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September, 2014Archive for

Did you know?
It’s easy to correct your income tax and benefit return if you realize after filing your return that you made a mistake.

Important facts
You will have to wait to receive your notice of assessment from the Canada Revenue Agency (CRA) before you can make a change to your return.

There are three ways to correct your return once you’ve received your notice of assessment:

use the “change my return” option found in My Account at www.cra.gc.ca/myaccount, one of the CRA’s secure online services;
send a completed Form T1-ADJ, T1 Adjustment Request, to your tax centre; or
send a signed letter to your tax centre asking for an adjustment to your return.
If you send a letter, make sure to give your name, address, and social insurance number and tell us which tax year you want to adjust. You will also need to provide any supporting documents for your change. For example, if you want to change the amount you claimed for charitable donations, you have to submit all your charitable donation receipts to support your claim.

My Account
My Account lets you track your refund, view or change your return, check your benefit and credit payments and your registered retirement savings plan deduction limit, set up direct deposit, and more. It allows you to transact with the CRA from the comfort of your home or the convenience of your office 21 hours a day, 7 days a week. To register for My Account, go to www.cra.gc.ca/myaccount.

Source: CRA website

The Canada Revenue Agency (CRA) warns all taxpayers to beware of telephone calls or emails that claim to be from the CRA but are not. These are phishing and other fraudulent scams that could result in identity and financial theft.

People should be especially aware of phishing scams asking for information such as credit card, bank account, and passport numbers. The CRA would never ask for this type information. Some of these scams ask for this personal information directly, and others refer the taxpayer to a Web site resembling the CRA’s, where the person is asked to verify their identity by entering personal information. Taxpayers should not click on links included in these emails. Email scams may also contain embedded malicious software that can harm your computer and put your personal information at risk.

Examples of recent telephone scams involve threatening or coercive language to scare individuals into pre-paying fictitious debt to the CRA. These calls should be ignored and reported to the RCMP (see contact information below).

Examples of recent email scams include notifications to taxpayers that they are entitled to a refund of a specific amount, or informing taxpayers that their tax assessment has been verified and they are eligible to receive a tax refund. These emails often have CRA logos or internet links that appear official. Some contain obvious grammar or spelling mistakes.

These types of communication are not from the CRA. If the CRA does contact you by telephone, there are established processes in place to ensure your personal information is protected. Should you wish to verify the authenticity of a CRA telephone number, contact the CRA directly by using the numbers on our Telephone numbers page. For business-related calls, contact 1-800-959-5525 and for individual concerns, contact 1-800-959-8281.

To better equip taxpayers to identify possible scams, the following guidelines should be used:

The CRA:

NEVER requests information from a taxpayer about a passport, health card, or driver’s license.
NEVER divulges taxpayer information to another person unless formal authorization is provided by the taxpayer.
NEVER leaves any personal information on an answering machine or asks taxpayers to leave a message with their personal information on an answering machine.
When in doubt, ask yourself the following:

Am I expecting additional money from the CRA?
Does this sound too good to be true?
Is the requester asking for information I would not include with my tax return?
Is the requester asking for information I know the CRA already has on file for me?
How did the requester get my email address or telephone number?
Am I confident I know who is asking for the information?
Is there a reason that the CRA may be calling? Do I have a tax balance outstanding?
The CRA has strong practices to protect the confidentiality of taxpayer information. The confidence and trust that individuals and businesses have in the CRA is a cornerstone of Canada’s tax system. For more information about security of taxpayer information and other examples of fraudulent communications, go to www.cra.gc.ca/security.

Anyone who receives a suspicious communication should immediately report it to info@antifraudcentre.ca or to the institution that the communication appears to be from.

For information on scams, to report deceptive telemarketing, and if personal or financial information has been unwittingly provided, go to the Royal Canadian Mounted Police Web page at: www.rcmp-grc.gc.ca/scams-fraudes/phishing-eng.htm.

Source: CRA website

Editors Note: This story has been revised to say that CRA opinion on collecting IRS penalties was offered in 2012.

The Canada Revenue Agency has confirmed that it will not help the U.S. Internal Revenue Service collect penalties imposed against dual citizens (or any Canadian citizens) for failing to meet financial information filing requirements under U.S. tax laws.

