Thursday Thirteen: 13 Tax-Related Things That Confuse Canadians.

I came across this interesting article from the Globe and Mail newspaper called “10 Tax Related Things that Leave Canadians Stumped”, and while I suggest you read the original article, I have used this article for inspiration to provide 13 Tax-Related Things that Confuse Canadians.

  1. Why can’t spouses file joint income tax returns as they can do in the US?
  2. Why are parents only allowed a transfer of $5,000 of their child’s unused tuition, education and book credits?  The parent is often the one who paid the costs of tuition, should they not be able use all of it?
  3. If I received an actual dividend of $1,000, why do I report $1,380 on my tax return ($380 is called a “dividend gross-up” and the purpose of grossing up a payment is to bring the dividend back up to the amount of money the corporation earned before it paid corporate tax.
  4. Why must child care expenses be claimed by the lower-income spouse?  Understanding that the motivation behind this child care deduction is to get people with children back to work to help drive the economy, but the way this deduction is written it is claimed by the lower-income spouse based on 2/3rds of their income.  By doing this, the deduction is constrained by that spouse’s income.  Should it not be based on the higher-earning spouse so that the family could often get a larger child care claim to offset the costs and since it’s being paid, why are they not allowed to claim it in full in each and every case?
  5. When one spouse has a tax refund and the other owes money, why can’t you net the refund and tax payment against each other? Again, this would simplify our tax system and reduce the administration and paper work for the CRA, but the privacy rules are cited for this not happening. but should the situation be different – a spouse with a debt – and they are all over that!
  6. Why do people hold on to their investments too long before converting them, resulting in a capital gain becoming a capital loss?  Yes, the tax on capital gains is 23% but paying tax on a gain is much better than losing money, isn’t it?
  7. How is it that the CRA never knows when people move when they are looking for missing filings or returns but they always know where I am when they need to send a legal warning letter or register a lien against a property.?
  8. Why do people pay no attention to the RRSP contribution limit information on their income tax assessments when planning their contributions for the year, usually at the last-minute in March? An individual’s RRSP contribution limit for the upcoming year is printed right on the Notice of Assessment for the prior year and can be found through the “My Accounts” section of the CRA website.
  9. Why can self-employed people claim mortgage interest as a home-office expense while employees cannot? If you have an employer that requires you to work from home and they sign a T2200 form saying so, why should an employee’s deductible expenses be restricted in comparison to a self-employed person’s?
  10. Why can I deduct my car expenses when I drive directly to my client’s office from my home – but when I drive to my own office to work with the client via teleconference or telephone, why is the mileage considered personal?
  11. Why is the maximum childcare expense set at $7,000, when the monthly child care cost far exceeds $1,000 in many cities? It drops to $4,000 for children aged 7 to 16.
  12. If the CRA send me a refund cheque in error – their error – and whether I cash it or not, they charge me penalties and interest when they recover it?
  13. How a CRA audit deemed to be a “random” audit where the auditor states that they are not looking for anything, always has something behind it which caused it.  Why can’t they just say, “You’ve been snitched on”, or “You claimed an expense with a fake invoice” or even “You took cash from your business and deposited it into your personal account.”  That way, knowing the gig is up, the auditor could transfer all like issues over and assess and give the person a warning that will have meaning.

Can anyone answer any of these?

 

Time will tell.

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Author: Warren Orlans

Welcome to inTAXicating. My name is Warren Orlans and this is my blog. With over 17-years experience in the taxation industry, 11 of them working for the Canada Revenue Agency (CRA), and the rest working in the private sector at large financial institutions responsible for resolving tax issues for corporations and individuals and the Canadian lead for a large US bank on FATCA implementation. My tax career began pretty much out of university at the CRA, in Collections, where I moved up, across, over and up again through their division with stops in Enforcement, Taxpayer Relief (then Fairness), Audit, Directors Liability, Training, Mentoring, GST, GST/HST, Payroll, Corporate Tax, Personal tax, and probably much more. If you have a collections, compliance or audit issue with the CRA, MRQ, IRS or with the CRTC, WSIB or any aspect of those agencies, inTAXicating is the place you need to contact. inTAXicating has entered into a strategic partnership with Goldhar and Associates, to create Goldhar Tax Solutions. This partnership allows my team to include amazing tax lawyers, insolvency practitioners, mortgage brokers, debt counselling experts and much more. When dealing with governments, knowledge is power. We possess strong understanding of government so we know what the next step is before the government does. When you have a collections problem with the CRA, do you hire a graphic artist? No, you get a former collector who trained the staff, and who worked as a resource officer for 5 years. Then you know you are on the right track to resolving your tax problem(s). Others offer suggestions. We offer solutions! tax@goldhar.ca

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