Don’t Forget The T3’s!

Are you a Canadian resident who also has an obligation to file in the US?  Before you send in your US taxes to meet the April 15th filing deadline, make sure to remember there is still one more tax slip on its way.

If you are set to receive a T3 for a Canadian trust, you have a little more time that your dual-filing counterparts.

T3 slips, otherwise known as the Statement of Trust Allocation and Designations (RL16 for Quebec residents), are being prepared and mailed – copies to the CRA – by the end of March.

A T3 slip reports how much income you received from investment in mutual funds in non-registered accounts, from business income trusts or income from an estate for a given tax year.

If you have not received your T3 tax slip – get in touch with the relevant financial administrator or trustee but make sure to file your income tax return by the deadline anyway to avoid late filing penalties.

You can find more information from the CRA website, here.

inTAXicating Is 6-Years-Old! Happy Anniversary. Let’s Share Links!

I received a surprising message from WordPress on Sunday, September 21st that this blog, inTAXicating,has celebrated it’s 6th anniversary!

Time flies!

Happy Anniversary inTAXicating.keep-calm-and-happy-6th-anniversary-1

That means it has been 6-years since I have been posting suggestions, tips, and recommendations surrounding the ins and outs of the Canada Revenue Agency (CRA), the IRS, Revenu Quebec and the WSIB.  I have written about these government organizations based on my practical work experience at the CRA and in private industry working closely with all of them.

I have posted some great stories and have so many more to come!

Compliance, Collections, Cross-Border issues, FATCA, Assessments, Liens, Director’s Liability, Audits, Negotiations, Accounting… I’ve done it all, and I’ve shared a lot of inside information that no one else hears about, or knows about.  Having all of this knowledge and wanting to share it is the driving reason behind maintaining this blog, and opening up a tax solutions business at www.intaxicating.ca.

I am also always looking for great Canadian tax content to read and discuss, so if you are a tax blogger, or if you have a different go-to site for Canadian tax information, please either post a comment on this post, or send me an email at info@intaxicating.ca and I will add the site to my blogroll.

The more Canadian tax information we can get together as a community, means we can help Canadian taxpayers that much better!

 

A Lesson in POWER: How to ALWAYS Level the Playing Field with the CRA.

Power is a funny thing.

Pretty much everyone wants it at some point in their life.

Most of the people who have it do not know how to use it properly.

To be honest, few will ever get it.

The most important thing to know about power is that it is most successful when used in two ways; either by declaring yourself King and having your cronies keep everyone else at bay by whatever means possible, or secondly by taking the time to get key players on your side and using your network to help you maintain power but all along helping those around you learn and grow, and they help everyone else under them do the same.

Which model do you think is most often associated with government tax collections agencies?

Having spent a lot of time working at the Canada Revenue Agency (CRA) in the collections and enforcement division and being responsible for training collections, enforcement and audit staff there I can honestly say not as many staff there who feel you have to do what they say no matter the consequences as you would think.

It is true that there are employees of the CRA who feel that being in a position of power allows them to do things, say things and act in a manner which is improper or unjustified.  There are also staff there who take their positions of power to a whole new level and they let their egos control their decision-making process which means they wield power in order to realize an outcome in their best interest, not yours.

I have seen how power corrupts and the result is never easy to correct.

The CRA has a lot of power.

Throughout my decade of employment at the Canada Revenue Agency I was surprised with how much power the Agency has and how many taxpayers feared this power.  I could hear collection officers tell taxpayers that they could clean out their bank accounts like “this!” (Insert snapping of fingers sound here), which is true, but also not true.  I learned to be subtle in my use of my apparent super-powers and the way I used my power was to visit my clients and by always making sure that when sitting with a taxpayer / representative that my chair was at its highest so that I would be looking down at them.  It was all I needed when dealing with the career tax evaders because it worked, but it was a tactic not necessary when dealing with 99% of the people I met with.

However, we already know that the CRA has a lot of power and in most cases before they use it, they are going to let you know first by phone, letter or a visit to your home or place of employment.  Once the CRA has decided they need to use their powers they are bound by the guidelines set out in the Income Tax Act and Excise Tax Act and by policies and procedures set out in their tax office.  The extent to which they use their powers is either their decision or it is influenced by their team leader or manager.