The ruling means that dual citizens who do not enter the U.S. (or U.S. airspace) and have no assets in the U.S. will be shielded from these penalties.

The opinion, written in 2012 on behalf of the Director of the Income Tax Rulings Directorate of the CRA’s International Division, came in response to a request from Vitaly Timokhov of TaxChambers LLP, a Toronto tax law boutique, on behalf of a “hypothetical situation” involving a client who was a U.S. citizen by birth, a Canadian resident under the Canada-United States Tax Convention, and a naturalized Canadian citizen for at least two decades.

The CRA opinion points out the terms of the Convention state specifically that Canada will not assist the U.S. with a “revenue claim” against a Canadian citizen.

The U.S. Bank Secrecy Act requires all U.S. citizens abroad who have assets beyond a specified amount to file an information return known as an FBAR (Report of Foreign Bank and Financial Accounts). Willful non-compliance draws severe penalties up to the greater of $100,000 or half the balance in the account at the time of violation.

The advent of FATCA (U.S. Foreign Account Tax Compliance Act) and the intergovernmental agreement requiring Canadian banks to disclose the names of all U.S. citizen depositors to the CRA, which has an obligation to turn the information over to the IRS, has now greatly increased the risk of discovery.

“The hand-over of information is punitive as many of these individuals most likely have never filed a U.S. tax return but will now be exposed to FBAR penalties,” says Sunita Doobay, also a lawyer at TaxChambers. “This is harsh where the only connection these individuals have with the U.S. is that they were born there.”

Source: Financial Post

Did you know?
The Canada Revenue Agency (CRA) has tax credits, deductions, and benefits to help students. All you have to do is file your income tax and benefit return and claim them.

Important Facts
Here are the top ways to save at tax time:

Claim your eligible tuition fees – An eligible tuition fee is a fee you paid to attend your post-secondary educational institution for the tax year in question. Enter the amount of your tuition on line 320 of Schedule 11, Tuition, Education, and Textbook Amounts.
Claim the education amount – If you are a full-time student (or a part-time student who can claim the disability amount or has a certified mental or physical impairment), you can claim $400 for each month you were enrolled in an educational institution. If you are a part-time student, you can claim $120 for each month you were enrolled.
Claim the textbook amount – You can claim this amount onlyif you are entitled to claim the education amount. You can claim:
$65 for each month you qualify for the full-time education amount (total of Box C times $65). Enter this amount on line 7 of Schedule 11; or
$20 for each month you qualify for the part-time education amount (total of Box B times $20). Enter this amount on line 4 of Schedule 11.
Claim the interest paid on your student loans – You may be able to claim an amount for the interest paid on your loan in 2013 for post-secondary education. You can also claim interest paid over the last five years if you haven’t already claimed it. Only interest paid on loans received under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or a similar provincial or territorial government law for post-secondary education can be claimed.
Claim the public transit amount – If you use public transit, you may be able to save by claiming the cost of your transit passes. Keep your transit passes for local buses, streetcars, subways, commuter trains, and local ferries, and enter your total public transit amount on line 364 of Schedule 1, Federal Tax.
Claim your eligible moving expenses – If you moved for your post-secondary studies and you are a full-time student, you may be able to claim moving expenses. However, you can only deduct these expenses from the part of your scholarships, fellowships, bursaries, certain prizes, and research grants that is required to be included in your income. If you moved to work, including summer employment, or to run a business, you can also claim moving expenses. However you can only deduct these expenses from the income you earned at the new work location. To qualify, your new home must be at least 40 kilometres closer to your new school or work location.
Claim the GST/HST credit – If you have low or modest income, and you are a resident of Canada, you may be able to claim the goods and services tax/harmonized sales tax (GST/HST) credit. Apply for this quarterly payment by filling out the application on the first page of your income tax and benefit return.
Claim your child care expenses – If you have to pay someone to look after your child so you can go to school, you may be able to deduct child care expenses.
The CRA has videos geared toward students. Check them out at www.cra.gc.ca/videogallery.

Do you need help filing your tax return? If you have modest income and a simple tax situation, volunteers from the Community Volunteer Income Tax Program may be able to file your tax return for you and make sure you receive all the credits and benefits you are entitled to. For more information, go to www.cra.gc.ca/volunteer.

