CRA treated you unfairly – What is your option?

Spring = Tax Headache (Photo credit: Canadian Pacific)

Have you ever had a situation where CRA treated you unfairly?  Dealing with CRA can be very intimidating experience and you did not know that you had another option for better resolution. It is Taxpayers’ Ombudsman.

The Taxpayers' Ombudsman is an independent and impartial officer who reviews complaints from people who believe they have been treated unfairly or unprofessionally by the Canada Revenue Agency.

As a tax payer you have following eight basic rights that are included in the Tax Payer Bill of Rights.

·         the right to be treated professionally, courteously, and fairly (Taxpayer Bill of Rights, Article 5);

·         the right to complete, accurate, clear, and timely information from the CRA (Taxpayer Bill of Rights, Article 6);

·         the right to lodge a service complaint and to be provided with an explanation of the CRA findings (Taxpayer Bill of Rights, Article 9);

·         the right to have the costs of compliance taken into account when tax legislation is administered (Taxpayer Bill of Rights, Article 10);

·         the right to expect the CRA to be accountable (Taxpayer Bill of Rights, Article 11);

·         the right to expect the CRA to publish service standards and report annually (Taxpayer Bill of Rights, Article 13);

·         the right to expect the CRA to warn you about questionable tax schemes in a timely manner (Taxpayer Bill of Rights, Article 14); and

·         the right to be represented by a person of your choice (Taxpayer Bill of Rights, Article 15).

It is Taxpayer’s Ombudsman’s responsibility to ensure CRA actually complies with these basic rights. 

Before you file a service-related complaint with the Taxpayers' Ombudsman, follow these steps:

1.    Try to resolve the issue with the Canada Revenue Agency (CRA) employee you have been dealing with or phone the number you've been given.

2.    If you are not satisfied, speak with the employee's supervisor.

3.    If you are still not satisfied with the way your issue is being handled, complete Form RC193, Service-Related Complaint to file a formal complaint. For more information, visit CRA – Service Complaints.

Submit a complaint

If you are not satisfied with the way your service-related complaint was handled by the CRA, submit the details of your complaint to the Taxpayers' Ombudsman using the Taxpayers' Ombudsman - Complaint Form.

Print your complete complaint form and send it along with any supporting documentation by fax to 1-866-586-3855 or by mail to:

Office of the Taxpayers' Ombudsman
50 O'Connor Street, Suite 724
Ottawa ON K1P 6L2
Canada

Related articles

• Important dates and other information about filing 2012 tax returns
• You may be eligible for Family Care Giver Credit from tax year 2012
• RRSP contribution refund calculator 2012

Important dates and other information about filing 2012 tax returns

Tax Preparation (Photo credit: agrilifetoday)

• Personal tax returns (except you or your spouse or common-law partner is self-employed) are due April 30^th 2013 and any balance due has to be paid that day and otherwise interest will be assessed. Tax returns for self–employed and their spouse or common-law partner is due June 15^th 2013 but balance due must be paid April 30^th 2013.
• You can file hard copy return or NETFILE or EFILE (EFILE can be done by tax preparer).
• TELEFILE option is not available.
• If you need a tax package (hard copy) you can order one from CRA and it will be delivered after February 4th 2013. The packages will also available to postal outlets and Service Canada offices from February 4th 2013.
• The NETFILE transmission service will be open from February 11, 2013, until November 30, 2013, for the electronic filing of your 2012 personal income tax and benefit return. Tax returns filed via NETFILE must first be prepared using one of the 2012 commercial tax preparation software packages or Web applications certified for NETFILE.
• List of certified software for NETFILE can be found here. 
• You employer has to provide your T4 slips by Feb 28^th 2013.
• Your investment provider or banks have to mail your T5 slips by Feb 28^th 2012 and T3 slips by March 31^st 2012.
• You can log in to My Account at CRA to find your RRSP contribution limit. RRSP contributions made in the first 60 days of 2013 (i.e. contributions made till March 1^st 2013) can be used in 2012 tax returns).

You may be eligible for Family Care Giver Credit from tax year 2012

This credit is available from year 2012 and subsequent years. This is not a standalone credit but enhances some of the other credits if you are eligible. You will get refundable credit of 15% of $2,000.

Here is the list of the credit that can be enhanced.

