Announcements

Download our 2017 filing dates to ensure you stay on track for the rest of the year!

Have you ever wanted to check a charitable organization’s identity and tax status before you donate?  In Canada all Registered Charities have key information made publicly available.  You can use the Charities Listing (Link below) to find out if a Charity is registered, revoked, annulled, suspended, or penalized.  You can even find a Charity’s contract information, general activities and financial information.

http://www.cra-arc.gc.ca/chrts-gvng/lstngs/menu-eng.html

This publication is produced by Andrews & Co. as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors.

The Canada Revenue Agency (CRA) is warning Canadian tax payers of an increase in telephone scams where the caller is impersonating a CRA representative. These callers are requesting personal and banking information that can result in identity and financial theft.

A clear indication of a scammer will be if they request unusual or suspicious information from you. This information includes your credit card information – including prepaid credit cards, and your passport, health card, or driver’s license details. In addition, the CRA will never leave personal information in a voice mail message or request you to do the same.

To verify if you are dealing with a legitimate CRA representative, request their name and identification number – some collections official may come off as forceful and aggressive, but all valid representatives will provide their identification number.

You can then call the CRA back at their general enquires line and explain the situation. Once you provide them with the identification number and information received they will be able to authenticate the original call. Due to the high increase in fraudulent calls occurring, it is recommended that you never release the information being requested and following up with the general enquires line at the CRA at once. You can also talk with your accountant and they can provide additional guidance on your specific situation.

A special note: If you are ever the victim of one of these calls, you should report it to the Canadian Anti-Fraud Centre at once.

This publication is produced by Andrews & Co. as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors

CRA released a Tax Tip summarizing “Six things to avoid at tax time”.

Read about it here to find out how you could save time and money: http://www.cra-arc.gc.ca/nwsrm/txtps/2017/tt170209-eng.html

This publication is produced by Andrews & Co. as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors.

The deadline for Trusts filing a T3 Statement of Trust Income Allocations and Designations is March 31, 2017.

Action Item: Please consult with your accountant to determine if this applies to you.

This publication is produced by Andrews & Co. as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors.

Have you been affected by Phoenix payroll issues?

If so, the government has issued a question and answer bulletin on how to file your taxes. Please refer to the following link: http://www.cra-arc.gc.ca/gncy/prm/phnx-fq-eng.html

Currently, a taxpayer (including individuals, corporations and trusts) may be assessed a repeated failure to report income penalty of 10% of the unreported amount of income for a second or subsequent failure to report income on a tax return that occurs within a four-year period.

For 2015 and subsequent tax years, the penalty would only apply where the amount of unreported income by the taxpayer is $500 or more. The budget also proposes changes to the penalty calculation. Under these changes, the amount of the penalty will be the lesser of 10% of the amount of unreported income; and

an amount equal to 50% of the difference between the understatement of tax (or the overstatement of tax credits) related to the omission and the amount of any tax paid in respect of the unreported amount.

Example:

Greg failed to report interest income of $10,000 on both his 2015 and 2016 Personal Income Tax return (T1). Since this was his second failure to report income within the four year window, a penalty of $1,000 plus a provincial/territorial penalty of $1,000 are assessed.

This publication is produced by Andrews & Co. as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors.

Employer Health Tax (EHT) is an Ontario payroll tax on remuneration paid to employees and former employees in excess of $450,000.  If your total payroll including any associated corporations’ payroll exceeds this balance, a separate tax filing is due by March 15, 2017.

Action Item: Please consult with your accountant to determine if this applies to you.

This publication is produced by Andrews & Co. as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors.

A recent article reported that CRA is reviewing every electronic fund transfer over $10,000 from Canada to four foreign jurisdictions per year. The first two targets were the Isle of Man and the Island of Guernsey, with two more undisclosed jurisdictions to be reviewed by March 31, 2017. CRA has started audits of 166 high-risk taxpayers and sent over 1,000 “nudge” letters to lower risk taxpayers. For 2017-2018, CRA plans on reviewing about 100,000 fund transfers to four other undisclosed jurisdictions.

The article also noted that the Offshore Tax Informant Program received over 3,000 tips as of October 31, resulting in almost 200 audits and 124 active files under review.

In addition to these activities, a November 14, 2016 Huffington Post article indicated CRA identified 2,600 documents with a Canadian link, opened 85 investigations into Canadians, and has commenced 60 audits with respect to the Panama Papers.

Action Item: If transferring funds offshore, retain appropriate documentation in case of CRA review.

This publication is produced by Andrews & Co. as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors.

CRA may grant relief from penalties and interest in cases where the timely satisfaction of a tax obligation was not completed due to:

• extraordinary circumstances;
• actions of the CRA; or
• inability to pay or financial hardship.

In a March 31, 2016 Federal Court Judicial Review, the taxpayer appealed a decision by CRA to refuse relief on penalties and interest.  In this case, the taxpayer argued that the CRA agent did not reasonably appreciate the taxpayer’s financial difficulties.

