Tax & Business News
Trips, tips and traps
March 2017
|
|
|
|
Links For March
|
|
Forward this email to a friend!
|
|
|
| |
Canada Revenue Agency has really embraced technology even launching a mobile app from which you can see your Notice of Assessment, tax return status and change your address. Check it out at here.
Also, they are encouraging taxpayers to sign up for My Account which will provide you with access to your online CRA account. By all measures, this initiative is a win-win situation. CRA will need less resources to answer questions and taxpayers have immediate access to their information. Register for My Account by clicking here.
|
|
|
|
| Calendar of Important Dates |
Corporations with a December year end, claiming the small business deduction must pay the balance of tax owing by the end of March.
Corporations with a January year end, not claiming the small business deduction must pay the balance of tax owing by the end of March.
Federal Budget Release
T3/Trust Returns - March 31, 2017
Next Issue - April 10, 2017
|
PRINCIPAL RESIDENCE EXEMPTION
Escalating real estate prices ...
|
On October 3, 2016, Minister of Finance Bill Morneau announced a number of measures to address perceived abuses of the Principal Residence Exemption (PRE). The PRE essentially allows gains experienced upon the sale of a principal residence to be tax free.
Here are some of the major changes;
Reporting the Sale of a Principal Residence
While the legislation has always required that property be designated as a principal residence, CRA has historically waived the requirement for any filings or disclosure where the entire gain was exempt due to the PRE. However, effective for sales of property eligible for the PRE occurring on January 1, 2016 and later,
individuals will be required to report the sale in their personal income tax return.
Basic information
such as the year of acquisition, proceeds of disposition, and the address of the property must be disclosed. This reporting may also be required where the property has not been sold but there is a deemed disposition. A deemed disposition may occur, for example, when a personal home is converted into something else, like a rental property.
Late Designations
If the disposition is not properly and timely reported, the PRE may not be available. However, CRA does have the discretion to accept a late designation. If the late submission is accepted, CRA also has the option to levy a penalty ($100 per month late, up to a maximum of $8,000). The penalty may or may not be issued depending on the circumstances.
Extended Assessment Period
A further proposal would provide CRA with the authority to assess taxpayers beyond the normal assessment limitation period (generally 3 years) when the disposition of real estate is not appropriately reported in the tax return. In other words, there would be no time limit for such an assessment. However, CRA's ability to reassess will be limited to only the unreported disposition of the real property.
Note that this extended reassessment period is not restricted to real estate used as a principal residence - most real estate counts. If the tax return is later amended to report the disposition, CRA's ability to reassess will end approximately three years after the adjustment or amendment is filed.
This amendment applies to taxation years that end on or after October 3, 2016.
Action Item: If disposing of any real estate, discuss with an advisor as to how this should be reported on your tax return.
|
|
QUICK LINKS FOR TAX INFO
Handy tool for tax time...
|
|
Top of Page
|
|
FOOD FOR THOUGHT
Taxing meal reimbursements...
|
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 advantage to 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.
Top of Page
|
|
DON'T SLIP-UP
Penalty for the unwary...
|
|
Are you a repeat offender? If you overlooked reporting income from a T-slip or any other source for an amount in excess of $500 once in the last three years, and did so once again for 2016 - you are a repeat offender!
Here is what CRA has in store for you - 10% penalty on the
income
omitted AND 50% of the difference between the tax withheld on the T-slip and the tax otherwise payable on the missed income.
My experience has been that missed income is not the result of willful intent to suppress income but the confusion related to enormous amounts of data hurled at taxpayers in the month of April.
Some investments have T-slips mailed, others emailed, people move and changes of address are sometimes expired, Snowbirds who forward their mail etc.
The best solution is to make a list of slips from the prior year and mark them off as information arrives for the current year. Additionally, it is possible to download the information directly from CRA website, however, if CRA doesn't have it listed when you or the preparer downloads, you will need the first method for a better chance of not omitting a slip.
Top of Page
|
|
CRA GOES YOU TUBE
Some of the videos are helpful...
|
|
More CRA videos can be found on You Tube
|
Recent CRA Decisions
There is no escape from tax...
|
WILLFUL BLINDNESS?
Directors' liability - Whether appellant director
liable for unremitted source deductions of corporation - The taxpayer was a director of a company which had failed to remit source deductions as required. An assessment was issued against him in respect of those amounts, and he appealed from that assessment.
His appeal to the Tax Court of Canada was unsuccessful, with the Court holding that
the appellant had failed to exercise the degree of skill and care required of a director.
He appealed from that decision to the Federal Court of Appeal and his appeal was dismissed.
The Federal Court of Appeal held that the decision of the Tax Court judge was reviewable on a standard of palpable and overriding error and that no such error had been made. The appellate Court concluded that the
appellant had failed to establish that a reasonably prudent person would rely simply on third party assurances that remittances were being made, particularly when it was clear that those third parties had previously misled the appellant with respect to such remittances.
In addition, the Court noted that the appellant had been informed by the Canada Revenue Agency that the required remittances were not being made, and that he failed to take any direct action to remedy that failure. - Income Tax Act, RSC 1985, c. 1 (5th Supp.), s. 227.1. Click
here to access the PDF
|
| Disclaimer |
 The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a commentary such as this, a further review should be done. Every effort has been made to ensure the accuracy of the information contained in this commentary. However, because of the nature of the subject, no person or firm involved in the distribution or preparation of this commentary accepts any liability for its contents or use.
|
|
NEW NEWS
All you need to know...
|
|
|
| Life in the Tax Lane - March 2017 (Episode 22) |
|
|
Sincerely,
Howard Render, CPA*CA
|
|
| |
|