Once the CRA starts using their powers, your ability to control the outcome diminishes greatly. What you can control, is how much power you will ALLOW the CRA to use against you.

This is done by being proactive – reading notices, asking questions and keeping all your paperwork in one spot where you can access it once it is asked for.  But if you are past that point, or if it is just not possible, then you can take power back by enlisting the help of people who know the CRA policies, procedures and most importantly, their techniques and tactics.

If the CRA knew they were dealing with someone who knew more about their job, more about their techniques and more about how quickly they need to take an action which they claim is urgent, then the playing field is changed forever.

Having someone there to look after your best interests, who will tell you what the best plan of action for you, and you only, then taking that plan to the CRA and telling them the same is the best way to always level the playing field.  Negotiating is always easier when you know more than your opponent.

So please, if you have a tax problem, old or new, and you have been spinning your wheels with the CRA, the IRS, the MRQ, WSIB or the CRTC, don’t let it continue any longer.  Come visit inTAXicating.ca, or send us an email at info@intaxicating.ca and take advantage of our free consultation to leave how to put these issues behind you once and for all.

Have you ever been put in a position where you accepted something which was not in your best interests because the other side had all the power?

Happy to read your comments below.

Happy Halloween!

Happy Halloween from Intaxicating Tax Services.

Is there anything scarier than taxes?!?

Possibly the taxing authorities and some of the people that work there…

Death and Taxes
Death and Taxes (Photo credit: Thomas Hawk)

Boo!

We’re not afraid of Halloween, taxes OR the government!

#IntaxicatingTaxServices

Tax Season in Canada… When can you expect to see your slips, receipts and returns?

Tax time in Canada.

April 30th for most Canadians and June 15th for self-employed Canadians.

So much fun… Really.  Organizations who issue tax slips, tax returns or contribution receipts have been working hard perfecting their processes since the end of the last tax reporting season and have been working through the summer putting any necessary changes in place and gearing up for the next tax season – which all begins next month in November for many top organizations.

Since issuing organizations are gearing up, so should you, the investor, start getting ready to file your income tax returns and to do that, it really helps if you have an idea as to which slips your investment(s) will generate and when you can expect them.

Of course, even if you do get all your slips, as expected, there could always be amended slips sent to you as well resulting from an error or late directional change from the company / fund.  Even the CRA sometimes are required to make changes to their tax forms, or to the calculations contained therein and there is nothing you, nor your tax preparer can do, let alone the poor folks issuing your tax slips.  You have a slip, assume it to be correct and file to the CRA with it only to find out it’s incorrect when another version comes, with a letter, to be used instead.

Take 2010, for example… The CRA changed the dividend tax rate by something like 0.0007% and they did that 5 days before they expected T5 slips to have been received by holders and in actual fact, most of the T5’s were already issued with the incorrect rate before the CRA realized what they had done.

Since the CRA determined that the rate change would be adjusted internally, there was a communication fired out industry-wide notifying those who received T5’s that no further actions would be taken on the holder side and that they should not need to go back to their bank, financial institution or transfer agent to have it amended.  I remember a few individuals demanding their slips being amended for a total change of $7.00.  But this is what you do – with a smile when you’re in that industry.

Back to the topic.

One of the most common frustrations during tax preparation time comes from those holders who are eager to file but are unsure of what they are getting and when, roughly, it should arrive.

Due Dates

Keeping tabs on due dates can be quite difficult, especially if you’re getting them from an organization which has not fully embraced social media and are unable to provide you with a timeline, or expected dates per slip depending on what you should be receiving.

For example, T4 and T5 tax slips must be mailed out by February 28th whereas, tax slips for mutual funds, flow-through shares, limited partnerships and income trusts are not due until March 31st.

When there are late deadlines, like March 31st, a lot of pressure is then placed on your accountant as it creates a heavy backlog in April, when accountants must rush through the preparation of personal tax returns for their clients – sadly unable to give each return the care and oversight that they deserve.

