Claiming Gas or Mileage? How to avoid having this expense denied by the Canada Revenue Agency.

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.

Intaxicating Tax Services can be found @ http://www.intaxicating.ca and make sure to drop by our helpful blog here.

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June 15th Unincorporated Filing Deadline (Canada) is Fast Approaching, Plus Year-Round Tax Tips!

The chaos and stress that comes with tax filing season in Canada has ended for most of us unless you are operating a sole proprietorship or partnership because you have until June 15th, 2013 to file your income tax (T1) return.  Any amounts owing to the Canada Revenue Agency (CRA) were due to the CRA by April 30th, but you have the extra month-and-a-half to file the information return, so don’t be late.

In addition, June 15th falls on a Saturday this year, so the actual return is due in the hands of the CRA by midnight on Monday June 17th.  Mailing it on the 14th is not the best option, so if you are waiting until that weekend to complete the return, I strongly recommend that you walk it into the closest CRA Tax Services Office at get it stamped with the 17th on it, or courier it to a tax centre to ensure it arrives on the due date.

If in completing the return you now find out that you actually owe(d) the CRA money, you need to pay that amount in full.  If paying it in full is not an option, then send in the amount you can best afford, and contact the CRA to make a payment arrangement on the remainder.  If doing that is not an option or if you have been carrying a balance with the CRA and this return is going to add to that balance then you have a tax problem and you are likely going to need professional help to keep enforcement actions at bay.

The CRA charges interest daily, beginning the day after taxes were due and a late-filing penalty of 5% of your balance owing plus 1% of your balance owing for each month your tax return is late, for a maximum of 12 months.   Once you caught up in the web of CRA collections and enforcement it can be very difficult to get out.  The collectors are not going to advise you how to best handle your affairs.  For the most part, then don’t understand how businesses operate, let alone your business and all they want is full payment in order to close their file.

It is in your best interest to resolve these tax matters as soon as possible, before penalties are charged and interest accumulates.  Accepting these extra fees in hope that the Taxpayer Relief Program is going to grant you relief is not a wise bet to make.

At Intaxicating Tax Services, we have seen all types of tax problems over the 17-years we’ve been helping taxpayers resolve their tax issues with the Canada Revenue Agency.  As a former Collections officer, Enforcement officer, Complex Case Officer and Team Leader I have personally handled files with every level of complexity, and all revenue types, and have recommended the same course of action for all of them – Find someone trustworthy, who knows the way CRA collections operate and leverage that expertise to get out of this mess once and for all.

If negotiating a payment plan with the Canada Revenue Agency was easy and without risk, there would be no need for Collections staff at the CRA.  The truth is, it can be very difficult to work out a payment plan with the Canada Revenue Agency while making sure that you do not give them any collection sources that they do not already have, so they can secure their liability at your expense.

Don’t let them take advantage of your good will.

Intaxicating Tax Services can help you with this!

Here are some tax facts to keep in mind as your prepare you finances for the 2013 tax filing season.

13. Contrary to popular belief the top 10% of Canadian earners pay half of all personal income taxes, while the half of earners with the lowest income pay less than a tenth (1/10th) of the total.  These high income earners keep the economy moving by having money to spend and by actually spending it.  It is this reason why those in the highest tax brackets need (and can afford) to best lawyers, accountants and tax experts, as they are already well into planning for their tax returns for 2013 and beyond.  They DO have some choice as to how much they want to spend and how much they plan to save.  All Canadians have this choice too.  By spending less, we pay less consumption taxes (GST/HST/PST), if we downsize our homes or live outside of metropolitan areas we can reduce or pay less property taxes, if we walk, cycle or carpool more, we pay less gasoline taxes, and if we are more organized and smarter with how much money we spend in total, we pay less bank fees, late fees, interest on credit cards, etc.  Everyone, not matter their income has to be smart with their money.  Paying penalties and interest to the CRA is NOT a smart way to handle our money.

