The thought of being audited is dreaded by most taxpayers. This fear stems from being unprepared. Often, tax returns are mismanaged, receipts are lost, and bank statements are unorganized. Audits are a central Canada Revenue Agency enforcement method. As such,…

A T2125 form is a schedule that goes along with a tax return, and it lists income, and expenses where taxpayers operate certain types of businesses. The Canada Revenue Agency (CRA) requires all resident taxpayers who generate business income or…

Maternity and Parental benefits are a form of Employment Insurance (EI) which provide financial assistance to people who are away from work because they are pregnant, have recently given birth, or because they are caring for their newborn or newly…

In Canada, personal tax returns for employees must be filed on or before April 30. Business tax returns must be filed on or before June 15 if a taxpayer, taxpayer’s spouse, or taxpayer’s common-law partner carries on a business. It…

A T2202A Tuition and Enrolment Certificate is a document that allows taxpayers to claim tax credits for amounts paid to certain schools, colleges, universities, etc. During tax season, one of the most important inclusions for Canadian post-secondary students when filing…

A T5018 is a T-Slip that is provided to subcontractors in the construction industry detailing how much they have been paid. It is similar to a T4 Slip that reports the amount of employment income that a taxpayer has received….

A T1013 form is an authorization form that allows someone to access, and make changes to your CRA Account (Social Insurance Number).   What is a T1013 Form? Filing a T1013 Form authorizes a representative to represent you for income…

Passive income is income that is derived from the ownership of capital property or assets that generate income without excessive effort on the part of the stakeholder. Most of the time, passive income is considered taxable income in Canada. Sources…

Canadian tax brackets are portions of Taxpayer’s income in Canada which get taxed at different rates. The following is a breakdown of the Canadian Federal tax rates for 2019: 15% on the first $47,630 of taxable income Income earned between…

Capital Cost Allowance is a deductible expense (taken off your taxable income) for the depreciation (wear and tear) of something. More specifically, Capital cost allowance (CCA) is the depreciation of fixed assets, excluding land, that is allowed to be claimed as…

The Principal Residence Exemption may allow for the profit from the sale of your home to be received tax-free. For many Canadian households, a vast amount, if not most of their wealth is tied to their homes. Accordingly, it is…

Taxable income means the value of what you have received is included in your income for the year, and you must pay tax on this amount. A common question for many Canadians filing their taxes each April is whether certain…

Land transfer taxes are one of many fees associated with buying real estate in Ontario. Upon the purchase of land or an interest in land in Ontario, the buyer is required to pay land transfer tax after closing. Land transfer…

A Revenue Canada dispute is any disagreement that you have with the Canada Revenue Agency. These disputes can be about anything on your tax returns, such as credits, deductions, and income. Additionally, disputes can be about how to classify income…

What is Capital Gains Tax? Capital Gains tax is a tax rate that is applied to income earned from the sale of capital property. This differs from the tax rate that is applied when you earn regular income.   How…

What is the Gig Economy? The gig economy is defined as one in which temporary, flexible jobs are much more common and companies lean more towards hiring independent contractors and/or freelancers instead of full-time employees. A common example of a…

Canadian income tax rates vary according to the amount of income a taxpayer earns. In addition, taxpayers pay different rates on different portions of their income, pending which bracket the income falls under. Canada has what is considered a “marginal…

Schedule 7 is a form that is attached to your Income Tax Return and it calculates your Registered Retirement Savings Plan (RRSP) deduction. The RRSP deduction lowers your taxable income, which means you pay less taxes than you would if…

A Tax-free savings account (TFSA) is a registered investment account that allows Canadian residents to earn tax-free money on certain types of investments. TFSAs are a great way for Canadians to save towards their financial goals, as they provide a great…

Recently, the Canada Revenue Agency has sent out a 13 page questionnaire to those it suspects of owning cryptocurrencies or digital currencies. These are currencies such as Bitcoin, Etherium, Litecoin, etc. The purpose of the questionnaire is to start the…

The Canada Revenue Agency (the “CRA”) requires all taxpayers to file income tax returns every year. Since Uber, and other similar companies, have arrived on the scene there have been questions about the tax implications of working for a company…

The harmonized sales tax (“HST”) is a consumption tax in Canada and it combines the goods and services tax (“GST”) and provincial sales tax (“PST”) . It is most often used in provinces where both the federal goods and services…

Uber drivers are considered self-employed in Canada, otherwise known as an independent contractor. As such, Uber drivers must keep records of the money they receive from Uber, and all of their expenses so that they may prepare and file proper…

