There are more than 10 ways to avoid an audit!

January 31, 2011 by Dan White.

There are more than 10 ways to avoid an audit!

Are you afraid of a tax audit? If not, then you are either audit ready or have never been through the stress and huge cost of an audit.

In today’s Canadian small business world, if you are in business, it is not a matter of if you will get attract the attention of the TaxMan, it is more a question of how high have you put yourself on the list of “Businesses of Interest” to CRA, when you filed your tax returns, that will trigger that contact from a hungry auditor.

There is no such thing in Canada as a random audit. All audits are as a result of human behavior. You may have a legitimate transaction that attracts attention, or you may have done something that flags your file. In either case, you better have audit ready books.

Not being audited in the first CRA place is always the best idea, and we will give you some guidance here, but what is the most important thing you can do is keep your books audit ready right from the first data entry on.

The accounting system in Canada is a setup, either by accident or design for audits to be a costly event for the average small Business in Canada. Generally Accepted Accounting Principles.. or… as it is known… GAAP is in no way a guide to keeping records that will end an audit shortly after it begins.

Auditors know that the better the bookkeeping, the less booty there will be for the TaxMan.

So let’s start at the end goal of surviving an audit without any collateral damage to your bank account. That objective needs to relate the quality of the bookkeeping to the quality of the tax return submitted. Sloppy record keeping ends up with a dangerously bad tax return.

Being that you and not your accountant is responsible for the information on the tax return, you better make sure you have the correct records to give to your tax preparer.

Don’t do your own tax return, unless you are under the misguided belief that you have nothing to hide or fear.

Do a bad tax return and with your luck, you will get a bad auditor. There is no need to send a senior auditor to someone who does not even know how to do a tax return properly. Good auditors are like surgeons, they come in and do skilled cutting remove the gold that is theirs, if any, and move on to the next victim. Bad auditors make all kinds of dumb assumptions and take gold that is not theirs, much the same as the common thief. They take without guilt or conscience.

In order to reduce the chance of being audited you need to be further down the list of persons of interest. To achieve that goal, you need to consider the following tips:

Report everything you’re supposed to, no matter how small the amount. A lot of small amounts are in indicator of a detailed bookkeeper.

Make sure you include absolutely every form you receive…. without exception. This is the first thing to avoid being sloppy about at tax time. And don’t annoy your tax preparers at their busiest season by remembering a missing form… after your return is finished and printed.

The CRA automatically gets duplicate copies of all the forms that you receive … your income and benefits, interest, CPP etc… They cross-check all the forms they receive against your return. They match every detail. That 60 cents interest on some old bank account? You need to Report that too.

It’s not the amount that matters. It’s your failure to file a complete set of documents. The discrepancy, when discovered, will cause you to receive an automatic audit, in the form of a letter from the CRA asking you to explain. You don’t’ want to call attention to yourself. You want to pass through the system without a hiccup.

Whatever your spousal situation, child custody, support, alimony, exact addresses, etc.. You need to make sure that you have everything documented and is 100% accurate. All government agencies and departments have access to your information, and data mining is the term of the day.

Meet all your filing deadlines. File in the middle of the rush… before the final deadline. Don’t do anything to set yourself apart from the maddening crowds of taxpayers. You don’t want to do anything to suggest you’re being anything less than 100% complaint.

If you can not afford to pay your full amount of tax owing, it is a good idea to include a partial payment, it shows a good faith payment and is less likely to move into CRA collections. Once you are in the cross hairs of CRA collectors, all they see is a lying cheating tax evader. At that point, it is questionable in their biased minds as to if you should be allowed to live your life or not.

Don’t be a greedy. People have a tendency to be too aggressive in claiming their business expense deductions. Only deduct what you’re legally entitled to.

The statement that you have to pay some tax, is true only when you actually have a net income. Paying tax when you have a business loss is not only dumb but it makes you a person of interest. Somewhere in your tax return, it stops making sense. There is no room for dishonesty in audit ready books and the subsequent tax returns. Whatever it is … is what it is… no more and no less.