The Court agreed with CRA that the concept of financial difficulties for a person is a financial insecurity or lack of what is necessary to meet basic living needs (that is food, clothing, housing, and reasonable non-essential elements).

As it appeared that the taxpayer was able to repay the outstanding tax arrears, without having an undue impact on a lifestyle of a relatively affluent Canadian taxpayer, CRA’s decision to deny the request was deemed reasonable.

CRA has also noted that relief may be granted:

• when collection had been suspended due to an inability to pay and substantial interest has accumulated or will accumulate;
• when a taxpayer’s demonstrated ability to pay requires an extended payment arrangement. Consideration may be given to waiving all or part of the interest for the period from when payments start until the amounts owing are paid, as long as the agreed payments are made on time and compliance with the Act is maintained.

Action Item: In addition to financial hardship, some of the more common reasons why taxpayer relief may be granted include: natural or human-made disaster; death/accident/serious illness/emotional or mental distress; or civil disturbance. If one of these situations apply, an application for interest and penalty relief may be available. Note that taxes would still be owing.

This publication is produced by Andrews & Co. as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors.

The T4/T5 filing deadline is fast approaching!

Be sure to provide your accountant with all relevant documents to make sure that your T4s, T5s and other slips are filed on time to avoid penalties.

When filing an objection to a CRA reassessment, one of the most frequently-posed questions is “How long will it take?”. The answer, according to the Auditor General, is “too long”.

On November 29, 2016, the Auditor General released a report to Parliament focusing on the effectiveness and timeliness of the objection process.

Length of Process

For the five-year period ending March 31, 2016, CRA took the following numbers of days, on average, to resolve objections from the time they were filed by the taxpayers:

• 143 days for low-complexity objections (about 61% of total objections for the period);
• 431 days for medium-complexity objections (about 37% of total objections for the period); and
• 896 days for high-complexity objections (about 2% of total objections for the period).

On average, CRA did not assign an objection to an appeals officer until 150 days after the taxpayer had mailed the notice of objection.

CRA’s performance was also compared to six other administrations using 2009 data. Canada took 276 days compared to an average of 70 days for the other six countries.

It was also noted that the tracking system for timing the process was not sufficiently accurate or complete.

Objection Decision Results

Of the objections accepted and processed by CRA, 65% were decided in favour (in whole or part) of the taxpayer. 0.6% of objections resulted in an increase in income tax owed.

Next Steps

In the Fall of 2016, CRA commenced a review of its objections process. As an immediate response, CRA indicated that it will implement the standard to respond to taxpayers on low-complexity objections within 180 days, 80% of the time. Also, beginning in the 2017-2018 year, as part of the initial step when objections are received and screened, taxpayers will be contacted (if necessary) to provide missing information to ensure the file is complete when assigned for resolution.

Action Item: As it will likely take a long time to complete an objection, a significant amount of interest on the tax liability may accumulate. Consider making an earlier payment to reduce the interest cost in the event that the objection is not successful. If it is successful, the CRA will pay interest to the taxpayer, albeit at a lower rate.

This publication is produced by Andrews & Co. as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors.

In an April 26, 2016 Technical Interpretation, CRA opined that where an employer provides a payroll advance to an employee, the amount is not generally considered to be a loan. A salary advance is a payment for salary, wages or commissions that an employee is expected to earn in the performance of future services. These amounts are generally included in the employee’s income in the year the advance is received.

If a repayment by the employee is required, a deduction is available in the tax year in which the repayment was made. The deduction cannot exceed the advance that was previously included in the employee’s income from employment.

Action Item: When providing an advance to an employee, ensure that the employee clearly understands the tax implications.

This publication is produced by Andrews & Co. as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors.

In a June 10, 2016 French Technical Interpretation, CRA commented on whether an employer had conferred a benefit to an employee where the employee was reimbursed for their meal expenses.

Generally, an employee must include the value of any benefits received or enjoyed in their taxable income. CRA normally considers a taxable benefit to be conferred when:

• the benefit provides an economic advantageto the employee;
• the benefit is measurable and quantifiable; and
• it mainly benefits the employee(or a non-arms’ length person) and not the employer.

If the meal is reimbursed while the employee is travelling within the municipality or metropolitan area of the establishment of the employer, the employee is generally considered the primary beneficiary. However, in certain cases, the reimbursement can be excluded from the employee’s income. For example, if the main purpose of the reimbursement is to ensure that the employee’s functions are carried out more effectively as part of a shift, then the employer could be the one who mainly benefits.

Meal reimbursements when the employee travels outside the municipality of the employer in the performance of their duties is generally considered to primarily benefit the employer.

The fact that the employer charges the client for the reimbursement is not a factor in this determination.

Action Item: Consider the tax ramifications when developing and implementing a meal reimbursement policy.

This publication is produced by Andrews & Co. as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors.