other hand, reduce the amount of tax you owe.”

Common deductions include:

• RRSP contributions
• Investment management fees
• Union or professional dues
• Childcare expenses
• Moving expenses
• Home office expenses

Tax credits commonly claimed by Canadians include:

• Charitable donations
• Medical expenses
• The Canada Employment Amount
• Tuition and education costs
• Student loan interest

Sinclaire notes that tax rules and available deductions can change from year to year, making it important to review current information before filing.

“If your tax situation is simple, you can often file using online software,” he said. “But if you’re self-employed, have multiple income streams, or more complex finances, it may be worth hiring a professional.”

What to do with a tax refund

While many Canadians treat a tax refund like a financial windfall, Sinclaire says it’s actually money that was overpaid during the year.

“A refund always feels like a bonus, but it’s really the government returning your own money,” he said.

Instead of spending it immediately, he suggests using the funds to strengthen your financial position.

That could include:

• Paying outstanding bills
• Reducing credit card debt
• Contributing to a mortgage payment
• Building an emergency fund
• Investing in an RRSP or TFSA

The advice comes as financial pressures remain high for many Canadians. Recent data shows missed debt payments and financial strain have been rising in several provinces, including British Columbia.

What to do if you owe taxes

If taxpayers discover they owe money and can’t pay the full amount immediately, Sinclaire says the worst thing they can do is ignore the problem.

“The Canada Revenue Agency will often work with people to set up a payment plan that fits their budget,” he said.

Failing to address tax debt can lead to additional interest, penalties, and collection actions such as frozen bank accounts or liens on property.

For people feeling overwhelmed by tax debt or other financial obligations, Sinclaire encourages them to seek professional advice.

“A licensed insolvency trustee can help you understand your options,” he said. “Sometimes just having that conversation can make things feel much more manageable.”