If you have a home office, make sure you understand the rules. There can not be any personal use of the space and your office needs to be your centre of operations.

Keeping good books is not something that you can do once a month or once a year. A shoe box is what a shoe box is; A container for keeping things you don’t use.

If you are going to avoid going to CRA Audit Hell, then you need to track absolutely ever penny that comes and goes in your business.

A big wake up call is that you also need to track your personal expenses. I can hear the wails of protest about this, why? You may ask. I’ll tell you why… It is because it is now standard policy for auditors to consider a lifestyle audit. If you can not prove how you paid for what you have and how you live, be prepared to receive a Lifestyle Audit. The other reason for tracking your own expenses is so that you can manage your personal finances.

You need to have every expense documented to prove that it relates to your business and so that it answers any question an auditor can ask and blocks them from assuming the expense is personal. In the absence of your statement of how the expense relates to your business, an auditor has the right to assume it is personal. In that case your business expenses are denied and are considered as personal expenses.

If you are in a start up business, especially converting a hobby into a business, you better make sure you set yourself up properly as a business in every possible way. Document that your venture has the potential to make money. Be able to show, that there are other people doing it for a profit; that you posses the necessary knowledge and experience; and that you are putting in the amount of time and energy necessary for it someday to succeed. You need to have the trappings of a real business; Business Number, Business Plan, Marketing Plan, Business Cards, Letterhead, a web site, a Budget, and a daily journal of activities. Your record keeping must be impeccable. At your third year of losses, you can expect an audit that could very well cost you all your deductions and end up giving you the shaft.

Choose your tax preparer carefully. Since you and not the preparer, are legally responsible for what’s submitted, you want to make sure the professional you use is ethical and skilled. Also make note that it is not in the tax preparers best interest to be aggressive, so you better keep good records, failing which your tax preparer will not want to include a considerable amount of expenses. Understand your tax preparer is subject to serious civil penalties for overly aggressive tax returns.

If you receive an unusually large payment that causes a spike in your income, make sure you have a complete audit trail to track the income and expenses related to it. Understand that just having this unusual payment is going to attract the attention of CRA. It is very important to have your paper ducks in order. Avoid anything that looks questionable or shaky.

In today’s world a business getting a cheque from a HST input tax credit, is paramount to asking for an audit. CRA will question any ITCs you request. If you want to avoid an audit, treat HST as a consumer tax and don’t ask for a refund. In this case pay some tax. Unless of course you have audit ready records and no secrets you don’t want the TaxMan to discover, in which case claim what is real for your input tax credits.

Avoid large Charitable donations that are out of sync with your ability to afford that amount of money.

Absolutely stay away from all tax shelters. They are such a cash cow for the TaxMan and you don’t need the bother. This is for sure a case of too good to be true is really too bad to be real. Getting a refund for more than you pay… loans or not…. is going to get you on the hot seat…. a very hot seat.

Don’t buy into the old husbands tale, of thinking that you have nothing to hide when it comes to an audit and if you have nothing to hide that you have nothing to fear. This is just plain uninformed head in the sand behavior. You owe it to yourself to do some research. The internet is full of horror stories. Check out the CBC documentaries and the news paper stories on how Canadians have been in the right but financially ruined anyway.

There are a number of red flags that may trigger CRA interest in your tax returns.

In general, the more complex the return and the more income from non-withholding, non-reporting sources, the higher the probability of an audit,

There are two categories that generate the highest probability of CRA interest: those who are self-employed, file a Business Activities Form and claim high deductions, and those who earn over a million dollars. Both cases will arouse the suspicion of the CRA.

To avoid an audit, stay within the industry standards. “The CRA has a table of national standards for every deduction based on income,”

Realize that CRA looks at your numbers, they use Bedford’s laws. Avoid rounding numbers when taking deductions. Don’t over inflate red flag deductions like automobile expense, meals, entertainment, travel and charitable contributions. Take your valid deduction and make sure you have plenty of substantiation in case of audit.

A great strategy to help avoid an audit is to essentially become “audit proof.” Consider having your Tax Representative conduct a “friendly audit.” Have them put on their TaxMan hat and act as if they actually are an auditor. They need to visit your place of business where they get the guide tour of the operations, conduct a review of your financial activities, bookkeeping and record keeping procedures, and accounting practices to uncover and correct sensitive areas before they are discovered in an CRA audit.

Whether the CRA interest is for a desk audit or a field audit, realize that just because they have contacted you does not mean you have done anything wrong. “Audit selections are generally made according to a computer model that selects returns based on how dissimilar they are from a national norm.

In cases of a desk audit, CRA is generally fishing to see if there should be a full blown field audit. If the documentation and explanation is exactly correct as per your tax returns, then often CRA is satisfied and the file is then closed.

If in the desk audit process it turns out that more information is needed, make sure you inquire about and understand the nature of the CRA inquiry and take notes during this process. Then immediately tell the agent that you’d like them to put their questions in writing and that you will to seek the advice from your tax representative, because bookkeeping and taxes is over your head. That you want to make sure that you both understand the question properly and answer the questions accurately. That you don’t think you should guess about anything. Once you make this request, you are under no obligation to answer any further questions and make sure you don’t get intimidated by anything the auditor says, they can be very intimidating.

In summary the glory days of hap hazard bookkeeping and aggressive tax returns is completely over. In today’s world, you need to be on top of your record keeping on a daily basis and you need to understand audit ready bookkeeping.

To find out more about CRA and tax problems requiring solutions, go to Tax Audit Solutions www.taxauditsolutions.ca or click here.

 

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About dealing with CRA… sometimes there is justice.

January 12, 2011 by Dan White.

Yesterday, I was really steamed, as I reviewed the documents that we received from CRA under the access to information act. (ATIP) The auditor wrote that the working papers and audit notes were withheld because there is a current notice of objection in progress. That my friends … in my opinion … is an obstruction of justice.

ATIP does not stipulate that you can withhold any information… so I am going to protest. Withholding information on a matter that could go to court as according to the law – is an obstruction of justice.- and this current matter just may be going to court. …

This morning I read the following article, (included herein and below) which … while under a different act, shows that this kind of behavior is not seen as OK by the courts.

The following court ruling will also be very useful in dealing with CRA auditors who go to third parties and give out information damaging to the taxpayer.

Some days I do have hope for meaningful justice in this land, this is one of those days.

Yesterday I was in court, and experienced another form of justice from a tax judge and a different kind of justice for a lawyer representing CRA via the Department of Justice.

The behavior of the said lawyer who was so outrageous that his associate Lesley was visibly embarrassed. His verbal diatribe did little to leave a shred of respect to him. Our client was so angry at him that I am sure she had some unspeakable thoughts on the matter. The justice of the situation, was that I was right in my position in that the facts of the matter were confused and that the lawyer did not know what he was talking about, and had not read the file. His threat of going for costs… was shall we say … out of the mouths of idiots comes idiotic words, and it showed him as to what he really is. As Forest Gump said, “Stupid is as stupid does. It was a cool sort of natural justice to see that he made a fool of himself… I doubt that his client (CRA) would have been impressed.

On the other hand, the Judge was fair reasonable and honest. He gave us what we wanted in spite of the Department of Justice wanting Sine Die … (having the matter postponed indefinitely.) We get our access to justice in spite of the Department of Justice wanting to avoid it…. Interesting eh?

I don’t profess to be a lawyer, I am a Tax Representative who is interested in seeing that truth and justice applies for my clients. So when some lawyers drop their standards, it does little for the image of lawyers and creates images of charlatans. There are a lot of really good lawyers out there and I am sure they would not appreciate the discredit to their profession by the few really bad ones.

I confess, that I have my frustrations with CRA bureaucrats… and I am steamed over the obstruction of Justice in the matter of not giving us all the required documentation under the Access To Information Act.

Seeing the article today gives me renewed hope for change.

You can read more in the blog here and gain more insight from or on our web site… just click here.

