After spending close to 11-years working in the Canada Revenue Agency (CRA), I have a pretty good idea what gets people into tax trouble.
Okay, I know exactly what gets people into tax trouble, and while it’s nearly impossible to list all of the reasons, I can tell you that there are ways to get you out of tax trouble which many of the people I come across on a daily basis have never considered.
I can honestly say, without any prejudice that I believe a main part of the problem has to do with targeted advertising this time of year, towards tax filing season and which is aimed at people who equate getting their money back fast through the quick, cheap filing of tax returns.
The ads go something like this;
“Get the Largest Tax Refund Possible”.
“Get the Most Back.”
“Get the Most You Are Entitled To.”
“Get your Money Back Now!”
Just hearing those advertising slogans scare me, and it should scare you too.
Getting money back from the government at tax time, does not mean what you might think it does. You are not getting money from the government because you fell into a threshold, but what you are doing is getting your money back from the government. Your money that you overpaid (or were over-deducted at source) which the government kept during the year – held interest-free in fact – which you are asking for back.
It’s akin to lending someone money for a year – they use it, or invest it and make money off of it – and then a year later you ask for it back and you get it, while they made money off of it.
So how does this tied into tax debt?
History has shown me that people do not wake up in the morning and decide that they want to start carrying a balance owing to the Canada Revenue Agency. Nobody wants to worry when they go to use their debit card that there might not be funds there as a result of a CRA bank garnishment, or when they go to sell their home find out that there is a lien on it.
Tax problem occur over time and as the time passes and interest accumulates, people find their ability to deal with it declines and before you know it, the amount owing is massive and the CRA is breathing down your neck.
So imagine if after rushing to have your tax return completed – so you can get back a couple of hundred dollars – you find out that you owed money instead. Now you have a tax problem. A tax problem that you have not budgeted for. Now in collections, you have time find a way to pay off this amount owing, and fast, before the CRA takes legal actions. You can ask friends and family for money, or consider a second job to pay that off. It can be done, it can take time, or it can snowball and you become a chronic tax debtor in the eyes of the CRA.
Now the fun starts. Visits to your house, your employer and notices to your bank or clients all run the risk of causing you long-term embarrassment.
If only there was a solution available to help out the repayment.
Well, there is.
This scenario could be completely different if you have taken the time to speak with an accountant, or a reputable tax firm and knew in advance that you might owe and together you had the opportunity to determine the best way to handle this impeding debt by placing money into your RRSP, or applying for, and claiming deductions to reduce your amount of taxes owing at year-end. With a good accountant, your tax planning is not just for the current year, but also for future years.
Wouldn’t that make more sense?
One of the first questions I ask a prospective client, or anyone who comes to me for tax advice, is who completed your tax return and what are their credentials. It’s important because I have taken tax returns which owned $3000, $4000 or $5000 each year and turned them in to $4000 and $5000 credit returns just by claiming deductions and tax credits available to those taxpayers. Nothing illegal and nothing which would cause the CRA to reject the claim.
So instead of rushing to have your return completed for $40 or $50, think about spending the extra money this year and take advantage of an accounting firm which will sit with you, determine how to minimize your tax expenditures for this year and for future years. Pay what you owe and not a cent more, and if you’re getting money back every year find out why. Learn which deductions you may be eligible for and start keeping your receipts. Take control of your year-end tax filing and stop sending the CRA penalty and interest revenue.
If you already have a tax problem, you need to have tax experts review your prior year tax returns to look for missed deductions and credits. With a simple amending of the return, your balance could be reduced or wiped out completely. This really is the best way to start paying back / down a tax debt!
It’s what I do. For you.
It’s worth the money!
If you are looking for an alternative, please feel free to reach out to me here in the comment section, or email me at firstname.lastname@example.org.