·         spouse or common-law partner amount (line 303 of the Schedule 1, Federal Tax);

·         amount for an eligible dependant (line 305 of the Schedule 1, Federal Tax);

·         amount for children under age 18 at the end of the year (line 367 of the Schedule 1, Federal Tax);

·         amount for infirm dependants age 18 or older (line 306 of the Schedule 1, Federal Tax); and

·         caregiver amount (line 315 of the Schedule 1, Federal Tax)

If you are eligible to claim the credit above then you are eligible for the Family Care Giver Credit provided the dependent meets one of the conditions below,.

·         For an individual age 18 or older, the individual must be dependent on you by reason of a mental or physical infirmity.

·         For a child under the age of 18, the child must have a medical or physical infirmity and as a result of that infirmity is, and is likely to be for a long continued period of indefinite duration, dependent on others for significantly more assistance in attending to the child's personal needs and care when compared to children of the same age.

You can get more information from CRA.

Online access of your account at CRA

You can access your account at CRA via My Account. It is a convenient way to check your account information, RRSP & TFSA contribution rooms and amend your tax returns.

With My Account you can see following information:

• tax refund or balance owing;
• direct deposit;
• RRSP, Home Buyers' Plan, and Lifelong Learning Plan;
• Tax-Free Savings Account;
• NETFILE access code;
• tax returns and carryover amounts;
• tax information slips – T4, T4A, T4A(P), T4A(OAS) and T4E
• disability tax credit;
• account balance and payments on filing;
• installments;
• Canada Child Tax Benefit and related provincial and territorial programs payments, account balance, and statement of account;
• GST/HST credit and related provincial programs payments, account balance, and statement of account;
• Universal Child Care Benefit payments, account balance, and statement of account;
• children for which you are the primary care giver;
• Working Income Tax Benefit advanced payments;
• pre-authorized payment plan;
• authorized representative; and
• addresses and telephone numbers.

You can also manage following information:

• changing your return(s);
• changing your address or telephone numbers;
• applying for child benefits;
• arranging your direct deposit;
• authorizing your representative;
• setting up a payment plan;
• formally disputing your assessment or determination; and
• changing your marital status.

Tax Tip 2011 - Tuition Amount - Examination Fees

From 2011 examination fees paid to take an occupational, trade or professional examination that is required to obtain a professional status recognized by federal or provincial statute, or to be licensed or certified as a trades person, to allow the person to practice a profession or trade in Canada can be claimed as tuition amount in income tax return provided it meets the CRA requirements.

In addition to examination fees, related fees given below are also eligible (must exceed $100):

· the cost of identification card

· certain prerequisite study materials

These amendments will not apply to fees in respect of examinations taken in order to begin study in a profession or field, such as a medical college admission test.

Tax deduction for qualified home buyers - Home Buyer’s amount

Image via WikipediaAre you a first time home buyer? You may be able to get a non refundable tax credit for 5K for your home purchase.

If you meet the following qualifications, you can claim the 5K tax credit in your tax return.

• you or your spouse or common-law partner bought a qualifying home; and
• you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer).

The amount can be claimed in Schedule 1 (line 369) of your tax return. The amount can be shared but the total amount cannot exceed $5K.

Here is the definition of Qualifying home from CRA website

A qualifying home must be registered in your and/or your spouse's or common-law partner's name in accordance with the applicable land registration system, and must be located in Canada. It includes existing homes and homes under construction.

The following are considered qualifying homes:

• single-family houses;
• semi-detached houses;
• townhouses;
• mobile homes;
• condominium units; and
• apartments in duplexes, triplexes, fourplexes, or apartment

Are you planning to Net File your income tax return for 2010? – Here are the software options

CRA each year publishes the certified softwares available for each year.  When you click the each tax software product, it lists restrictions as well. It helps you to choose the proper software for your needs. The list has different sections fo Windows, Mac and web applications.  