I just don’t understand why all slips are not made available on the web or by email all by say March 10th in order to allow time for issuing organizations to prepare better their processes to allow for additional oversight and for time to correct errors.  This way organizations preparing the slips will have to begin auditing the slips traditionally due in February for errors and get the March ones completed – have them all merged together in the same file and made available sooner rather than later for the holder.  In addition, with a fixed deadline, the CRA or MRQ would then know when they can or cannot change slips or information on slips.

Let’s look a little closer at some issues and potential solutions;

Year-end trading summaries

Banks and brokerages use year-end trade summaries to report proceeds and commissions on each sale. However, the proceeds reported are sometimes net of commissions, which can lead investors to erroneously deduct the reported commission number a second time.  In addition, many banks issue multiple slips for each investment account, but send a consolidated summary of the slips to the CRA, which causes havoc when there is a missing slip or a question regarding one of them.

By keeping track of the totals or having them all come in March would allow the issuing organization time to audit and compare the slips to the summary before issuing to ensure they balance.

Another solution is for the issuing organization to make the slips available on their investor website and then holders can wait for the year-end summary to post – which of course would balance – and then before a holder does anything with their slips they can be comfortable that they balance.

An additional bonus would be for the issuing organization to also provide the calculations behind the slips on the website so that if there is a discrepancy, the holder can look to see how the slips were calculated and they can also learn more about how taxes are calculated.  It’s a win-win situation.  Accurate reporting and teaching the holder more about taxes.

Gain and loss reports

Many privately managed bank funds prepare gain and loss reports for clients. However, where there are US stock sales, often the cost reflects the US dollar purchase amount at the current year’s exchange rate, rather than at the time of purchase.

Traditionally, the onus is on the holder to figure out the historic exchange rate and the issuing organizations can and should assist by making this information available on their website for ease of balancing.  They should also make sure that there is accurate and complete documentation on their website and on all reports indicating the rate used and the rate needed for reporting.

T3 and T5013 tax slips

These are the two main slips which have a mailing deadline of March 31st because the trust/partnership has to finalize their books and prepare their tax returns in order to know the breakdown of the distributions so that the individual holders can then have their tax returns rushed to them – a high risk process indeed.  So once the T5’s have been received and accounted for, issuing organizations like transfer agents have only a month or less to then prepare the T3 and T5013 slips.

Let’s be honest here, it’s more like 2-3 days, due to the complexity of the partnership returns and one way around this is to ensure that any issuing organization is capable to preparing T5013’s by themselves, or that they have an organization capable of preparing them in an expedited manner.  In addition, the partnership should be contacted to let them know that the quicker they get their books in order, the quicker the rest of the slips can be prepared.  If enough people come forward, I guarantee it will get done faster.

Final Review:

When reviewing your slips before filing your tax return, keep in mind a few small differences;

T4’s vs. T4A’s – A T4 is issued by your employer and reflects the income you earned during the year, as well as showing the amount of deductions you had removed from your pay, such as; CPP, Employment Insurance (EI) and tax.  A T4A, on the other hand, is issued by a pension plan administrator and reflects the pension income you received from a pension source. T4As will not have figures listed for CPP or EI contributions since these are not deducted from pension income.

The T5 investment income slip – identifies the various types of investment income that residents of Canada have to report on their income tax and benefit returns.  T5’s are NOT issued to report income paid to non-residents of Canada, however, if you earned US interest on your investments, it will show up on your T5, with a note at the bottom saying that the interest is in US dollars.

It’s not always clear to the holder that this figure needs to be converted at the average exchange rate for the year, as set out by the CRA.   T5 slips also have both eligible and ineligible dividend boxes, which holders can accidentally reverse on their returns.

Investment loan interest

Most banks do not issue receipts for interest on investment loans unless specifically requested, resulting in a missed deduction for the client.  Borrowers should request receipts well in advance of the tax-filing deadline to ensure they arrive in time.

All in all, it’s best to keep track of investments you have and to check off when they are expected and when they are received in order to ensure you can file at your earliest convenience or reach out and ask your issuing organization / bank / transfer agency to step up and find a solution.

It’s never to early.

Even in October.

Did you know the MRQ (Revenu Quebec) has an office in Toronto?

Did you know that The Secrétariat aux Affaires Intergouvernementales Canadiennes had an office in Toronto?  So does Revenu Quebec…

The Secrétariat advises the Government of Québec on all Canadian intergovernmental matters, coordinates Québec government activities in Canada, assures the defence and promotion of Québec’s interests, and collaborates to strengthen links with Canada’s francophone and Acadian communities.

The mandate of this office which opened in 1973, is to promote and safeguard Québec’s interests in Ontario, Manitoba and Nunavut. The head of the Bureau du Québec à Toronto represents the Québec government in its relations with these three governments and is also in charge of Québec’s Vancouver branch office, which is mandated to maintain relations with the governments of British Columbia, Alberta, Saskatchewan, the Yukon and the Northwest Territories.

Contact information

Bureau du Québec à Toronto
20 Queen Street West, Suite 1504
P.O. Box 13
Toronto, Ontario M5H 3S3

Telephone: 416 977-6060
Fax: 416 596-1407
E-mail: bqtoronto@mce.gouv.qc.ca

Head: Paul-Arthur Huot

Intergovernmental and institutional relations

One of the main tasks of the Toronto office is to maintain and develop Québec’s intergovernmental and institutional relations with Ontario, Manitoba and Nunavut and facilitate exchanges with them. To that end, the office plays an active, ongoing liaison role with government and public departments and agencies such as universities, colleges and municipalities.

Economy

The office’s solid market expertise enables it to offer a wide range of economic and commercial consultation services to Québec businesses. It also promotes Québec products. Thus, the office:

  • supports Québec businesses seeking to penetrate the Ontario and Manitoba markets;
  • advises businesses in its territory looking to invest in Québec or market their products there;
  • provides services proper to the regional economic context;
  • bolsters business partnerships.

Culture

The office fosters an ongoing dialogue with the artists of Ontario and Manitoba to promote exchanges and develop a network for disseminating the work of Québec artists. Its activities are also aimed at promoting Québec’s cultural works and informing the people of Ontario and Manitoba on Québec culture.

Francophonie

The Office nurtures privileged ties with the Francophone organizations that are present on the territory it covers, thus fostering exchanges and partnerships between the Francophone representatives of these regions and Québec. It plays an active role in managing the programs arising out of the Québec Policy on the Canadian Francophonie, and in monitoring the various cooperation agreements.

E-mail: bqtoronto@mce.gouv.qc.ca

In the “Francophonie” section of its Website, the Secrétariat aux affaires intergouvernementales canadiennes offers useful information concerning the policy’s implementation and available financial assistance pursuant to the policy

Communications and public affairs

The Toronto office represents and promotes Québec. It informs Québec government authorities of the major political and economic issues in its territory. Hence, it:

  • provides information and documentation on Québec;
  • maintains relations with the national press;
  • makes a daily survey of major events in its territory;
  • informs Québec government authorities of, and advises them on, the major political, economic and social issues in Ontario and Manitoba.

 

UPDATE:

Taxation

The ministère du Revenu du Québec (or MRQ) has a team of tax specialists in Toronto who USED to be located in the Bureau du Québec à Toronto, to carry out the necessary verifications concerning Canadian firms that do business in Québec, however, they have moved!

The new Toronto office offers taxpayers and agents a tax information telephone service. It also makes available a complete inventory of tax forms.

As of December 2014, their office moved, and is now located at:

400 University Avenue, Suite 1500.

Toronto, ON M5G 1S7

 

Documents may be dropped off at this address between 8 am – 12 pm, and 1 -4 pm.

There is a drop box!

The new telephone number for Revenu Québec in Toronto is: 416.645.8770 x 645 4000

The new office sent me a note to update the information – and I thank them – but they state that with the awesome Clic Revenue Service they offer online, it is very rare that the general public would need to contact them.  I agree.

Ms. Nicole Lemieux is now the Chief Representative.

The MRQ office email: saic-bqtrev@mce.gouv.qc.ca

 

For further information on the Bureau du Québec à Toronto, feel free to contact the office’s personnel.

E-mail: bqtoronto@mce.gouv.qc.ca

http://www.saic.gouv.qc.ca/bureauduquebec/bureau_quebec_toronto_en.htm

Now that’s service!

