I came across this article from the Montreal Gazette;
I strongly recommend that you take the time to read it. It is brief, but very informative as it tells the story that I have been trying to tell for the past 20-plus years! There is that there is a significant percentage of, not just Quebecers, but Canadians who leaving money on the table because they don’t understand the tax system, according to a report released by the C.D. Howe Institute last week.
The report — which bases many of its conclusions on a survey of 1,000 Quebecers — suggests that lack of knowledge is one of the reasons many people don’t take advantage of credits and savings vehicles, like RRSPs, which could reduce their tax burden.
“People might be missing out on benefits that they’re entitled to,” said Antoine Genest-Grégoire, a tax policy researcher at the Université de Sherbrooke and one of the authors of the report.
“It can take various forms, people can simply not know about the existence of the credit … sometimes, they know it exists but they don’t know how to use it or they find it too complicated.”
Survey participants were asked a series of questions about how the tax system works and the average score was just 55%.
It wasn’t just tax credits that left participants stumped. Respondents scored poorly on questions about progressivity — the idea that people with higher incomes pay a higher tax rate, a core principle of the Canadian income tax system.
While almost 90% of respondents knew that income tax rates differ based on how much people make, many struggled with the concept of bracketing — when different segments of an individual’s income are taxed at different rates.
“We hear a lot of people thinking that once you reach the top income brackets, you essentially pay close to 50% of your income in taxes,” Genest-Grégoire says, when in reality, it’s only the income above the cut-off for the highest tax bracket that’s taxed at the highest tax rate.
Only 26% of survey respondents were able to answer a question about that correctly.
While survey respondents generally had a good sense of whether they pay sales tax on everyday purchases, like groceries, prepared food and clothing, there were some exceptions.
For example, Quebec provincial sales tax doesn’t apply to books, a decision made to encourage literacy and support book publishers in the province. Only 21% of survey respondents knew that.
The result, Genest-Grégoire said, is that the public policy objectives of the tax exemption are unlikely to be realized.
The lack of tax literacy doesn’t just affect individuals pocketbooks, Genest-Grégoire said.
“People who don’t understand taxes tend to have lower trust in the tax system. The Canadian tax system, even though you’re obligated by law to produce a tax return, works on trust. The government doesn’t audit everyone,” he said. This lack of trust “makes tax avoidance, tax evasion more probable.”
Genest-Grégoire said the provincial and federal revenue agencies have taken steps to put more information online, but the system itself remains complex. One solution would be to make benefits that are currently provided through the tax system more accessible and for government to automatically enrol people, as is already the case with many benefits for children.
Warren Orlans, a former CRA Collections Employee turned Taxpayer Advocate has been saying for over a decade that the CRA needs to continue putting out information on the Internet, however it needs to be available in many different formats in order to be most effectively accessed by Canadians everywhere. “Not everyone learns the same way, so having a concept explained in text, showing steps, and possibly with an example and even with little videos would expose the greatest number of Canadians to the message at once.”
“Every day, I deal with Canadian taxpayers and corporations of all sizes as they try to understand and interpret the CRA. My 11-year’s experience at the CRA and 10-years outside the CRA have afforded me the ability to diagnose and resolve even the most complex of tax matters”, Orlans said.
If you need help understanding the CRA, or interpreting their letters or actions, contact the best, at inTAXicating. Email: info@inTAXicating.ca. Or call us at 416.833.1581.
Toronto-based, Coast-to-coast tax liability expertise.
Since today is Thursday, I thought a Thursday Thirteen themed post might be a good change of pace!
Here are 13 things that should NEVER be said to someone with a tax problem, from someone who claims to want to help (or just your money).
Each quote below was an actual quote uttered by a tax solution representative or accountant to a prospective client in my presence.
Sit tight, and get ready to shake your head in disbelief…
13. “GST, HST, PST… They’re all the same.”
12. “CRA Collectors don’t care about you. They treat their clients like a ‘whack-a-mole’ game. You pop your head up and they smack you on the head with a hammer. We provide you with a helmet or advise you to stay underground until the game is over.”
11. “You’re an alcoholic? GREAT! Substance abuse qualifies for relief!!”
10. “I can tell you for a fact that the Auditor General requires the CRA to close files, NOT collect money. The benchmark is 7-years. We can close your file in 7-years!”
9. “You’re just a little guy! Nobody cares about you.”
8. “If you tell the CRA anything you are shooting yourself in the feet. That’s dumb and it hurts.”
7. “I know the CRA have won in Tax Court, but they are wrong, and this time we have everything we need to prove them wrong!”
6. “Just ignore them and it will all go away.”
5. “You don’t need to speak to a Tax lawyer, or an accountant. They’re useless. You should never talk to the tax preparer. Just pay us $5,000 and we can make it all go away.”
