This blog is written by a former Canada Revenue Agency (CRA) Employee of the Year who worked in, managed and trained CRA's Collections Department staff for almost 11-years. inTAXicating provides information, support and solutions for everything CRA related, including but not limited to; Collections, Enforcement, Audits, Liens, Back-Filing, Assessments, Director's Liability, s160 Assessments, Taxpayer Relief, Voluntary Disclosure, Bankruptcies, Proposals, Mortgages and diagnosing and solving the most complex of tax problems. Contact us for a free consultation! Should you need to hire us, you will find us to be Experienced, Honest and On Your Side. Email us at firstname.lastname@example.org, and let's begin solving your tax problems together!
Whether you like it or hate it, it is almost a certainty that TTC fares will be increasing in the City of Toronto at some point later this year or early in 2014. The City of Toronto requires additional funding in order to FINALLY start building subways in the city and the TTC needs extra funds to improve it’s crumbling infrastructure.
Either way, if you are a user of public transit, you need to be aware that you may be eligible for the Canada Revenue Agency’s Public transit deduction.
These passes must permit unlimited travel within Canada on:
commuter trains or buses; and
You can also claim the cost of:
Shorter duration passes if:
each pass entitles you to unlimited travel for an uninterrupted period of at least 5 days; and
you purchase enough of these passes so that you are entitled to unlimited travel for at least 20 days in any 28-day period
Electronic payment cards if:
the card is used to make at least 32 one-way trips during an uninterrupted period not exceeding 31 days; and
the card is issued by a public transit authority that records and provides a receipt for the cost and usage of the card.
Who can claim these deductions?
Only you or your spouse or common-law partner can claim the cost of transit passes (to the extent that these amounts have not already been claimed) for:
your spouse or common-law partner; and
your or your spouse’s or common-law partner’s children who were under 19 years of age on December 31, 2012.
But I do my own tax return. Where does this go?
It goes on line 364 of Schedule 1, Federal Tax, enter your total public transit amount.
Amount shown on a T4 slip – Enter the amount from box 84 on line 364 of Schedule 1.
Note: If your employer paid your public transit pass, it is a taxable benefit included in your employment income.
Reimbursement of an eligible expense – You can only claim the part of the amount for which you have not been or will not be reimbursed. However, you can claim the full amount if the reimbursement is included in your income, such as a benefit shown on a T4 slip, and you did not deduct the reimbursement anywhere else on your return.
Always remember that if you are going to claim this amount you must keep your Supporting Documentation – receipts and transit passes – In case the CRA asks to see them at a later date.
The CRA will need the following in order to support your claim;
Your transit pass must display all of the following information to support your claim:
an indication that it is a monthly (or longer duration) pass;
the date or period for which the pass is valid;
the name of the transit authority or organization issuing the pass;
the amount paid for the pass; and
the identity of the rider, either by name or unique identifier.
If the pass does not have all of this information, you will also need to keep receipts, cancelled cheques or credit card statements, along with your pass(es), to support your claim.
The CRA will accept receipts (letters) generated by employers or Employer Pass Program Coordinators for employer transit pass programs. The receipt should note the purpose, exact amount received, date of payment, and name of the payee.
Generally, the CRA will NOT consider a bank statement to substitute for a valid receipt, however, if your bank statement clearly indicates the purpose of the debit (for example, Employee FareCard), they will accept it as support for your claim.
If your current accountant does not ask you whether you take public transit, then you need to think about what else they are ignoring, and what other deductions you may be missing.
Passionate about Tax. Passionate about helping people.
A link to the CRA website to verify this information is below.
I had a nice conversation the other day with a representative from the CBC regarding the findings made public by The Fraser Institute, stating that it has never been easier financially, to raise a child in Canada.
My immediate thoughts were that it was absolutely not possible to do this. I even tried to convince the reporter that the figures being tossed around of $10,000-$12,000 per year were low. How could this be possible? I mean once you take into consideration child care (daycare or a nanny), you’re at the high-end of that estimation. Taking out of the equation that a major city in Canada – such as Toronto – has certain added costs, I pictured a rural community, handed-down clothing, one-parent working and home-grown veggies in the summer and I still came in over $4000.