June 15 filing deadline for the self-employed

Reminder: there is less than one week until the June 15, 2010 deadline for self-employed individuals and their spouses or common-law partners to file their 2009 individual income tax returns. Returns that are postmarked or received by the CRA after June 15 will incur a late-filing penalty as well as interest on amounts owing. Read the CRA’s news release for more information. Similar rules apply to self-employed Quebec residents who must submit their personal income tax returns to Revenue Quebec.

IRS – Treasury Regulation §301.6212-2: Definition of Last Known Address

I came across this IRS definition of “Last Known Address” which is very important as it outlines how the IRS views your address in their systems and the impact on you if you move and fail to notify the IRS, or if you send back your government mail marked “moved” yet you still live at that address.

I picked out the important parts and the whole document is available if you follow the URL as well.

The IRS and the CRA both view the last known address the same way.  If you do not update them with a new address when you move, then the last known address on file is the notice where they will send all government notices including monthly statements, refund cheques and collection / information notices. 

It is absolutely in your best interest to keep your address up to date and notify the government if you move.  The IRS takes it one step further than the CRA in that the IRS also checks with the US Postal Service to see if you have updated your address, while the CRA follows up returned mail in collection cases with a visit from your local field office to see if you have moved and talk to your neighbours and new owner / tenant for any forwarding information.

If you cannot be located after that, the CRA usually pulls a property search to see if you sold your property and a credit search to see if you moved (you always let your bank know!).  The enquiry on your credit report from the CRA should be enough to make you want to update them all by itself.

Here is the IRS regulation;

IRS – Treasury Regulation §301.6212-2: Definition of Last Known Address

This revenue procedure explains how the Internal Revenue Service is informed of a change of address. When so informed, the IRS will update the taxpayer’s address of record to the new address. The IRS uses the taxpayer’s address of record for the various documents that are required to be sent to a taxpayer’s “last known address” under the Internal Revenue Code and for refunds of overpayments of tax. Rev. Proc. 2001-18, 2001-1 C.B. 708, is superseded by this Revenue Procedure.

The Code sections listed in section 3.01 of this revenue procedure use the phrase “last known address.”

The meaning of the phrase “last known address” is important, and taxpayers should be aware of their need to update their address with the IRS in order to receive refunds of tax as well as the notices and documents listed in section 3.01 of this revenue procedure.  When a notice or document is sent to a taxpayer’s “last known address,” it is legally effective even if the taxpayer never receives it.

A taxpayer’s “last known address” is defined in Treas. Reg. § 301.6212-2(a) as the address on the taxpayer’s most recently filed and properly processed return, unless the IRS has been given clear and concise notification of a different address.

A taxpayer should take appropriate steps to ensure that his or her address is correct in accordance with the addressing standards of the United States Postal Service

(USPS) and, when providing the IRS with an address, should include all required addressing information, including apartment/suite number, street name and number, city, state, and zip code.

The IRS generally will use the address on the most recently filed and properly processed return as the address of record for all the notices and documents set forth in section 3.01 above. The IRS will, however, automatically update a taxpayer’s address of record based on a new address that the taxpayer provides the USPS that is retained in USPS’s National Change of Address database (NCOA database). See Treas. Reg. § 301.6212-2(b)(2). If a taxpayer wishes to change the address of record, the taxpayer must give clear and concise notification as provided by this revenue procedure. The terms “return,” “properly processed,” “address on return,” and “clear and concise notification” are defined in section 5 below.

If a taxpayer files a return with new address information, the proper processing of the return will update the taxpayer’s address of record. With the exception of the returns listed in section 4.04, a taxpayer’s address of record will be updated for the name and taxpayer identification number (the employer identification number, individual taxpayer identification number, or social security number) under which the return is filed.

If a taxpayer no longer wishes the address of record to be the one shown on the most recently filed return (for example, because the taxpayer moved after the return was filed), clear and concise notification of a change of address as defined in section

5.04 below should be provided to the Service.

If, after a joint return is filed, either taxpayer establishes a separate residence, each taxpayer should provide clear and concise notification of a current address to the Service as provided in section 4.02 above.

The IRS maintains address records for gift, estate, and generationskipping transfer tax returns (Forms 706, 706-A, 706-NA, 709, and 709-A) separate from the address records for individual income tax returns (Forms 1040, 1040-A, 1040-EZ, 1040 (NR), 1040 (PR), 1040-SS, and 1040-X). Thus, an individual taxpayer’s notification of a change of address should identify whether any gift, estate, or generation-skipping transfer tax returns are affected by the notification.

A taxpayer should notify the USPS facility serving the taxpayer’s old address of the taxpayer’s new address so that mail from the Service can be forwarded to the new address. The Service will also automatically update a taxpayer’s address of record based on a new address that the taxpayer provides to the USPS and that the USPS retains in its National Change of Address database. See Treas. Reg. § 301.6212-2(b)(2).  Taxpayers are nonetheless advised to notify the Service directly of a change of address to ensure a timely and accurate update of the Service’s address of record for the taxpayer.

If the taxpayer’s last known address is altered due to address reorganization or standardization measures taken by the USPS or a legislative body, the Service will treat the altered address as the taxpayer’s new address of record. Examples of an address reorganization or standardization measures include the redesignation of rural route addresses as street addresses or changes to zip code boundaries. Any clear and concise notification of a different address provided by the taxpayer to the Service subsequent to an address standardization or reorganization shall control over any address changes made pursuant to this section 4.06.

This revenue procedure is effective June 1, 2010.

http://www.irs.gov/pub/irs-drop/rp-10-16.pdf

Mailing to Supressed Holders – CRA and MRQ.

Have you ever wondered if you are required by law to mail out a tax slip to an individual / entity even though in doing so you know it will be returned by the post office marked as “undeliverable”.

These Q&A’s below may help you get a cleared picture of your legal requirements;

Q1: Is there a requirement to mail tax forms to suppressed holders?

A1: Yes. There is no statutory exception to this requirement. The forms specifically mentioned included; the T5, T5008, T4, T4PS, T4RSP, T4RIF, RSPR, T3, NR4, T5013 and T101.

Q2: Will the government excuse you from mailing to suppressed holders if the issuer/client advises you not to mail them / their clients?

A2: No, the obligation to mail is yours, because you make the payment (e.g. dividend or interest). In fact, if there were a penalty charged for failing to provide a tax slip, it would be on you, not the entity or person advising you.

The Income Tax Act does not specifically say “you must mail to suppressed holders”.  Rather, it states that if you make a payment, you have to send out a tax form.   The Income Tax Act does not make a distinction between suppressed holders and other holders. (Note, even though we do not actually “make a payment” – in that we do not send out a cheque to a suppressed holder – the analysis is the same.)

Q3: Is the requirement to mail absolute regardless of the dollar amount, or is there a dollar amount threshold? For example, don’t have to mail unless the aggregate amount paid to a holder is greater than $50.00.

A3: There is a $50 threshold for T5 reporting (that is, the CRA does not require that a T5 be prepared if the amount of the payment was less than $50).  For the other tax forms, there is no threshold.

Q4: What about prior tax years?  Do we have to mail these prior years’ tax forms if requested?

A4: There is nothing in the Income Tax Act which would alleviate the responsibility to provide prior year forms and failing to provide one may result in a complaint and subsequent audit.

Q5: What is the situation with respect to suppressed holders under the Quebec income tax regime, the MRQ?

A5: Similar to the Federal Income Tax Act, under the Quebec income tax regime (a) there is a requirement to mail the tax forms and (b) you are not excused from mailing if the issuer/client advises you not to mail.

Bottom line… Mail!

Change to the Dividend Tax Credit Rate – MRQ

Further to an announcement made by the Québec Minister of Finance, the rate of the dividend tax credit will be modified for the 2010 taxation year.

The current rate of 17.255% will be reduced to 17.136%. This change will affect the RL-3 slip (box C), the RL-15 slip (box 44), the RL-16 slip (box J) and the RL-25 slip (box G).

The new rate must be taken into account for certification purposes, and in the production of the slips concerned for 2010.

Is anyone tracking this?

I’m looking for confirmation that it still is a go.