Tax Tips To Avoid A Canada Revenue Agency Review
By Contributor
Tax time is getting closer than we think (2016 deadline to file is May 2) and The Nelson Daily, with help from H&R Block, is providing tips to the public leading up to the final day of filing to CRA.
Today the focus is on tips for staying off CRA radar.
What you can do to stay off the taxman’s radar
Have you ever cheated on your taxes?
Chances are you know someone who has. A recent Leger survey conducted for H&R Block Canada found that one in five Canadians knows a tax cheat. However, almost half of the people surveyed (47 per cent) said they would not report the tax evasion to the Canada Revenue Agency (CRA).
There are serious consequences for filing a tax return you know is wrong. Here are some ways to avoid attracting attention from the CRA:
Report all your income: The CRA receives copies of all the T slips issued, so if you forget, misplace or hide a T slip, it will inevitably be uncovered by their matching program and result in a reassessment. Do this twice in a four-year period and you will be looking at substantial penalties.
Claim credits correctly: There are some credits that are more likely to be reviewed than others by the CRA. Moving expenses are commonly reviewed. However, if you are asked to supply your receipts, you should not be concerned as long as you claimed everything correctly. Same with the tuition transfer. As long as you have the signed T2202A Form from the student doing the transferring and the student has filed their taxes, you have nothing to worry about.
Be realistic with expenses: Claiming higher than usual expenses is asking for trouble. For obvious reasons, the CRA does not publicize what the amounts are that will automatically trigger a review. However, if you are claiming to use your vehicle 95 per cent for business use, we would expect that they will want to see your log book.
Live within your means: If you are living large on a limited income, it will raise eyebrows. The CRA may conduct a net worth assessment and you will then have to explain the discrepancy. If you have undisclosed income, you may want to come clean under their Voluntary Disclosure Program. Net worth assessments often result from information provided to the CRA on their snitch line.
Ensure your business doesn’t look like a hobby: The CRA does not expect every new enterprise to make a profit their first few years in business. However, you cannot create a business for the purpose of creating losses. There must be some reasonable expectation of profit in future years. If you claim year after year of losses, you may be answering questions about your business plan from a CRA auditor. Unfortunately, if the CRA finds that you have cheated once, you can be sure that you will remain on their radar. On the other hand, if they conduct a random review and you pass they will be more likely in the future to commit their resources elsewhere.
A tax professional at H&R Block at 810 Vernon Street, Nelson, BC, V1L 4G4 can talk about other credits and deductions that may affect you. Call (250) 354-4210 and ask for Ellen. Or to find the office nearest you visit www.hrblock.ca