Windows:
AceTax, eTaxCanada, FutureTax 2010, GenuTax Standard, H & R Block At Home, Impôt Professionnel, myTaxExpress, StudioTax 2010, TaxFreeway, Taxnic, Taxtron, TurboTax (previously QuickTax), UDoTaxes 2010, UFile

Web applications: (for Windows and Macintosh)
5dollarTax, AceTax Online, EachTax.com, easyCTax, eTaxCanada Online, FileTaxOnline.ca, H & R Block At Home, TaxChopper 2010 from CuteTax, Taxnic.ca, TurboTax (previously QuickTax), UFile Online, WebTax4U.ca

Macintosh:
TaxFreeway, TaxTron

iPad:
TaxFreeway

Here is some the  recents blog posts about  Canadian Personal Tax Softwares available

TurboTax Review  by Canadian Finance blog

Top Canadian Tax Software Reviews by  iSoftwareReviews

CD & Download Tax Software by Canadian Tax Resource Blog

Common mistakes made in the personal income tax returns

 

1. Small income amounts not included in the income

Some financial institutions will not issue T3 or T5 slips, if the income amount is small but you still have to include it in your income tax return. Example: BMO will not issue T3 if your income from the fund is less than $50.00 and the income is other income. Some times you will not get T5 slips for interest earned in your savings accounts but those need to be added to under interest income in your tax return.

2. Joint account income not allocated according to contribution

Usually joint account incomes are allocated equally but it should be allocated according to the contribution made by each person. For example David and his dad opened a GIC and dad contributed $8K and David contributed 2K and they earned $200 income for 2010. David’s portion of the income is $40 (20% of the income) and dad’s portion of income is $160.00 ( 80% of the income). David should only include $40.00 in his income.

3. Allowable deductions or tax credits not claimed 

There are some expenses that can be claimed as deduction from your income.

Here are some examples (I have provided summary description but there are detailed rules regarding deductions.):

Childcare expenses - Incurred due to parents working or going to school. Spouse with lower income must claim the amount unless it meets the exception rules.

Moving expenses – You moved more than 40 Km to be closer to your new work. Business. You can deduct certain expenses related to moving against the income earned in the new location. The amount that can’t be deducted can be carry forward to the next year.

Carrying charges and interest expenses – Fees paid to management of investment, interest paid on investment loan (provided investment income is not 100% capital gains) and safety deposit box charges.

There are some tax credits that can be claimed. Here are some examples:

Public transit amount – You can claim the amount if you have purchased monthly pass, weekly pass or electronic payment cards that meets the CRA requirement.

Children’s fitness amount  - Amount paid for eligible fitness programs can be claimed up to maximum amount $500/ child.

4. Any info received after filing the income tax return not adjusted

If you receive any tax slips for income that you did not include in the income tax return the return  can be adjusted by filing T1 Adjustment Request.

Daycare business – How to do the Personal Income Tax Return?

I have seen many home daycare providers do not know how to report their income and expenses. Gross income has to be reported in line 162 and net income in line 135 of T1 General Return (I have chosen Ontario Link). Make sure the software you buy has T2125 form. You can deduct business related expenses to arrive at net income.

Image by neuroskeptic.blogspot.com

Here is a list of some expenses that can be deducted:

Supplies

Kids meals

Business use of home office

Field trip expenses

Professional fees (accountant, lawyer etc)

Office expenses

Salaries.

Keep your receipts incase CRA comes for audit.

CRA site has wealth of information on this

Ways to reduce withholding taxes withheld from the salary

If you are an employee with periodic salary, your withholding taxes are determined by the information you filled in TD1 Personal Tax Credits Return form. But TD 1 form does not take into consideration expenses listed below.

• RRSP contributions – other than contributions through your employer
• Child care expenses
• Support payments paid
• Employment expenses
• Carrying  charges and interest expenses
• Charitable donations and rental losses

If you incur these expenses and if those are substantial amount, you can complete T1213 Request to Reduce Tax Deductions at Source for Year(s)  form to request CRA to authorize your employer to reduce the withholding taxes. You will less withholding taxes withheld during the year rather than getting a refund when you file your tax return. It is always better to get it during the year than lending an interest free loan to CRA.

HST- Why some businesses do not charge it?

Here is one question  from one of my readers.

Question from Pat:

I am a small business owner that collected GST so now HST. There are other small businesses that didn’t collect GST, now don’t collect HST. So potentially sales could decrease for me as we could be side by side, I charge HST and they don’t, so customer saves 13% by buying from them. This isn’t fair. Any words of wisdom? 

Answer:

You have not indicated what products or services you sell. Therefore I have provided generic answer.