12. Regardless of where you are and what you do, you really should file a tax return.  Canadian reporting is voluntary in certain conditions, but be sure you are exempted before you pass on filing.  The CRA provides details as to when you need to file and why you should file right here.

11. You have the option to defer the paying of taxes, in some cases, when you save for retirement inside a RRSP / IRA or any other form of registered retirement savings plan.  In these plans, you defer payment of income taxes until later in life. There are taxes assessed when you withdraw the money, after you have reached a certain age but those tax rates are probably lower than you would be paying now, if you have above-average income.  If your income is below average, you may be better off to pay taxes now and save in a tax-free savings account (TFSA).  If you save for your family inside a registered education savings plan or a registered disability savings plan, there will be a deferral of taxes on interest earnings, other investment returns and government grants.  Then the child or other relative for whom the plan was set up for, will likely pay little or no taxes on those savings.

10. Before you file make sure you have all your slips – it’s best to have a place where they can go throughout the year, and periodically, you should take them out, write on them what they were for and keep them all together at time of filing.   Amending tax returns is a long, tedious process, plus having to search the house or business for these slips one day before filing deadline can be extremely stressful.

9.  Make sure the government has correct information for you – address, name, direct deposit (if you never owe money) because you want your refund and if they audit you, they might not be re-assessing you, but rather they may be looking for an additional copy of a receipt they lost in the processing of 20 million tax returns.   If they do not have a correct address and they need information or something gets lost along the way and a balance arises, they will take it from your bank account or freeze that account until they get all your information – but now you are in collections…

8.  Do not ignore government mail.  Open it and action it.

7.  File electronically – but keep your receipts handy for audit and verification purposes.  It is the quickest way to file, and you may even get your refund quicker.   As an added bonus, you are also being environmentally responsible and saving trees.

6.  If you owe money, make sure that you address it properly.  Do not write a note and attach it to your return – those notes get tossed during the mass-processing cycle – but instead, contact the government and make a payment arrangement and honor it.   Anything you attach to your return – even if it is written with a glitter pen (don’t laugh, I have received MANY letters written this way during my time at the CRA) comes into the processing centres, the processors, who are usually temporary hires to help the CRA get through the tax season, rip of cheques and process that right away, then tear off any unnecessary paperwork and send the returns to a data processing group.  Anything not a return or money gets shredded.

5.  Think before you complain.  Paying taxes means your earned more money than you had to pay out.  Good for you.  As well, a third of all income in Canada is paid in taxes, which may seem really high, but before you consider moving out of the country, consider that the Canadian tax burden is less than that of 19 other developed nations. We, as Canadians only pay more taxes than 10 developed nations.

4.  Ever wonder what the CRA does with the tax money they collect?  Well, the Minister of National Revenue uses 62% of it to pay for health care, education and social assistance, including unemployment benefits.  The other 38% goes for everything else we need, like infrastructure, social programs, etc.

3.  Not everything in Canada is taxed, and here are some prime examples; There is no tax on a winning Lottery tickets, on scholarships, inheritances, gifts, the Guaranteed Income Supplement (GIS) to the taxable Old Age Security (OAS) pension, Canada Child Tax Benefit cheques or child support payments after a divorce. You pay no tax on at least the first $9,000 of waged earnings or $40,000 of income per year if you receive only eligible corporate dividends and $18,000 if you receive only capital gains.

2.  On the flip side, there are some high-tax items, some you can make the choice to avoid, and one you might accept regardless of the amount of tax owing; The Federal income tax rate on income greater than $135,054 a year in 2012 is 29%, plus Provincial tax rates which bounce between 10%-21% based on the Province.  Taxes on cigarettes in Ontario was 63.5%; alcohol, 52.7%; and regular gasoline 39.47%.

1.  Tax relief opportunities are available, but you need to either research them or ask an expert how to qualify and what they are.  For example, there are tax breaks and benefits for those who better themselves, or the economy through getting a higher education, earning high grades, raising children, moving closer to a job, belonging to a professional group or organization, taking public transit, making charitable and political donations, investing in companies, starting a small business, and saving for retirement.   We all have the opportunity to save money, pay less tax and help ourselves and others in the future, but whatever you choose to do today, or tomorrow it’s never too late to make a change for the better.