Source: CRA website

The Canada Revenue Agency (CRA) is reminding Canadians who earn tips and gratuities that they represent taxable income and must be reported on annual income tax and benefit returns. Restaurant servers, hairdressers, valets, taxi drivers, and others who earn tips may not have all of their income recorded by their employers, which means that their T4 slips may not include all of their income.

How do I report my tips?
In preparing to file your tax return, you may have to contact your employer to find out if any or all of your tips will be included on your T4 slip. If you do not get a T4 slip to show your income from tips, you still have to report all tips received in your work on line 104 of your return. It is your responsibility to keep track of any earnings that are not reported on your T4 slip (such as tips and gratuities).

Why should I report my tips?
The Income Tax Act is clear about income from tips: tips are taxable and it is your responsibility to report any that you receive. When you earn tips and do not report them, you are participating in the underground economy—you are increasing the tax burden on your friends, family, and neighbours, who have all of their income reported by their employers on their T4 slips.

Deliberately deciding not to report your tips is also illegal. If CRA auditors and investigators find that you are not reporting all your sources of income, you may be audited, face fines, penalties, or potential jail time.

It’s not too late to report your income
If you have ever made a tax mistake or omission on a previous tax return, the CRA is offering you a second chance to make things right through its Voluntary Disclosures Program (VDP). If you make a valid disclosure before you become aware that the CRA is taking action against you, you may only have to pay the taxes owing plus interest. More information on the VDP can be found on the CRA website at www.cra.gc.ca/voluntarydisclosures.

Source: CRA Website

What is digital currency?

Digital currency is virtual money that can be used to buy and sell goods or services on the Internet. Bitcoins are an example of digital currency. Bitcoins are not controlled by central banks or any country, and can be traded anonymously. Bitcoins can be bought and sold in return for traditional currency, and can also be transferred from one person to another.

Do tax rules apply when digital currency is used?

Yes. Where digital currency is used to pay for goods or services, the rules for barter transactions apply. A barter transaction occurs when any two persons agree to exchange goods or services and carry out that exchange without using legal currency. For example, paying for movies with digital currency is a barter transaction. The value of the movies purchased using digital currency must be included in the seller’s income for tax purposes. The amount to be included would be the value of the movies in Canadian dollars.

More information on the tax implications of barter transactions is available by consulting the Canada Revenue Agency’s Interpretation Bulletin IT-490, Barter Transactions.

Digital currency can also be bought or sold like a commodity. Any resulting gains or losses could be taxable income or capital for the taxpayer. Paragraphs 9 to 32 of Interpretation Bulletin IT-479R, Transactions in Securities, provide information that can help in determining whether transactions are income or capital in nature.

Should I be concerned about reporting requirements when using digital currency?

Not reporting income from domestic or foreign sources is illegal. Canadians should know that the Canada Revenue Agency (CRA) is very active in pursuing cases of non-compliance, in order to ensure that the tax system remains fair for everyone.

Source: CRA website

Before you decide to hire a contractor to do construction, renovation, or repair work on your home, ensure they are reputable and insist on getting a written contract and receipts. Be sure to ask a lot of questions, and ask for proof of workers’ compensation or equivalent private liability insurance to cover injury and any damage that could occur in your home. This will protect you from being liable for an injury in your home or on your property, as well as damage to your home or the suppliers’ equipment. Information is key. Know the businesses and individuals that you are dealing with. Recognize those that are participating in the underground economy and don’t do business with them.

You are putting yourself at risk if you pay for a job “under-the-table” without a written contract. You may think you are getting a deal by paying cash and avoiding taxes, but it can leave you with no warranty, no recourse for poor workmanship, and the added risk of liability if an injury takes place on your property. If you are caught evading taxes, you may face fines, penalties, or potential jail time.

Save yourself the trouble — don’t participate in the underground economy. Under-the-table deals undermine the integrity of Canada’s tax system. They deprive the Government of funds for vital programs that benefit all Canadians, including children and seniors. They also provide certain contractors with an unfair, illegal advantage over those who follow Canada’s tax laws.

Source: CRA website

New tax relief will save small businesses more than half a billion dollars over two years
September 11, 2014 – Toronto, Ontario – Department of Finance

Minister of Finance Joe Oliver today announced more action by the Harper Government to create jobs, growth and long-term prosperity: the introduction of the new Small Business Job Credit which is expected to save small businesses more than $550 million over the next two years.