There can be three reasons

A. The supplier is small supplier. Here is the description of small supplier from CRA website.

You are a small supplier and do not have to register if you meet one of the following conditions:

·         you are a sole proprietor and your total revenues from taxable supplies (before expenses) from all of your businesses are $30,000 or less in the last four consecutive calendar quarters or in any single calendar quarter;

·         you are a partnership or a corporation and your total revenues from taxable supplies (before expenses) are $30,000 or less in the last four consecutive calendar quarters or in any single calendar quarter;

·         you are a public service body (charity, non-profit organization, municipality, university, public college, school authority, or hospital authority) and your total revenues from taxable supplies from all of the activities of the organization are $50,000 or less in the last four consecutive calendar quarters or in any single calendar quarter. A gross revenue threshold of $250,000 also applies to charities and public institutions.

B. If the product is a zero rated or exempt supplies, then the business does not to charge HST. Check whether the product you are supplying falls under these catergories.

Check below the list of zero rated and exempt supplies from CRA website below.

Zero-rated supplies

Some supplies are zero-rated under the GST/HST – that is, GST/HST applies at a rate of 0%. This means that you do not charge GST/HST on these supplies, but you may claim input tax credits for the GST/HST paid or payable on purchases and expenses made to provide these supplies.

Examples of supplies taxable at 0% (zero-rated) include:

• basic groceries such as milk, bread, and vegetables;
• agricultural products such as grain, raw wool, and dried tobacco leaves;
• most farm livestock;
• most fishery products such as fish for human consumption;prescription drugs and drug-dispensing services;
• medical devices such as hearing aids and artificial teeth;
• exports (most goods and services for which you charge and collect the GST/HST in Canada, are zero-rated when exported); and
• many transportation services where the origin or destination is outside Canada; .

Exempt Supplies
Some supplies are exempt from the GST/HST - that is, no GST/HST applies to them. This means that you do not charge the GST/HST on these supplies of property and services, and you do not claim input tax credits.

Examples of exempt supplies include:

• a sale of housing that was last used by an individual as a place of residence;
• long-term rentals of residential accommodation (of one month or more) and residential condominium fees;
• most health, medical, and dental services performed by licensed physicians or dentists for medical reasons;
• child-care services, where the primary purpose is to provide care and supervision to children 14 years of age or under for periods of less than 24 hours per day;
• most domestic ferry services;
• legal aid services;
• many educational services such as:
• courses supplied by a vocational school leading to a certificate or a diploma that certifies the ability of individuals to practise or perform a trade or a vocation, or
• tutoring services made to an individual in a course that follows a curriculum designated by a school authority;
• music lessons;
• most services provided by financial institutions such as lending money or operating deposit accounts;
• arranging for and the issuance of insurance policies by an insurer and the arranging for the issuance of insurance policies by insurance agents;
• most goods and services provided by charities; and
• certain goods and services provided by non-profit organizations, governments, and public service bodies such as municipal transit services and standard residential services such as water distribution.

C. The business is neither A or B  above and if they are not collecting or remitting HST, If CRA audits them, they are still liable for the HST and the business has to pay it even though they have not collected it. CRA may even assess GST for the prior years based on the audit.

Withdrawals from RRSP

RRSPs are for saving money for your retirement but some times you may have to take money for some urgent needs. But when you redeem there will be withholding taxes taken at source before you receive the money. If you withdraw money under Home Buyers Plan or Life Long Learning Plan, there will not be taxes withheld for those.

For example, if you (Ontario resident) redeem $4,500.00 from the plan, you will receive $4,050.00 and the financial institution will remit CRA the balance $450.00 as taxes (10% tax see below. At the end of the year, you will include the $4,500 in your income and $450.00 as tax paid. Based on your other income you may get a refund or you will pay more taxes for the withdrawal when you file income tax return for that year.

Amount Withdrawn	Withholding Tax Rate (Except Quebec)	Quebec Resident Federal	Quebec Resident Provincial	Total Quebec Withholding Tax
$0 - $5,000	10%	5%	16%	21%
$5,001 - $15,000	20%	10%	16%	26%
$15,001 and over	30%	15%	16%	31%

Other scenario is what happens when you move out of Canada and become non resident. Generally there will be 25% withholding taxes but if there is a tax treaty with the other country then the tax rate may be lower.