by Chris Cowland, Cowland & Associates –
For those of you who have not yet filed your tax return, here are a few tips you might find useful:
FILE ON TIME!
- Don’t file late. Even if you are missing some information, file your best estimate – you can amend later. 2015 deadline is May 2, unless you have self-employment income (sold something on eBay, for example?) when it is extended to June 15 for both you and your spouse.
- Late filing penalties are nasty. If you late file your return, the penalty is 5% of your balance owing, plus 1% for each full month your return is late, up to a maximum of 12 months.
- Things get even worse if you late filed in any of the three previous years – up to 50% if you are 20 months late!
- Even if you can’t pay the taxes, file your return and avoid the penalty. Interest on unpaid taxes is charged at 5% per annum, which isn’t too bad.
DON’T MISS ANYTHING
If you miss reporting income on your return, and also in any of the three previous years, there could be a penalty of 20% on the face amount of the income – even if you owe no taxes! This one is particularly nasty, though CRA has recently softened the penalties. We have successfully appealed this under the taxpayer relief provisions, for example when a taxpayer develops Alzheimer’s and a relative has attempted to assist in the filing. If it comes to your attention that you missed reporting income, the penalties may be waived if you bring it to CRA’s attention under the Voluntary Disclosures Program.
BEWARE OF DONATION SCHEMES
For example: you donate $1,000 to entity A, which then buys pharmaceuticals that are donated to another charity. The drugs are said to be actually worth $10,000 on the donation receipt, so you get a nice tax refund of about $4,700. Sounds too good to be true – you are $3,700 ahead of the game, and you have saved the life of some sad-eyed kid pictured on the sales brochure. CRA isn’t too fond of these – it has denied $4.5 billion of claims and reassessed over 130,000 taxpayers. Please don’t go there – a CRA audit is worse than a toothache.
OTHER TIPS
Register for “My Account” with CRA – it provides a wealth of personal tax history and information slip details.
Please view www.sidneycpa.com or www.TaxTips.ca for other tips and information links!