4. “The Taxman…”
3. “I don’t care what the CRA wants, and how soon they want it. They’re getting what I want to give them, when I’m ready to give it to them, AND they’re going to see that I’m right and they are wrong.”
2. “We need to reduce the amount that you owe, so I’m going to create a T2200 for you, and claim a lot of expenses that your employer has not deducted like mileage, phone, and parking. They’ll never know its not true and on the off-chance that they ask, I have hundreds of parking receipts in my car I can give them. It’s perfectly fine…”
- “Don’t even bother opening that envelope… Just throw it out.”
Just missing this list, but barely, is the commonly uttered line; “Quick, transfer the house out of your name before the CRA registers a lien against it!”
Just wanted to drop a quick note to all of you who called, emailed and hit me up on the blog or on social media that we’re back to work and trying to get to everyone as soon as possible.
If anyone has an urgent matter, please send an email to email@example.com, in the subject line, please write “urgent” and that will be the top priority.
For new readers of this blog or who are seeing this blog through our website, here is what you need to know!
inTAXicating is a Canadian tax consulting business which provides solutions to Canadian Tax problems predominantly related to the Canada Revenue Agency (CRA), but not limited to the CRA.
With over 20-years experience in Canadian Tax (throw in some IRS tax, FATCA, Revenu Quebec, Cross-border matters and WSIB) combined with over 10-years working in the CRA in their collections division, you have the experience and expertise that no-one else can boast to have.
Our model is simple! Give you the truth based on the facts.
You get a free consultation and if it is determined that you can handle it best, or if your questions are quickly answered, then you are on your way.
If there are more complex matters which may eventually require greater expertise, then you have the option to handle you tax matters up to that point and then hand it over, or you may wish to hand it over right away…
It’s your taxes and you need to know what is being done and how to properly handle them going forward.
There are no magical cures for tax problems which took years and years to grow, so if anyone promises you a magic bullet, proceed with caution.
inTAXicating also believes that everyone who earns money needs to pay their taxes, however, they should pay what they owe, and in circumstances where there is no ability to pay, the government should understand that and give you a break.
No questions are bad questions.
I do not believe in the “natural person” being exempt from taxes because the CRA does not believe it, but I have spoken to many, many “de-taxers” and enjoy the conversations and helping them through the CRA’s prosecutions.
We specialize in all matters relating to CRA collections, specifically Directors Liability, Taxpayers Relief, s160 assessments, liens, and garnishments, RTP’s.
We provide audit representation, accounting (through a CA), as well as presenting the options to solve all tax matters including the ugliest and most complex tax matters. The messier the better!
In short, we want to help.
15 minute Consultation / responding to questions via email – free
Meeting – $250 plus HST (one hour meeting – detailed summary and recommended plan of action included)
Engagement – either hourly @ $250/hour or a fixed fee depending on the complexity and amount of work involved.
Accounting – best rates possible also related to the amount of work involved.
We try to stick to this model as best as humanly possible because it’s your money and you work hard for it, so you should not have to throw it away.
I receive a lot of queries surrounding the key Canadian Tax Filing Dates and Deadlines which impacts Individuals and Businesses, so I gathered that information and while not exhaustive, it highlights key dates and deadlines for you to remember and mark on your calendar for the next couple of months.
Remember being late results in penalties and interest and penalties incurred year over year increase in percentage. For example, a regular non-filer who became a late filer was paying a late filing penalty of 62% by his 5th year of late filing.
2015 Canadian Tax Dates and Deadlines for the 2014 Taxation Year.
On or before April 30th, 2015 (a Thursday) is the Personal Income Tax return deadline.
Self-Employed (you or spouse/common-law partner):
If you or your spouse or common-law partner carried on a business in 2014 (other than a business whose expenditures are primarily in connection with a tax shelter), the deadline to file your 2014 income tax and benefit return is midnight on June 15th, 2015.
*** However, if you have a balance owing for 2014, you still have to pay it on or before April 30, 2015.
If you are the legal representative – executor, administrator, or liquidator – of the estate of an individual who died in 2014, you may have to file a return for 2014 for that individual.
Information relating to those filing requirements can be found on the CRA website; Guide T4011, Preparing Returns for Deceased Persons,
Additional information can be found here: Information Sheet RC4111, What to do following a death.
The due date for the final return will depend on the date of death and whether or not the deceased or his or her spouse or common-law partner carried on a business in 2014.
Of note, if you received income in 2014 for a person who died in 2013 or earlier, do not file an individual return for 2014 for that income on behalf of that person. You likely will have to file a T3 Trust Income Tax and Information Return for the estate.