Then I learned that this figure did not take into consideration child care.
Okay, so it might be possible… Might.
A couple of hours after speaking with the CBC, I heard Dr. Sarlow (who prepared this report), explain on AM640 that these figures represented the low-end of the scale. $3000-$4000 are what parents can expect to spend for the necessary expenses such as food, fitness, clothing, personal care and school supplies. All of this, of course, takes into consideration that the parents are being as fiscally responsible as possible and buying only what is absolutely necessary.
Even in cases where a parent stays home to look after the child(ren) or if there are parents or grandparents available to do this, there is still an opportunity cost of the lost income from that parent not working and earning income instead. I do not agree that through the omitting of childcare expenses there is a belief that the majority of Canadian families have zero child-care costs. In fact, the report states that childcare expenses are “best treated as a special expense for families for whom it applies.”
As a tax professional and a father of 3 young children in one of Canada’s most expensive cities, I can say that it takes more than “income” to be able to “afford” my children. The Canadian government (CRA) has made many benefits and credits available to help families with their expenses throughout the year and reduce the amount that they owe at tax time, including;
Children’s fitness tax credit – Children who played soccer, took ballet classes, or participated in a program of physical activity in 2012 may be eligible for a tax credit up to $500, per child, of the cost of these activities for a non-refundable tax credit of up to $75 for each child. An additional $500 for each eligible child who qualifies for the disability amount and for whom parents have paid a minimum of $100 in eligible expenses is also available.
Children’s arts tax credit – Parents of children who participated in a program of artistic, cultural, recreational, or developmental activity in 2012 may be able to claim up to $500 of the money spent per child on these activities for a non-refundable tax credit of up to $75 for each child. An additional $500 for each eligible child who qualifies for the disability amount and for whom parents have paid a minimum of $100 on registration or membership fees for an eligible program.
Child care expenses – Did your children attend daycare or a program such as a summer day camp in 2012? You or your spouse or common-law partner may be able to claim what you spent on eligible child care in 2012.
Family caregiver amount – If you have a dependant with a physical or mental impairment, you may be able to claim up to an additional $2,000 when you claim certain non-refundable tax credits.
Public transit amount – Did you or your eligible dependant use public transit in 2012? You may be able to claim the cost of certain public transit passes or electronic payment cards under this non-refundable tax credit.
Universal child care benefit – If you have children under the age of six years, you may be eligible for this taxable benefit, which supports child care choices for families.
Medical expenses – You may be able to claim a non-refundable tax credit based on the medical expenses paid for you, your spouse or common-law partner, or your children for any 12-month period ending in 2012.
Disability amount – If you or a family member has a severe and prolonged impairment in physical or mental functions, you may be able to claim this non-refundable tax credit.
Registered disability savings plan (RDSP) – A RDSP is a savings plan to help Canadians with disabilities and their families save for the long-term financial security of a person who is eligible for the disability tax credit.
In addition, in situations where parents or grand parents look after children, the family is missing out on the childcare tax credit where parents can claim payments for childcare expenses made to; caregivers, nursery schools, daycare centres, educational institutions for the part of the fee relating to childcare services, boarding schools, day camps and day sports schools.
These expenses cannot be claimed if the child care is provided by an individual who is the child’s father or mother, another individual, a related person under the age of 18-years-old, or a blood relative, or someone connected through marriage, common law partnership or adoption.
So is it better to spend the least amount of money possible when raising children, or to be aware and take advantage of the benefits and credits available to assist with raising the next generation of public policy analysts?
In today’s hyper-competitive, global economy, parents need to find ways to give their children the edge against their future competition and the best way to do this is to take advantage the credit and benefits available.
If you are now checking you prior-year tax returns to see if you claimed any of these tax credit and you did not, do not worry. In-TAX_icating Tax Services will review your previously filed tax-returns and correct them for you.
Working in the Canada Revenue Agency for almost 11-years, I learned a thing or two about how the CRA operates as well as what is a red flag for them and what the CRA often let’s slide. It helps when I negotiate with them that I know their policies, procedures and how to navigate their systems as well as they do, or even better. I’ve used this knowledge to help my clients save millions of dollars of taxes.
With that in mind, I want to help you save unnecessary expenses, so I decided to reveal the 8 Biggest Taxation No-No’s EVER.
8. Try and do it yourself. Taxation is a complicated topic for many and if you don’t live and breathe tax then you should consider either hiring someone to help you along or at the very least hire someone to set you up correctly and who will take the time to learn about you and your business so that you are getting all of the tax deductions and credits available to you all the time.
7. Think that you are above taxation. Everyone pays taxes no matter their income level; whether it be income tax, payroll tax, or consumption tax. To think that there is a magic “Pay no tax” card is a huge mistake and the CRA does not take “detaxers” or the underground economy lightly..
6. Brag about not paying taxes / scamming the government. Our tax system here in Canada is a self-assessing system with the government’s responsibility being the checks and balances. It’s not that they don’t trust you but… They don’t trust you, which is why they have huge departments responsible for catching the tax cheats. If the government doesn’t get you, your ego might;
5. Post information online about yourself or your business and think that the government will not see it and use it against you. The “government” are a bunch of people like you and I who are trying to make a living. If you claim you are suffering from financial hardship yet post pictures on Facebook showing yourself living it up, or if you claim to be Canadian and your profile states that you are born in the US, the collectors or auditors will find it and us it against you.
4. File late, miss installment payments or fail to make remittances. All this will do is add penalties and interest onto your tax account and there are very few excuses the government will accept to have them reversed or cancelled. Many large tax debts start in just this way.
3. Carry a balance. If at all possible it is critical to make sure that you do not carry a balance with the CRA. With interest being charged at a floating rate of just over 10%, compounding daily, your balance can grow at a shocking rate. The CRA is not a bank and you should not think it’s okay to treat their debt as a bank loan.
2. Don’t be afraid to search online for your tax advice. Not only has the CRA moved to strengthen their online presence but there are a lot of professionals online who have posted their experiences with the CRA and steps they took to resolve tax problems for themselves and their clients. Anyone suggestion otherwise is doing so to avoid you from finding out there are other – better – tax solution providers in Canada.
1. Thinking that anyone can help you. This is the absolute biggest tax no-no I have encountered in 17-years of taxation. If you have an electrical problem at home, do you call a plumber? Would you ask a dentist to perform open-heart surgery? How about asking a former auditor to help you with a collections problem, or an appeals officer to help you correct your payroll nanny account issues? How about going to an Insolvency firm to have a lien removed from you house which was placed there by CRA collections?
It doesn’t make sense but don’t get me wrong. If you have created a tax crime, such as tax evasion, you will need a tax lawyer, and if you need tax returns prepared, they need to be done by an accountant, and a former CRA auditor is the right solution if you have a difficult, complex corporate tax audit underway,
In taxation it is critical that you have experience on your side when you work to resolve your tax issues and understanding the way the CRA operates is more important than you could imagine.
Tax debts begin with audit or compliance issues.
Then they go to collections.
Collections leads to enforcement – garnishments, requirements to pay (RTP), liens, seizures, director’s liability, and much more.
You need experienced former collections staff to help you, and with almost 11-years of progressive collections experience in all areas, from collector to resource officer, to team leader, believe me when I say that experience helps!
When your representative knows more than the collector, or trained that collector, you know you have the best representation possible.
To leave your $250,000 tax liability to anyone else would keep me up at night too.
But there was nothing new here. While the article does, however, get a very important message across in a somewhat alarming and shocking manner probably meant to draw the attention of those who have no interest in taxation – the truth speaks for itself.
CRA auditors have always been looking at condo sellers and house sellers to determine who are flipping these properties for profit, If they are, then they have to pay a capital gains tax on the profit they make during the flip. If they hide it and are found out, then they have to pay the capital gains tax on the flip, plus they get required to pay a penalty plus interest.
For those of you who are unaware of what the article said, it essentially outlined that there are citizens who were not aware that if they buy a property and sell it within 6 months, or if they buy it but never move into it and sell it. they are liable to be taxed by the CRA, in what a Toronto tax lawyer referred to as “abusive audit practices” by the CRA.