The Small Business Job Credit will effectively lower small businesses’ Employment Insurance (EI) premiums from the current legislated rate of $1.88 to $1.60 per $100 of insurable earnings in 2015 and 2016. Any firm that pays employer EI premiums equal to or less than $15,000 in those years will be eligible for the credit. Almost 90% of all EI premium-paying businesses in Canada will receive the credit, reducing their EI payroll taxes by nearly 15%.

The Canada Revenue Agency will automatically calculate the credit on a business’ return, ensuring no new paper burden will be imposed on business owners.

In addition, all employers and employees will benefit from a substantial reduction in the EI premium rate in 2017 when the new seven-year break-even rate-setting mechanism takes effect. This will ensure that EI premiums are no higher than needed to pay for the EI program over time.

Quick Facts
Canada has created more than 1.1 million net new jobs since the height of the recession—one of the strongest job creation records in the Group of Seven (G-7).
In 2013, Canada leapt from sixth to second place in Bloomberg’s ranking of the most attractive destinations for business.
According to KPMG, total business tax costs in Canada are the lowest in the G-7 and 46% lower than those in the United States.
In September 2013, the Government announced a three-year freeze of the EI rate at its 2013 level of $1.88 to prevent it from rising to $1.93 in 2014, saving employers and employees an expected $660 million in 2014 alone.

Source: Department of Finance Website

Kamloops, British Columbia, September 5, 2014… The Canada Revenue Agency (CRA) announced today that a contractor from Kamloops was sentenced on September 3, 2014, in Kamloops Provincial Court, after pleading guilty to two counts of income tax evasion and one count of excise tax evasion. He was fined a total of $222,504, and was ordered to serve an 18-month conditional sentence.

A CRA investigation determined that from 2007 to 2009 the contractor paid $527,372, for the renovation and construction of his personal residence and the homes of his children. These costs were then claimed as business expenses, which resulted in the taxpayer evading $24,772, in federal income tax for the 2007 and 2008 taxation years. Input tax credits totaling $36,779 related to these personal expenditures were also falsely claimed. As a result, the company failed to remit $30,517 in Goods and Services Tax (GST) and received a GST refund of $6,262, to which it was not entitled. By claiming these benefits as expenses of the corporation, the taxpayer failed to report $564,151, in taxable income on his personal income tax returns for the 2007 to 2009 taxation years, evading $160,953, in federal income tax.

The preceding information was obtained from the court records.

When taxpayers are convicted of income tax evasion, they must still repay the full amount of taxes owing, plus interest and any civil penalties that may be assessed by the CRA. In addition, the court may fine them up to 200% of the taxes evaded and impose a jail term of up to five years.

If you have ever made a tax mistake or omission, the CRA is offering you a second chance to make things right through its Voluntary Disclosures Program (VDP). If you make a valid disclosure before you become aware that the CRA is taking action against you, you may only have to pay the taxes owing plus interest. More information on the VDP can be found on the CRA’s website at www.cra.gc.ca/voluntarydisclosures.

Source: CRA Website

Vancouver, British Columbia, September 3, 2014… The Canada Revenue Agency (CRA) announced today that a Vancouver resident was sentenced on August 29, 2014, in Robson Square Provincial Court. The “taxpayer” pleaded guilty to one count of failing to comply with a Compliance Order to file personal income tax returns for 2005 to 2011. He was ordered to serve a 45-day conditional sentence, including a curfew, and was fined $1,000, payable by October 1, 2014. All outstanding returns have been filed.

The preceding information was obtained from the court records.

When taxpayers are convicted of failing to file tax returns, in addition to any fines imposed by the courts, they must still file the returns and pay the full amount of taxes owing, plus interest owed, as well as any civil penalties that may be assessed by the CRA.

If you have ever made a tax mistake or omission, the CRA is offering you a second chance to make things right through its Voluntary Disclosures Program (VDP). If you make a valid disclosure before you become aware that the CRA is taking action against you, you may only have to pay the taxes owing plus interest. More information on the VDP can be found on the CRA’s website at www.cra.gc.ca/voluntarydisclosures.