Dan White

The price of inaccuracy: Federal Court awards first damages for PIPEDA breach

This week, the Federal Court of Canada made its first damage award ever under the 10 year old Personal Information Protection and Electronic Documents Act (PIPEDA), awarding damages to a businessman in connection with the provision of inaccurate credit information by a credit reporting agency — despite a failure to prove actual losses arising from the breach.

While the quantum of the damages awarded in Nammo v. Transunion of Canada Inc., was a modest $5,000 plus costs, the case establishes several important principles respecting the interpretation of PIPEDA and the availability of damages for humiliation stemming from a violation of the Act.

The case concerned a businessman who sought a bank loan in order to launch a trucking business with a partner. The loan was rejected by the bank based on an inaccurate credit profile for the applicant, which subsequently was discovered to include the credit history of another individual with a different name, date of birth, Social Insurance Number and address history.

The case marks the Court’s first consideration of Clause 4.6 of Schedule 1 to the legislation, which requires that personal information held by an organization must be “as accurate, complete and up-to-date as is necessary for the purposes for which it is to be used.” Justice Zinn rejected the respondent’s argument that there is no breach of “the Accuracy Principle” where an organization responds adequately to correct inaccurate information after it is brought to its attention, finding that while such rectification may be a factor to consider in determining an appropriate remedy, it cannot be used as “an escape hatch” to avoid a finding of a breach of the principle itself. Justice Zinn similarly found that neither prior notification of inaccuracy, nor industry standard practices, nor commercial efficiency were relevant to assessing whether the Accuracy Principle had been breached.

In the first Federal Court damage award under s. 16 of PIPEDA, Justice Zinn awarded damages for humiliation for violation of the Accuracy Principle of the Act, finding “a serious breach involving financial information of high personal and professional importance.” It is noteworthy that damages were awarded despite little apparent evidence in this regard, with the judge finding that a reasonable person would have been humiliated by having their loan application turned down, having to convey to their business partner that their credit was “bad” and living with the taint of uncreditworthiness before their bank, in addition to undergoing the process to have the error corrected.

On the question of jurisdiction, Justice Zinn found that, while the Federal Court, on conducting a hearing de novo pursuant to s. 14 of PIPEDA, does not have jurisdiction to consider matters that were not complained of to the Privacy Commissioner of Canada in the complaint on which the rehearing is based, the Court’s jurisdiction is constrained only by the factual issues raised before the Privacy Commissioner, not by the particular clauses of the legislation considered by the Commissioner or her legal characterization of the factual issues raised.

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Canada Revenue Agency letter campaign

January 4, 2011 by Dan White.

Canada Revenue Agency letter campaign

CRA is sending out another 29,000 letters to Canadians in the next two months. One would want to wonder why would they be doing so. The information below is provided by CRA from their web site. However one needs to look at this behaviour as part of the bigger tax picture.

The first thing that comes to mind is that most of the letters will be for information purposes and promotes the Voluntary Disclosure Program (VDP). I can see where this makes sense for scaring those in the underground economy to come forward. And the letters of intent to audit does affect he ability to file a VDP.

I think the scaring is more about short term cash than long term tax collected. CRA has become so sophisticated that they are going to catch everyone sooner or later.

So the message to Canadians really reads: Pay me now or pay me later. CRA will get more later, but they need the money now, hence the scare letters.

Make no bones about this situation, it is serious. The days of being a tax evader are over. Yes… there will be some people who get away with it, either because they know how, or simply the luck of the draw on who CRA has time to go after.

CRA writes on their site in response to the question of why me?:     ” Letter recipients were chosen at random within your industry segment.” Frankly that is pretty hard to believe… why would they do random audits when their computers will tell them exactly who to target? My guess is that random is scarier than targeted audits.

The claim by CRA is that Canada’s tax system is based on self-assessment, which means that individuals are responsible for accurately completing and filing their tax returns on time. The Canada Revenue Agency (CRA) provides Canadians with the information they need to meet their income tax obligations. Mostly they just audit and use that as a means to teach taxpayers and of course to get more money that way.

