Published on Sep 17, 2017

Here's a case that involves a taxpayer who had rental income, investment income, business income, and had T4 income. 

 

If you have any one of these sources of income, you may want to see how the tax courts handled this.

 

 

The taxpayer claimed rental losses.  She claimed she rented out a couple of rooms in her house.  Whenever there is a personal component to a "venture", CRA will be diligent with their review.  In this case, the CRA disallowed the losses.  In court, the taxpayer testified she had rented rooms to three female exchange students.  However, during the initial audit, she told the CRA it was two male exchange students.  The courts sided with the CRA.

 

The taxpayer claimed a deduction for bank charges and a safety deposit box.  However, these were disallowed as she had no investment income.  Only investment council fees can be deducted if they are incurred to generate investment income.  Safety deposit boxes have not been deductible for a number of years now.
 All business deductions were originally disallowed due to lack of support.  However, in court, she provided some supporting documentation and was allowed to use some of these deductions.

 

She worked for a restaurant as a server.  On occasion, she worked at different locations providing catering services.  She claimed over $12,000 in deductions for a cell phone, travel costs, and uniforms.

 

The cell phone was denied because the added costs of using the cell phone for employment purposes was incidental and no incremental costs could be demonstrated.  Remember, CRA takes the position that a cell phone is personal.  Only incremental costs as a result of employment or business use may be deductible.

 

As for travel costs, she used a per km rate and a few other automobile type costs as a deduction.  This was double dipping.  CRA did allow her $400 as a deduction even though her support was weak.

 

Uniforms deducted were for normal clothes and therefore disallowed in court.
 

 

The Court also noted the support was disorganized, insufficient, and contained some false statements.  They determined this resulted in willful blindness and applied the gross negligence penalty.  This penalty is 50% of the understated taxes.  If the result of this individual's actions resulted in additional taxes of $10,000, the penalty will be $5,000 and interest will accrue on $15,000.

 

I wonder what the legal fees cost her.


TCC 2016-2774 - Bobic vs The Queen

Published on Nov 24, 2014

Northshore Tax Consulting Bridges the Geography

Gap Online with GoToAssist

Evan Engell, President

Evan Engell, President

By Nilas Edlinger

Remember the days when stores had to take on high costs in terms of space, rent and staff to grow? Then came the Internet, making shopping more efficient and creating new entrepreneurs every day.

But what about other kinds of businesses? Sure, you can get all kinds of things on the Internet, but did you know that now more and more services are online, too? GoToAssist client Northshore Tax Consulting Limited offers one such service in the previously brick-and-mortar-based accounting industry.

Northshore’s President, Evan Engell, says his clientele was once limited to small businesses located within a one-hour radius of his office in the small town of Port Rowan, Ontario. Any prospective customers beyond that area were just too time consuming and expensive to support.

Previously, Engell had used GoToAssist to access his office computer from home, but then he had an epiphany: what if he could work on clients’ computers from the office, too? Ready to try remote support with clients, Engell did his homework and tested a few remote access tools. He decided to stick with GoToAssist Remote Support because it was simply the easiest option for his clients to set up and use in their own offices.

With the software in place, Northshore launched a remote bookkeeping service, allowing clients to share access to their computers with Northshore’s bookkeepers. And with GoToAssist, Northshore’s bookkeepers can even work on client files outside of regular business hours, so they don’t interrupt their clients’ normal workday.logo

Clients love the convenience of having their accounting files updated without any effort on their part, and Engell and his team can now support clients all over Canada and the U.S.

As in the case of e-commerce, what’s good for the firm is good for clients: Northshore saves money and serves more small businesses by reducing travel to client offices, and these cost savings are passed along to clients in lower fees. Remote bookkeeping has already brought in 20 new clients for the Northshore team of five employees.

Read the full blog here 

Read more of Northshore’s story in this case study.

Published on Jun 8, 2014

Globe and Mail - June 8, 2014
 
With new laws coming into effect on both sides of the border, it is clear the IRS is squeezing in on Americans living in Canada.  Penalties and accounting fees are staggering.  This is all because the IRS is using a net to catch the big sharks but inadvertently catching all the minnows too.
 
The new IRS commissioner appears to be softening their position by admitting their has been "too little regard for non-willful victims of its crackdown."
 
Step in the right direction?  
 
This article helps shed some light on the dark-side of CRA.  With FATCA coming into effect July 1 and Canada's budget bill (to implement FATCA in Canada) expected to pass before Parliament breaks for the summer, it may be too little too late.
 
For the full story, click here.

 

Published on May 5, 2014

CBC News - May 5, 2014
 
CRA knows about off-shore accounts.  My understanding is not one charge or claim has been made on those individuals.  Yet, they continue to force their way on the unsuspecting.
 
I get asked by clients all the time what I think CRA will do if they are unable to pay a balance owing.  I honestly have to answer that legally they can seize your bank account and/or assets.  What will they likely do?  I cannot answer that question any longer.  I have taxpayers that owe $100,000 or more continue on for years with nothing more than penalties and interest accumulating at warp speed.
 
But then a taxpayer comes along and owes $1,200, and their account gets seized.  The recommendation by the agent at the other end was for this senior couple to mortgage their house to pay the $1,200 balance.
 
This article helps shed some light on the dark-side of CRA.  
 
For the full story, click here.

 

Published on Feb 23, 2014

The Windsor Star - Feb 23, 2014
 
If volunteers are having difficulty understanding the tax credits, how are DIY'ers supposed to figure it out.
 
I find it interesting that H&R Block advertises in Canada that people should go to their website to file their own returns.  Their US advertisements describe in detail what $1 Billion looks like (ex. $500 for every seat in every sporting venue in the US) as that is the amount do it yourselfers miss out of by filing their own returns.
 
I guess you can advertise according to the market.  Americans must value the money and Canadians must value the feeling of independence.  Extrapolating the US figure by our population that is 10% of their's and the fact our income tax rates are say only 20% higher than their's, Canadians doing their own returns leave $120 Million in unclaimed tax credits.  Annually.
 
Ouch!
 
For the full story, click here.

Published on Jan 29, 2014

Going after multi-million dollar off-shore accounts held by the mega-rich billionaires is a challenge for CRA.  Too tough as has been reported recently.  So what does CRA do instead?  As part of a blitz, they went after the 145 wait staff in St. Catharines.  Total find?  $1.7 million in unreported tips.
 
According to Statistics Canada (2008 is the most recent stats), the underground economy was worth $35 billion.
 
For the full article, click here
 

Published on Jan 26, 2014

TheRecord.com - Jan 25, 2014
 
A new book out says tax cuts have been our problem here in Canada.  "You can't expect to cut taxes and keep the services at the same level", says one of the authors, Alex Himelfarb.
 
When the feds cut taxes, the provinces should have increased taxes, and passed it on to the municipalities.  Property tax revenues are not enough for the municipalities to do what they need to do, the other author says.
 
For the full article, click here
 
 
 

Published on Jan 16, 2014

CBC News - Jan 13, 2014 
 
The Foreign Account Tax Compliance Act (FATCA) became US law in March 2010 but takes effect around the world on July 1, 2014.  The purposes: to find US taxpayers hiding money in offshore accounts.
 
Who will this affect?
 
Directly affected are dual citizens, green card holders, and snowbirds spending considerable time in the US.
 
The short answer though is it will affect all Canadians.  Banks have to change their processes and procedures to find residents with US connections.  It is expected to cost each financial institution $100 million.  And guess who pays when the bank needs money?  You.
 
For the full article, click here
 
 
 
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