March 2nd, 2015 is the deadline for contributing to an RRSP and to have that contribution count towards your 2014 tax year.
If you suspect you might owe taxes, making a RRSP contribution should help lessen the burden, and in some cases will turn your liability into a credit.
Employee / Nanny Filing Deadline for providing a T4:
In all instances, you have to file your T4 information return (T4’s plus T4 Summary) on or before the last day of February following the calendar year that the information return applies to.
If the due date falls on a Saturday, a Sunday, or a public holiday, your return is due the next business day, so for 2015, they are due March 2nd, 2015 as February 28th falls on a Saturday.
The CRA considers your return to be filed on time if they receive it or it is postmarked on or before the due date. If you fail to file it on time, the CRA will likely assess a penalty.
If you have more than one payroll program account, you will have to file a separate information return for each account.
If you need to file early due to bankruptcy or if your business stops operating, you are required to file within 30 days from the date your business ends.
If the owner of a business dies, the T4 slips and T4 Summary have to be filed within 90 days from the date of death.
You must file information returns by Internet if you file more than 50 information returns (slips) for a calendar year. More information is available at the CRA website, here: Filing Information Returns Electronically (T4/T5 and other types of returns).
General filing information:
* Please keep in mind that if the deadline falls on a weekend or public holiday, for federal income tax purposes, your return is filed on time if it is received or it is postmarked on the next business day.
As well, you should note the difference in “received” dates the CRA adheres to. The CRA considers something to have been received by a taxpayer once the CRA sends that item out to a known address they have on file. On the other hand, the CRA does not consider your paperwork or payments as being received until the CRA actually has said cheque or return in hand and stamps it with their postmark. Mailing something on February 28th which is due February 28th is likely going to result in a penalty for late filing.
* In cases where an individual dies, the final income tax return must generally be filed on or before the regular filing deadline for the year OR six months after the date of death of the individual – whichever is later.
* There will be no income inclusion for an operating cost benefit if an employee fully reimburses the employer for all operating expenses, including GST/HST and PST, relating to the personal use of the automobile within 45 days after the end of the calendar year.
* An employee who has received a low-interest loan from an employer during any part of the year is deemed to have received a taxable employment benefit that is calculated as interest at the CRA’s prescribed rate for the period during which the loan was outstanding. The amount of the benefit is reduced by any interest actually paid on the loan within 30 days of the end of the calendar year.
* Where a family member has loaned funds to another family member or to a family trust, the income attribution rules may not apply on the related investment income where interest on the loan is charged at a rate at least equal to the prescribed rate that was in effect when the loan was made and where interest on the loan is paid by January 30 of the following year.
* In the case of a general corporation, the due date for the balance owing for a taxation year is generally the last day of the second month following the end of the year. In addition, provided certain conditions are met, the due date for the balance owing for CCPCs is the last day of the third month following the end of the taxation year.
* Corporations are required to pay monthly tax installments during the year if their total taxes payable (which is specifically defined) for the current or preceding taxation year is more than $3,000.
* In cases where the taxation year-end of the corporation is the last day of the month, installment payments are due on or before the last day of each month or each quarter. Where the taxation year-end of the corporation does not fall on the last day of the month, the first installment is due one month or quarter less a day from the first day of the corporation’s taxation year-end. Subsequent installments are due on the same day of each of the following months or quarters.
* CCPCs may pay quarterly installments if the following conditions are met:
- The corporation’s taxable income, and that of any associated corporations, for the current or previous year does not exceed $500,000;
- The corporation claimed the small business deduction in computing its tax payable for the taxation year or for the preceding taxation year;
- The corporation’s taxable capital employed in Canada, and that of any associated corporations, does not exceed $10 million in the year or in the preceding taxation year; and
- Throughout the 12 months ending at the last installment payment date, the corporation made all tax remittances and filings under the Income Tax Act, Employment Insurance Act, Canada Pension Plan or GST/HST section of the Excise Tax Act on time.
* The due date of a GST/HST return is determined by the reporting period. If the reporting period is monthly or quarterly, the GST/HST return must be filed and any amount owing must be remitted no later than one month after the end of the reporting period. If there is an annual reporting period, the GST/HST return must be filed and any amount owing must be remitted no later than three months after the end of the fiscal year. Please note that an individual with business income for income tax purposes, who is also an annual filer with a December 31 fiscal year-end, must file their GST/HST return by June 15 and pay their net GST/HST owing by April 30 to avoid penalties and interest.
* Information returns that include T4, T4A, T4A-NR and T5 must be filed on or before the last day of February in each year and shall be in respect of the preceding calendar year.
* An NR4 Information Return must be filed on or before the last day of March or in the case of an estate or trust, no later than 90 days after the end of the estate’s or trust’s tax year. An NR4 Information Return must be filed in respect of payments such as interest, dividends, royalties or pensions made to non-residents in the preceding calendar year.