In 2010, the CRA began a letter campaign which involved sending 37,000 letters to Canadians. These letters purportidly served two purposes: to educate taxpayers on specific claims they made on their income tax and benefit returns and to provide notice of the CRA’s intent to audit some taxpayers. It is well advised to note… that the letter of intent removes your possibility to file a VDP.

As part of the second year of its campaign, the CRA will send 29,000 letters similar to those described above to taxpayers in January and February 2011.

Educational letters and intent to audit letters will be mailed to those sectors where taxpayers or industry segments are at risk of misunderstanding their tax obligations or willfully avoiding paying their taxes.

If you are one of the Canadians who recently received a letter providing you with information about expenses that you deducted on your income tax and benefit returns, the following information may interest you.

Readers beware; the taxman will come to your door. The answer is found in being prepared ahead of time.

Dan White

*

Frequently asked questions
*

Forms and publications
*

Related links

Frequently asked questions **** see answers by number below.

1.

I just received a letter from you. What is it all about? Did I do something wrong?
2.

I paid a professional tax preparer to do my tax returns. Did he or she do something wrong?
3.

What am I supposed to do as a result of this letter?
4.

Do I have to send any documents to the CRA? If so, when do I send them and where?
5.

What do I do if I find errors on my tax returns?
6.

How much tax will I have to pay if I file this adjustment? What happens if I cannot afford to pay the resulting tax liability right away?
7.

Your letter mentions that the CRA is considering conducting an audit of my business, rental, or professional activities. What are the chances that I will be audited, and when will the audit take place? What tax years will the CRA audit?
8.

Why is the CRA targeting specific sectors of activity? What is the rationale behind its selection criteria? Is this not discrimination?
9.

Is the CRA trying to intimidate taxpayers?
10.

Why have you sent me a letter and not my associates/partners?
11.

I received (or my associate or my spouse received) the same kind of letter from the CRA last year. Why is the CRA sending me another letter?
12.

How does the CRA define “potential risk” within the scope of this compliance letter campaign?
13.

Your letter mentions that there is a Voluntary Disclosures Program (VDP). What is the difference between a voluntary disclosure and a request for adjustment using Form T1-ADJ? Where can I find more information about the VDP?
14.

I would like more information on business, professional, or rental activities. Where can I find it?

1. I just received a letter from you. What is it all about? Did I do something wrong?

The CRA has sent you this letter to educate you about certain claims you made on your recent income tax and benefit returns. This letter also gives you the opportunity to request an adjustment if you find that you claimed some items incorrectly on past tax returns. Some of the letters that the CRA is sending will also notify taxpayers that the CRA may conduct audits in their industry sector.

This letter does not mean that the tax returns you filed in the past were incorrect. Like 90% of Canadians, you probably filed an error-free return and paid your taxes on time. You do not need to respond to this letter if your past tax return filings are correct.

The information in this letter will also be useful to you when you prepare to file your 2010 income tax and benefit return.
2. I paid a professional tax preparer to do my tax returns. Did he or she do something wrong?

Although a professional tax preparer completed your return, the CRA has sent this letter to you because you are most likely the person responsible for carrying on your rental and/or business activities. In most cases, tax preparers use information provided by taxpayers to prepare the taxpayers’ returns.

The CRA regularly identifies the most common errors on income tax and benefit returns in an effort to determine areas that require clarification. You have claimed deductions that often lead to common errors. This letter provides you with information about these errors.

This information will make it easier for you and your tax preparer to comply with Canada’s tax laws. It will also help you and your tax preparer to verify your most recent tax returns to ensure they were correct when you filed them.
3. What am I supposed to do as a result of this letter?

Please review your income tax and benefit returns and ensure that your income and deductions have been reported correctly. If you find any errors, you can correct your return(s) by requesting an adjustment.

If you determine that the claims you made on your return(s) are accurate, you do not need to take any action.
4. Do I have to send any documents to the CRA? If so, when do I send them and where?

If you determine that the claims you made on your income tax and benefit returns are accurate, you do not need to send any documents to the CRA.

If you would like to adjust one or more tax returns because you have found errors, you will need to submit a request for an adjustment. We recommend submitting your request within 30 days from the date of this letter to minimize the interest charged on any outstanding amounts.

If the CRA decides to audit you, we will not take any audit action before the 30 days have elapsed. If the CRA starts an audit before you file your adjustment, you will be invited to give the auditor all relevant information regarding the adjustment.

To request an adjustment, complete Form T1-ADJ. You can also request this form by calling 1-800-959-2221 or by ordering it online.

Instructions on how to complete Form T1-ADJ are on page 2 of the form, along with the CRA return mailing address. To access our electronic services and make changes to your return online, login to My Account and follow the steps given.

Do not send a completed Form T1-ADJ, or any other documents, to the author of the letter.
5. What do I do if I find errors on my tax returns?

Do I also have to correct my provincial return? (Quebec residents only)

If you would like to adjust your tax return because you have found errors, you will need to submit a request for an adjustment. You may want to submit your request within 30 days from the date of this letter to reduce the interest charges on any outstanding amounts. If the CRA decides to audit you, we will not take any audit action before the 30 days have elapsed.

If the CRA starts an audit before you file your adjustment, you will be invited to give the auditor all relevant information regarding the adjustment.

To request an adjustment, complete Form T1-ADJ. You can also request this form by calling 1-800-959-2221 or by ordering it online.

Instructions on how to complete Form T1-ADJ are on page 2 of the form, along with the CRA’s return mailing address. To access our electronic services and make changes to your return online, login to My Account and follow the steps given. Do not send a completed Form T1-ADJ, or any other documents, to the author of the letter.

Do not send a completed Form T1-ADJ, or any other documents, to the author of the letter.

If you are a resident of Quebec and you have questions related to your provincial tax return, please contact Revenu Québec directly.
6. How much tax will I have to pay if I file this adjustment? What happens if I cannot afford to pay the resulting tax liability right away?

The CRA cannot accurately estimate the amount of tax that you may have to pay as a result of your request for an adjustment. You will receive a notice of reassessment or a statement of account/remittance showing any amount owing as a result of your adjustment.

Any amount you owe must be paid in full once you receive your notice of assessment or reassessment to avoid paying additional interest.

If you cannot pay the total amount owing immediately, please call the telephone number on your notice of assessment or reassessment to discuss your options.

For information about payment options, go to Making payments or call the telephone number on your notice of assessment or reassessment.
7. Your letter mentions that the CRA is considering conducting an audit of my business, rental, or professional activities. What are the chances that I will be audited, and when will the audit take place? What tax years will the CRA audit?

Receiving this letter does not necessarily mean that you will be selected for an audit. The CRA is not in a position to indicate the likelihood of being selected for audit for a number of reasons. The CRA considers risk from a number of criteria before selecting files for audit.

If it is determined that an audit is required, it will commence only after the upcoming filing season, to give you an opportunity to self-assess your returns using the information provided in the letter.

However, the Income Tax Act allows the CRA to adjust tax returns:

1.

in the three years following the date on your notice of assessment

For example, if your 2009 tax return was filed on April 15, 2010, and your 2009 notice of assessment is dated May 28, 2010, the CRA can reassess your 2009 tax return until May 28, 2013 (May 28, 2010 + 3 years).
2.

for any years that the taxpayer or person filing the return has made any misrepresentation that is attributable to neglect, carelessness, or wilful default or has committed any fraud in filing a return or in supplying information under the Income Tax Act.

8. Why is the CRA targeting specific sectors of activity? What is the rationale behind its selection criteria? Is this not discrimination?

The CRA reviews groups of taxpayers to determine how many of them are paying their taxes in full and on time. If the review shows that there are many who are not compliant, the CRA may audit taxpayers within this segment.
9. Is the CRA trying to intimidate taxpayers?

The CRA wants to give you the opportunity to request an adjustment, which you can do if you find that, in any past tax return filings, items were incorrectly claimed.
10. Why have you sent me a letter and not my associates/partners?