Source: CRA website

The Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P., Minister of National Revenue, spoke today at the 89th Annual General Meeting and Luncheon of the Richmond Chamber of Commerce in Richmond, British Columbia. Minister Findlay highlighted the Government of Canada’s actions to reduce red tape for small and medium businesses, including those introduced in Economic Action Plan 2014, as well as new enhancements to the Canada Revenue Agency (CRA) online services for businesses.

Since 2006, the Government of Canada has introduced dozens of measures to reduce the red tape burden on small businesses and improve services.

Most recently, in April 2014, the CRA introduced new services that allow corporations to file amended T2 income tax returns using commercial tax preparation software, and taxpayer representatives to submit an authorization request online on behalf of the businesses they represent. In October 2014, the CRA will launch another new service to allow businesses to manage their banking and direct deposit information online using the My Business Account secure online service. More and more businesses are registering to use the CRA’s online services because of all the service options—and new ones continue to be added.

Economic Action Plan 2014 introduced proposals that also target red tape, including revising remittance thresholds for employer source deductions to reduce the maximum number of payments that businesses are required to prepare and submit to the CRA. In addition, the CRA continues to build partnerships with the small business community and provincial and municipal governments on initiatives such as the business number. Based on the idea of “one business, one number”, the business number is a common identifier for businesses that allows them to simplify their dealings with federal, provincial, and municipal governments. The Liaison Officer Initiative, a recently announced pilot project, will also focus on improving compliance and avoiding red tape by providing businesses with in-person support and information at key points of their business cycle, when they most need it.

Quick facts
The Richmond Chamber of Commerce was formed as a society in 1925, originally as a Board of Trade and then later as a Chamber of Commerce. It counts roughly 1100 members today.
Close to four million log-ins were made to the CRA’s My Business Account between April 2013 and March 2014. The number of businesses that are enrolled in My Business Account and have a business number has almost doubled in the last three years.
Increasing the remittance thresholds for employer source deductions will eliminate more than 800,000 payroll remittances for over 50,000 employers of small and medium-sized businesses, saving them time and money.
In October 2014, the first free online option for paying taxes will be available for business owners registered with My Business Account. A detailed payment history for all of their accounts will also be available in one secure and convenient place.
Economic Action Plan 2014 will simplify the tax rules for the lifetime capital gains exemption for certain individuals who operate farming and fishing businesses, to allow for more consistent treatment.
Source: CRA Website

The Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P., Minister of National Revenue, today highlighted pilot projects to help small and medium enterprise (SME) compliance. The Liaison Officer Initiative (LOI) focuses on providing in-person support to businesses as their operations grow. The CRA initially launched two LOI pilot projects in March 2014, one in Ontario, and the other in Quebec. The LOI is based on a “right from the start” approach which allows the CRA to address non-compliance in a more efficient and effective way by focusing on educating, informing and supporting small and medium businesses.

In the fall of 2014, the Canada Revenue Agency (CRA) will expand the Liaison Officer Initiative (LOI) pilot project to British Columbia, the Prairies and Atlantic Canada. Through these pilot projects, the CRA is providing information and guidance at key points in the lifecycle of a business so that businesses can avoid mistakes that would be more costly to correct down the road. Such an approach translates into fewer audits, re-assessments, and potentially fines, which in turn means less red tape and lower costs for both the taxpayer and the CRA.

As part of the pilot project, businesses in the industry sectors selected for the pilot will be contacted by the CRA and a Liaison Officer will offer a voluntary face-to-face visit that will focus on educational and preventative measures to improve voluntary compliance. Businesses that accept the CRA’s offer will benefit from one, two or all of the following activities: small business support visits; books and records reviews; and compliance support arrangements. These educational and preventative measures should not be confused with CRA audit activities.

The Minister’s visit today is part of a three-stop tour to Kitchener-Waterloo, London and Mississauga where she is holding round-table discussions with stakeholders to discuss the CRA’s red-tape reduction initiatives, including the LOI.

Quick Facts
The CRA wants to help Canadian businesses reduce red tape and avoid tax-related problems by ensuring they understand their tax obligations. By meeting their obligations, SMEs can potentially avoid time-consuming audits in the future.
LOI pilot projects are taking place from March 2014 to December 2015 in the Ontario and Quebec regions. New pilot projects will get underway in B.C, the Prairies and Atlantic Canada in the fall of 2014.
The LOI is built on the “right from the start” approach that has been identified as an international best practice by other tax administrations.

Source: CRA Website