Start today.  Stop paying the government late filing penalties, or penalties for missing installments.  Stop paying the government interest at 10% and don’t be afraid to open that brown envelope.  If you have a tax problem, we  can help.  We understand how these can spin out of control and we certainly do not judge.  With 17-years of actual tax expertise, 11 of them in the CRA, why would you trust anyone else?

Call today for a free consultation.

The Minister of National Revenue can have your tax dollars to run the country.  All Canadians thank you for that.

You don’t need to pay them penalties and interest.  You do not want to know that the CRA do with the penalties and interest money it collects!

The Canada Revenue Agency Informant Leads aka “Snitch” Line

You have come to this blog for more information on the Canada Revenue Agency’s (CRA) Informant Leads or Snitch Line.  Yes, the line does exist and if you are looking for the number in order to use it, that number is 1.866.809.6841.

You may have heard me speak on CFAX1070 about the CRA Snitch line, or possibly you heard my interview on CBC.ca regarding the existence and use of this line.  If you have not, then let me take a moment to clear the air on this line.  The Informant Leads line does exist.  In fact, it has become such a popular tool for finding new collection sources that it’s increased volume of calls can be directly attributed to a reduction in the need for collections staff / auditors and investigators who were responsible for digging up new leads.

It is absolutely not possible for someone to call the line, make up a story and have someone investigated.  Anyone who states that does not know the purpose of this line and obviously has no experience working in the CRA.  To say that is irresponsible and fear mongering.   The CRA will act on leads but there must be some proof provided.  Simply asking for your neighbour to be audited because they drive a nicer car than you is not going to begin years or investigations-hell for them.  If, however, you purchase an item from a retail establishment, and are charged taxes, but you notice that the teller never ran the purchase through the till, then you can be assured that they are pocketing the taxes instead of remitting it to the CRA.  Or, if you notice on the receipt that they have charged you the wrong rate of tax, then you need to notify the CRA.

In one case, while I was working at the CRA, I purchased a large ticket item from a local store only to find out later that the taxes on the bill totaled 28%.  I went back to the store to ask for it to be corrected, only to have them advise me that it was a “US cash register” and that the rate was incorrect.  I took the receipt into the office hoping to launch an internal investigation but was told it would be 6-weeks before they were able to look at it.

So I walked over to a phone beside my desk, called the snitch line, explained the issue and after providing the receipt as proof, found that an investigation was launched the next day and heard through the grapevine that over $200,000.00 was recovered from the company.

That is where the snitch line can be put to good use.

If, however, you hear your neighbour bragging about how much money he makes under the table and he lives way better than you do?  You can call the snitch line.   Or if your ex-spouse is unwilling to file their outstanding tax returns because it would mean they would have to increase child support payments, then you can call the snitch line.  The CRA will take the information, begin with an internal investigation to see if there is merit, then possibly drop by the home or business to get a feel for whether an audit is required or if a net worth assessment is needed.

At the end of the day, the intention of the snitch line is to provide a direct link to the CRA’s Audit department and it assists the CRA as they use these “tips” to recover funds from professional tax avoiders.

Key words the CRA likes to hear includes;

Their names, their address, an amount of unreported income greater than, say $50K, maybe a second set of books, or 2nd property in the name of their cat…

It never hurts to call.

It always hurts to not call.

This line is anonymous and believe it or not, the majority of “tips” come from exes who are left holding the bag while their ex-spouses are living it up.

I figured I would post this since it is the most frequently asked question I get.  Yes a line exists and yes it gets acted on… and fast if the dollar amount to be recovered is high.

I have actual experience seeing this line work and I know for certain of instances where people have called this line in effort to discredit or attack someone and at the end of the day, the CRA  has investigated that person or party and punished them for making a false claim.  Those in glass houses should never throw stones.

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