Letter recipients were chosen at random within your industry segment.
11. I received (or my associate or my spouse received) the same kind of letter from the CRA last year. Why is the CRA sending me another letter?

Letter recipients were chosen at random within your industry segment.
12. How does the CRA define “potential risk” within the scope of this compliance letter campaign?

To direct letters to the taxpayer groups potentially at risk of non compliance, the CRA relies on risk-assessment systems to determine which taxpayers or industry sectors are at risk of misunderstanding their tax obligations or wilfully evading paying their taxes. This includes research to identify current and emerging risks to the tax base.
13. Your letter mentions that there is a Voluntary Disclosures Program (VDP). What is the difference between a voluntary disclosure and a request for adjustment using Form T1-ADJ? Where can I find more information about the VDP?

Generally, taxpayers make adjustments to previously filed tax returns using Form T1-ADJ, T1 Adjustment Request. This form allows you to modify any amounts claimed or income reported on any line of your tax return or schedules, and the modifications may result in either a refund or an amount owing.

To request an adjustment, complete Form T1-ADJ. You can also request this form by calling 1-800-959-2221 or by ordering it online.

You can use the VDP to correct inaccurate or incomplete tax information and/or to disclose information that was not previously reported to the CRA.

You will not be penalized or prosecuted if you make a valid disclosure before you become aware of any compliance action taken against you by the CRA. If you make a valid voluntary disclosure, you will only have to pay the taxes owing, plus interest. You will not be subject to prosecution or penalties. For more information about the VDP, or to find the appropriate tax services office, go to Voluntary Disclosures Program.
14. I would like more information on business, professional, or rental activities. Where can I find it?

If you need additional information, call the author of the letter. You can also call our Individual income tax inquiries line at 1-800-959-8281.

To learn more about how CRA operates, go to Canada’s definitive source of the behind the scenes scoop on CRA activity. Click Here

To learn more about how CRA operates, go to Canada’s definitive source of the behind the scenes scoop on CRA activity. Click Here

 

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Reducing income tax is good for business and for total tax collected.

January 4, 2011 by Dan White.

 In the good old days, prior to world war II there was no income tax and there was a period of prosperity, however the government got hooked on the benefits of a war tax and continued to tighten the tacks on the backs of hard working Canadians. Now we are at the stage where bankruptcies are at an unprecedented high.

Apparently Manitoba understands the principles of reduced tax rates generates more total taxes, by way of increased employment. The ration is simple. More corporations going to Manitoba for tax breaks, means more jobs, more jobs means more employees, more employees means more income tax paid out in payroll.

I wonder if Ontario will wake up and try to keep as much business at home as possible.?

for more information on tax issues click here.

The following article written by Carol Sanders, is a reprint from the Winnipeg Free Press print edition January 3, 2011 A4

Starting Jan. 1, Manitoba has totally wiped out its general corporation capital tax.

The tax was eliminated July 1, 2008 for manufacturers and processors and, starting this year, other corporations don’t have to pay it, either. The change will save Manitoba businesses more than $119 million annually starting next year, Finance Minister Rosann Wowchuk said in a press release Friday.
The Manitoba Chambers of Commerce said the province jumped at a federal incentive to eliminate the tax and deserves credit for acting on it quickly.
“Each province had until 2011 to accommodate that removal,” president Graham Starmer said Friday. “The province was very proactive a couple of years ago in 2008 removing it from manufacturers and processors,” he said. Now it is following through and totally removing it. “I give the province credit for following through with their commitment,” Starmer said. “If only they could do that with the payroll tax, we’d be very happy.”
On Dec. 1, Manitoba became the first province in Canada to permanently eliminate the small business income tax rate.
But Manitoba is one of three provinces — including Ontario and Quebec — that still collect the payroll tax, he said. And Manitoba charges the largest percentage, taking $370 million a year from employers, said Starmer.
“It deters companies from expanding because it expands the tax they have to pay on payroll. That’s probably why some corporate head offices have moved to other locations.”
carol.sanders@freepress.mb.ca
Republished from the Winnipeg Free Press print edition January 3, 2011 A4

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