HST stands for “harmonized sales tax”. A harmonized sales tax is otherwise known as a consumption tax, which is a tax levied on spending (think of goods and services). Typically, this tax is used in provinces where both the federal…

The Canada Pension Plan (“CPP”) are government payments representing a replacement of income where disability, retirement, or death are involved. It is also one of the three levels of Canada’s retirement income system. CPP is responsible for paying retirement funds and…

The Canada Pension Plan (CPP) operates throughout Canada, except in Quebec, where the Quebec Pension Plan (QPP) exists, aiming to provide contributors and families with partial replacement of earnings in the case of retirement, disability, or death. With very few…

The Working Income Tax Benefit (“WITB”) is a refundable tax credit intended to provide tax relief for eligible working low-income individuals. Because it is a benefit / credit, taxpayers may be entitled to the Working Income Tax Benefit even if…

The marginal tax rate is the percentage of tax you will pay, which is based on the amount of income you earn. The more money you make, the more tax you are expected to pay. This approach is otherwise known as…

The Canada Revenue Agency’s (CRA) Schedule 5 is used when taxpayer’s want to claim an amount for an eligible dependent, the amount for an infirm dependent age 18 or older, a caregiver amount, or an amount for a spouse or…

CRA Schedule 1 A Schedule 1 Federal Tax Form, or a CRA Schedule 1 as some people call it, is used to calculate the percentage of your income you are going to pay as taxes. If you are looking at…

While health care in Canada is publicly funded, there are various out-of-pocket medical expenses that taxpayers incur on a daily basis. Examples include over-the-counter medications, eyeglasses, vitamins and other items not covered by provincial or private health insurance. What many…

What is Rental Income? Rental income is any income earned for allowing others the use of a specific space. This includes houses, apartments, individual rooms, office space, or any other real or moveable property.   Do You Have to Pay…

A wage garnishment is when a creditor seizes some, or all of your earnings to pay off your amount owing. It is often used by the Canada Revenue Agency (“CRA”) to collect outstanding balances owed to them. Garnishments are not…

For one reason or another, your last years’ tax return was not filed . The longer it remains un-filed, the more penalties and interest that will be charged once you do file. It is also possible that the Canada Revenue…

If you have a balance owing for a tax year, the Canada Revenue Agency begins charging compound daily interest on May 1st of that year. The interest is charged on any unpaid amounts owing for that tax year. For example, if…

The CRA Reassessment Period is the amount of time the Canada Revenue Agency is allowed to adjust a personal, corporate, GST/HST, or payroll return. Each of these returns have different CRA Reassessment Periods, and the Canada Revenue Agency may even…

What Happens if you Owe Money to the CRA? It is important to know that if you are unable to pay the full amount that you owe to the Canada Revenue Agency, then it is essential to either contact the…

What is CRA Tax Evasion? The Canada Revenue Agency states that an individual or business engages in tax evasion when they intentionally ignore Canada’s tax laws. More specifically, it is the willful decision to suppress or avoid disclosing income required to…

The Difference Between a CRA Audit, and a CRA Review The Canada Revenue Agency (“CRA”) has two options when looking at reassessing or adjusting tax returns. First, “tax reviews”, which are not formal audits, but rather a process that promotes…

What is a Taxable Benefit? A taxable benefit is a benefit that a taxpayer receives, typically paid for by a corporation, that is more related to personal choices than business expenses.  If this is the case, then the taxable benefit…

The Tuition Tax Credit The tuition tax credit (“TTC”) is a non-refundable tax credit that helps Canadian students who are currently attending, or recently finished attending post-secondary education. The cost of post-secondary education represents a financial detriment to many Canadian students and…

The Canada Revenue Agency (“CRA”) can charge interest and penalties for a variety of reasons. Perhaps more worrisome is the alarming rate that penalties and interest can accrue at thereafter. Interest and penalties can easily accumulate to amounts greater than…

Anyone who has been audited will tell you about the amount of time they spent compiling receipts, bank statements, and other documentation to refute assessments made by an auditor. Once an auditor has made their determination of what a taxpayer…

A Principal Residence audit occurs when the Canada Revenue Agency audits a taxpayer for the sale of one, or multiple properties where no taxes are paid. No taxes are paid because the taxpayer is claiming the Principal Residence Exemption, which…

It’s no secret that Vancouver is one of Canada’s hottest real estate markets, and that other large urban centres in British Columbia have enjoyed similar popularity in investment patterns. A limited supply of housing, however, has caused issues with accessibility….

