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
 
 
 

Published on Jan 9, 2014

Lethbridge Herald - Jan 9, 2014
 
One in four children is overweight.  Two thirds of Canadian deaths can be attributed to a chronic disease.  80% of adults support policies that have removed pop and such from vending machines in schools and public buildings.
 
Should charge a "fat tax" to consumers?  Should we charge a tax to "bad" food providers?  Or do we tax the suppliers of "bad" products used to make "bad" foods?
 
For the full article, click here

Published on Jan 8, 2014

Financial Post - Jan 8, 2014
 
You owe the government money?  You forgot to claim a T4?  How long will I sit in the slammer?
 
First, relax, as jail time for CRA tax offences is rare.  A recent article in the Financial Post shows just how difficult it is.  In reading the article, I was amazed at one story.  A Markham man stole nearly $10M in unwarranted GST refunds between 2001 and 2005.  In 2013, he was fined $935,000 and sentenced to 92 months.  I calculated he will net roughly $3,200 per day during his time in the big house.
 
For the full article, click here

Published on Jan 2, 2014

In January 2014 CRA will send out its fifth annual letter to small and medium sized businesses.  Approximately 33,000 letters will go out randomly to those who claim business, farm, or rental activity on their tax returns.  Also, those who claim employment expenses will be targeted.

This campaign is used by CRA to encourage voluntary compliance of taxpayers they feel are at "at risk” of non-compliance.

Taxpayers are encouraged to come forward and correct their tax affairs.  There are two letters.  One letter is an educational letter.  The other says you may be chosen for an audit.  Historically, they get a response rate of 4% and 8% on these letters respectively.

If they get approximately 2,000 taxpayers coming forward with adjustments, that is a pretty good rate of return on their part.

What do you do if you get one of these letters?  If you are aware of errors, they need to be corrected.  If you are not aware of any errors, ignore it.  You did not receive the letter because they had inside dirt on you.

To fix errors, it is best to contact our office.  There is a voluntary disclosure process that you should follow to minimize penalties.


Published on Dec 10, 2013

Huffington Post – Dec 10, 2013

You wake up New Year’s Day shaking out the cobwebs from the night before.  But by then it is too late for many things that affect your tax return.  The linked article from the Huffington Post mentions some of the more common things to be aware of but the author made some mistakes.

Marital status is determined on December 31.  Common-law relationships have a couple of conditions before determining marital status.  Where the reporter made one mistake is with respect to separation.  In her article, the author says that a married couple separated by December 31 is separated for tax purposes.  That is not true.  The same 90 day rules she mentions for common-law separation applies to married folks as well.

Residency is accurately explained in the article.  Where you reside on December 31 determines which provincial tax rate applies on your tax return.  This can make a huge difference on your tax bill come April 30.  If you worked all year in a low tax rate province, and had taxes withheld accordingly, but then moved to a high tax rate province just prior to December 31, you will have to pay the difference.

Where the author blew it was with respect to self-employed earnings "on-the-side”.  She suggested you report it when you collect the money.  This is absolutely false.  You must report your self-employed earnings generated between January 1 and December 31.  And you MUST report it on the accrual method.  This means even if you started your business on December 20, you must report from December 20 to December 31.  AND you must report income and expenses incurred in that period and not just those collected or paid in that period.  The ONLY exceptions are farmers and fishers who get to decide whether to use cash or accrual accounting.

Medical expenses was reported inaccurately as well.  You can still pick the best twelve months.  Typically, you do report based on the calendar year.  Situations where you wouldn’t is if you normally don’t have enough medical expenses to make a claim.  Sadly, you have a setback in October one year.  Due to treatment, travel, and all the other types of expenses incurred over the next six months, you rack up huge medical expenses.  It may make sense to report that entire six month period on the following year’s tax return.  BUT you can still do that.  The rules have not changed.

Charitable donations are based on calendar years as she described.

RRSPs can be applied back to the tax year if made in the first 60 days of the following year.  If the 60th day is on a weekend, then you get to the following Monday.  You can still contribute for your 2013 tax return on March 3, 2014.  Day 60 is March 1 which is a Saturday.

The author didn’t mention other credits determined by your age on December 31.  There is an age amount, child amount, and pension amount that may be determined by ages on December 31.  And in Ontario, we have the Healthy Homes Tax Credit which is also based on your age at December 31.  In other words, with all of these credits there is no prorating for those who turned a certain age during the year but rather as long as they fit the age requirement on December 31.

For the full article, click here

Published on Nov 30, 2013

Financial Post - Nov 30, 2013

Do you feel CRA seems to spend a lot of time auditing small businesses?  You are likely correct.  We hear all the time where taxpayers are fined for making mistakes; intentional and otherwise.  Yet we also hear all the time of offshore banks and tax havens set up to for the wealthy to hide their money out of reach of their own governments.

Britain, France, and U.S. have taken some of these holders to court, but not here in Canada.  They have only nailed those who came clean using the voluntary disclosure program (a method that eliminates penalties if they come clean before getting caught).

The CRA has not even attempted to estimate the size of this problem.

It appears to be much easier to come after the small business owner for two reasons.  First, the big companies have made it too confusing for CRA auditors to figure out.  Second, the big companies have legal teams that can tie up CRA's claims for years.

For the full article, click here
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