* In cases where all members of the partnership are individuals (including trusts), the T5013 is due no later than March 31 of the calendar year following the year in which the partnership’s fiscal period ended. In cases where all members of the partnership are corporations, the T5013 is due no later than five months from the end of the partnership’s fiscal period. In all other cases, the T5013 is due on or before the earlier of (i) the day that is five months after the end of the fiscal period, and (ii) the last day of March in the calendar year immediately following the calendar year in which the fiscal period ended or with which the end of the fiscal period coincides.
Good news if you are ready to get filing, because the 2014 General Income Tax and Benefit packages are available at post offices as of early February, and the first day you can use NETFILE was February 9th, 2015.
Most people are familiar with the concept of bankruptcy. Creditors are owed money, assets are liquidated and the liquidation proceeds are paid to creditors. The process is usually very difficult for the person filing bankruptcy as his/her assets may consist of a family home or a cottage, which possibly has been in the family for generations. The disruption can be devastating for the family and their children.
The Bankruptcy and Insolvency Act (BIA), the federal statute that governs bankruptcy and restructuring in Canada, provides an option other than bankruptcy.
The BIA allows an insolvent person whose aggregate debts are less than $250,000 (not including mortgages on residential property) to file what is known as a “consumer proposal”. A consumer proposal is not the same as bankruptcy, even though they are both governed by the same laws.
A consumer proposal is a formal settlement between a debtor and his/her creditors of all unsecured debts for an agreed upon amount. The settlement does not have to be for the full amount of all debts but can be for a fraction of the total owed. The debtor makes one monthly payment to the administrator of the proposal, who in turn makes dividend payments to the creditors.
More specifically, a person who is unable to meet their monthly debt payments meets with a qualified professional, who administers consumer proposals, and they discuss the ability of the debtor to make monthly payments. Together, they review the monthly income and expense statement of the debtor, as well as his/her net worth, to determine how much the debtor is able to pay each month. Once a monthly amount is determined the administrator notifies the creditors and helps to finalize a settlement agreement between the debtor and the creditors. Fifty percent (in dollar value) of the creditors must vote to accept the proposal for it to become binding on all.
The main difference between a consumer proposal and a bankruptcy is that in the case of the proposal the debtor’s assets are not liquidated. The debtor receives the same protection from creditors and collectors but retains control of his/her assets. The two obvious benefits are that there is no loss of assets and no family disruption.
One might ask “Well why don’t I just call all my creditors and work out my own settlement?” This will not necessarily work because, for example, if you have five creditors and you are able to settle with only
three of them, the remaining two are not forced to settle. They can still pursue you for the amounts they are owed. In a consumer proposal, all creditors are dealt with together and receive the same payment plan. As consumer proposals are governed by federal law, any settlement is enforced by the courts and creditors are required to accept the settlement in full and final satisfaction of all debts. So the debtor gets to keep his/her assets, he makes monthly payments to satisfy all debts over time and the creditors receive payments, which are greater than what they would have received if the debtor had filed bankruptcy.
Consumer proposals comprise an increasingly large percentage of overall personal insolvency filings in Canada. For records ending November 30, 2010, 31% of all consumer insolvencies in Canada were
consumer proposals. This is up dramatically from ten years ago when the majority filed for bankruptcy, having had no knowledge of the alternative.
In today’s economic environment, it’s important that people know what options they have to deal with debt. Canada’s insolvency laws mean that today, “Proposals are not just for marriage anymore”.
Office of the Superintendent of Bankruptcy. Insolvency Statistics in Canada – November 2010. Retrieved 2011, from http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br02528.html
Todd Howell is a licensed Trustee in bankruptcy and has over 13 years of experience in the bankruptcy and insolvency field. Todd is also a certified Insolvency Counsellor and a member of the Canadian
Association of Insolvency and Restructuring Professionals.
Connect with Todd at: 416.963.7198 or firstname.lastname@example.org.
This article was originally published in Crowe Soberman’s quarterly business newsletter – Comments and is intended for clients of the firm. inTAXicating has been granted permission to repost this article solely for informative purposes. Should you require any assistance, we encourage you to contact the author(s) toll free at 1.877.929.2501, or in the GTA at 416.929.2500.
More articles can be found here; http://www.crowehorwath.net/SOBERMAN/services/advisory/Personal_Insolvency/Personal_Insolvency.aspx
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.
- CRA Tightening the ship and tightening their grip… (intaxicating.wordpress.com)
- CRA: The Ten Year Rule for forgiveness on penalties and interest overturned at the court of appeal. (intaxicating.wordpress.com)