The article seems to focus on the fact that the CRA audit group are reviewing condo sales in the two hottest markets – Toronto and Vancouver – for instances where a flip was evident and in doing so are trying to find the truth. To do that, the CRA follows their usual practices which means some people get phone calls, some get letters, some legal warning letters and some just get assessed. In the Canadian tax system, the burden of proof is on the taxpayer, so in this case they would have to prove (or explain) why they should not be subjected to a capital gains tax when all evidence points to it being owed.
At issue here is that there are some people who were forced to sell within that 6-month window due to circumstances beyond their control and they have been hit with a massive tax bill – or in the most recent case I successfully defended, a letter from the CRA real estate audit group indicating that the CRA would assess unless other information was provided.
From the article, even the Toronto Real Estate Board (TREB) stated; “the rules are generally clear on the amount of time one has to occupy a unit (as a principal residence) to benefit from a capital gains exemption.”
So what is the problem?
According to this article, the law does not stipulate a specific amount of time so people have been receiving assessments “for at least 50 per cent of any gains made if they’ve sold before living in the property 18 months to two years.” An assessment like that, I would certainly challenge!
The CRA, however, through their spokesman Sam Papadopoulos, said; “We’ve just been a little more aggressive in sending out questionnaires.”
In addition to keeping an eye on capital gains, the CRA also are seeing an increase in GST/HST housing rebates being claimed, so if a letter is sent your way regarding missing information, it is advisable to provide the information to the CRA, or seek professional help, such as the Tax professionals at Intaxicating Tax Services to make sure the CRA is comfortable with the information provided and that your interests are represented throughout the discussions.
While I would not agree that this is a “full frontal attack on everybody out there who has bought and sold a property”, I would recommend anyone who received a questionnaire or an assessment notice from the CRA but do not fall in the 6-month window, or who were required to sell for reasons beyond their control, to contact us, because we can help.
Recently, we helped out a former Live-in caregiver who came to Canada almost 20 years ago, and worked 2 jobs to buy her dream home. She purchased a condo which was scheduled to be built in 15 months, and when her floor was ready, she moved in. When tragedy struck her family back home, she was required to sell the condo and send home money to help her family.
To add insult to injury, the CRA sent her a bill for $45,000.
She had no idea such a tax existed and was an emotional wreck at the time we met.
After 2 weeks of discussions and negotiations with the CRA auditor (some of which surrounded our clients actual ability to pay for a condo based on her income of $350/yr – the auditor was reading the educational expenses, not the income field) our client received a letter from the CRA stating that the CRA would not be raising the assessment.
So no matter what tips or tricks, or techniques the CRA utilizes, the approach is consistent; If you have the facts, and you can support them, then do so. If the CRA disputes your facts, then you can file an objection and you can present your case to an appeals officer.
If you have questions, or don’t know something, then ask.
Contact us today for a free consultation, or to help you resolve your tax problem(s) once and for all.
inTAXicating Tax Services is a full-service boutique tax firm run by actual former CRA staff who over a combined 22 years have learned, applied and taught other CRA staff about the ins and outs of the CRA’s collection and enforcement divisions.
Who better to trust that the people who trained the CRA on how to do their jobs!
Many taxpayers here in Canada are advised to “keep their receipts” when they claim mileage and / or gas on their tax returns. The thought here is that the Canada Revenue Agency (CRA) might audit your tax return and will deny your claim if you cannot show proof, but what are you allowed to deduct? Does it matter if you are self-employed or if you are a salaried employee? Did you know that just keeping your receipts is not enough and there might be deductions you are entitled to that you are not claiming?
It all matters.
If you are claiming vehicle expenses and you are a salaried T4 employee working for someone else, then you need to know this;
Or, if you are self employed, you need to know this;
So if you rely on your accountant to take care of this for you, or if you wish to use the services of Intaxicating Tax Services, at the very least, you need to be aware of this important fact;
The CRA regularly rejects gas receipts from taxpayers who pay for their gas with debit cards. Why? Because they are not sure if you are getting cash back on the transaction – that does not show on the debit slip.
Example: I go to fill up my car 3 times a week, and each time I put in $20.00 worth of gasoline, but get cash back of $80.00 each time. My debit slip reads $100.00, and I claim $300.00 worth of gasoline expenses for that week on my tax return when in actual fact I was only entitled to receive a deduction in the amount of $60.00.
In addition, if you are required to travel a lot for work, make sure that you have a calendar at home and at the office (on the office computers) which show the location of the meeting, the name of the organization and / or people that you are meeting, as well as the purpose of the meeting (ie/ sales, cold call, delivery). Make sure that you track the mileage as well. This way when the CRA questions the high claims, you can show them with 100% certainty that your travel claims are for work purposes.
It also helps to keep all the gas transactions on the same credit card for organizational purposes.
It takes a little effort and organization but it’s worth it.
It is important to determine whether a worker is an employee or a self-employed individual. Employment status directly affects a person’s entitlement to employment insurance (EI) benefits under the Employment Insurance Act. It can also have an impact on how a worker is treated under other legislation such as the Canada Pension Plan and the Income Tax Act (ITA).
The facts of the working relationship as a whole determine the employment status. If the worker is an employee (employer-employee relationship), the payer is considered an employer. Employers are responsible for deducting Canada Pension Plan (CPP) contributions, EI premiums, and income tax from remuneration or other amounts they pay to their employees. They have to remit these deductions along with their share of CPP contributions and EI premiums to the Canada Revenue Agency (CRA).
An employer who fails to deduct the required CPP contributions or EI premiums has to pay both the employer’s share and the employee’s share of any contributions and premiums owing, plus penalties and interest.
If the worker is a self-employed individual and in a business relationship, he or she is considered to have a business.
The best way to be sure if there is any doubt is to request a ruling from the CRA. A ruling determines whether a worker is an employee or is self-employed, and whether that worker’s employment is pensionable or insurable. If you have a payroll account and are registered on My Business Account, you can use the “Request a CPP/EI ruling” service in My Business Account.
As well, an authorized representative for the payer can also request a ruling electronically through the Authorized Representatives Section of the CRA website, here.
This appeal in this case involved 3 women who worked for Connor Homes, a licensed operator of foster homes and group homes for children with serious behavioural and developmental disorders, as area supervisors and/or child and youth workers. Each worked under a contract that stipulated she was an independent contractor “responsible for payment of all necessary remittances, including CPP, EI and Taxes”. Each was paid at a specified hourly rate or flat rate that depended on the service provided and provided those services in accordance with the homes’ policies and procedures manual.
The CRA ruled that each of these workers were engaged in employment for purposes of the Canada Pension Plan and the Employment Insurance Act., which Connor Homes disagreed with.
In hearing the appeal, the FCA commented that the question of an individual’s working status has become increasingly important with the trend towards outsourcing and short-term contracts and the consequent effect on entitlements to Employment Insurance and Canada Pension Plan benefits. The Court also acknowledged that although the question is simple in theory, it is difficult to apply with any degree of certainty given its fact specific nature and the ever-changing workplace.
Many employers also tend to categorize employees as independent contractors so they are not responsible for withholding and remitting CPP, EI and Tax to the CRA on behalf of the employee and to avoid being responsible for benefits. If the CRA determines otherwise, the employer is responsible for both the employer and the employee portions of CPP, EI and tax (plus P&I) until they are current.
The FCA refined a number of lower court decisions into a two-part test;
1st step: Is there a mutual understanding or common intention between the parties regarding their relationship? This step generally will be determined by the written contractual arrangements and behaviour of the parties and is quite subjective. For example, is there a written agreement, were invoices issued for services rendered, was the service provider registered for GST/HST, were the income tax filings consistent with that of an independent contractor?
If so, then;
2nd step: Do the pertinent facts support that the worker is providing services as a business on her own account? The factors to consider include the level of control exercised over the worker’s activities, and whether the worker provides her own equipment, hires helpers, manages and assumes financial risk, and has an opportunity of profit in the performance of her tasks. This step is very objective.
In this appeal, the FCA found that, although the parties intended their relationship to be that of independent contractors, they were, in fact, employees. The degree of control exercised over their work was the same as that exercised over employees, they were limited in what they could earn and they took on no financial risks. Although the individuals were expected to use their own motor vehicles, this factor was insufficient to outweigh all others.
So if after this ruling and after a review of the CRA website, you are still unsure if you, or your worker is an employee or an independent contractor, then it’s best to get a ruling to be sure.