Unreported Income and the CRA Canada’s tax system is built on the premise that those filing their taxes are being honest with the Canada Revenue Agency (CRA). You are expected to report the proper amount of income, and expenses. Of…

The Disability Tax Credit The disability tax credit (DTC) is a non-refundable tax credit that helps Canadians with disabilities pay for their out of pocket expenses. The credit is intended to provide greater tax equity by allowing relief for disability…

GST/HST New Home Housing Rebate When you buy a new property in Canada, you must pay GST or HST on the purchase. However, purchasers can receive a rebate of some of the GST/HST paid, subject to certain conditions. In simple…

Exporting Vehicles – GST/HST and Input Tax Credits The sale and export of vehicles from Canada should theoretically yield GST/HST refunds. These are known as Input Tax Credits (ITCs). The reason for this is because you would have paid GST/HST…

What is Director’s Liability? In Canada, corporations are considered to be separate legal entities with their own assets and liabilities. It is a basic principle that employees, officers, and directors are not personally responsible for the debts incurred by their…

Section 160: Paying Other People’s Taxes As explained previously (here), section 160 of the Income Tax Act, and its counterpart, section 325 of the Excise Tax Act, can be used by the Canada Revenue Agency to attach tax liability to…

GST/HST Audits after already being Audited Subject to exceptions, Canadians running businesses are expected to collect and remit GST/HST to the government on most of their sales. Sometimes, though, they may not even know that they were running a business…

The informal procedure at the Tax Court of Canada is similar to the Small Claims Court offered throughout Canada. Essentially, if you are disputing less than $25,000 per tax assessment, you may choose the informal procedure.   What is the…

In 2017, the Federal Government announced its intention to make sweeping changes towards small business taxation in Canada. The government initially targeted hallmarks of tax planning strategies for small and medium-sized business owners under the ostensibly stated goal of bringing…

In our last post, we discussed the importance of legal representation on the “back end” of the voluntary disclosure process, assisting you with handling the Canada Revenue Agency’s collections division. Additionally, having legal assistance is more important now then ever…

Under the Canada Revenue Agency’s Voluntary Disclosures Program, taxpayers can come forward to disclose past non-compliance, whether that be non-filing, over-claimed expenses, offshore reporting, or any of an almost limitless number of errors and omissions on Canadian taxes. We help Canadians…

Have you been involved in, and affected by Edge Software, Edge of Command or Highshare Franchise? Edge Software Inc., Edge of Command Inc., and Highshare Inc., are just a few names for one single franchise entity that entered into franchise agreements…

This is part two in a series of posts discussing Indirect Verification methods used by the Canada Revenue Agency (“CRA”). If you want to reach about what these are or learn about the various types, consider reading part one found here….

Indirect Verification of Income Audits & the Canada Revenue Agency Indirect Income Verification methods are an extremely powerful weapon in the CRA’s arsenal, particularly when dealing with small businesses or individuals who do not have an extensive paper trail. Where a…

Throughout 2017, the Trudeau government’s proposed changes to Canadian business taxation often dominated headlines. However, their gradual rollout and ponderous process resulted in something of a slow burn of coverage, which, however much Canadians discussed it, cannot hold a candle…

On December 13, 2017, the Department of Finance re-released its draft legislation regarding income splitting rules and provided guidance to the revised legislation. The Government’s stated objective for changing the income splitting rules is to limit the ability of owners…

In our first discussion of when to hire tax lawyers, we discussed their experience in advocacy and knowledge of the legal avenues open to you to seek redress under Canada’s tax laws. Here, we will discuss one of the most important…

The Canada Revenue Agency has recently received a court order from the Federal Court allowing them to collect a broad range of data from paypal. The service is frequently used by relatively informal businesses, particularly those based online, to make sales…

The Liberal Government continues to work towards legalizing marijuana throughout Canada by releasing proposed amendments to the Excise Tax Act concerning the production and sale of legal cannabis. On April 13, 2017, the Liberal Government introduced to Parliament Bill-45, “an Act…

In the recently announced changes to the Income Tax Act, “reasonableness” takes centre stage. Taxpayers running businesses who pay money out to their family members in the form of dividends or salary, can currently “spread” that money around, distributing it to…

In a tax context, an expense or a write-off is another word for a deduction. Canadian corporations are taxed on their profits, that is, the income that they earn less the cost of earning that income. Costs that you legitimately incur…

When Canadians think of taxes, they likely think of strict rules that come out of the Income Tax Act. Parts of the Act, however, do not really work that way, and rather turn on less clearly defined concepts, such as “reasonableness” or…

There are clear distinctions to be made between tax lawyers and accountants.  Understanding these differences will make it easier to decide what you are in need of.   The most important distinction is between legal tax issues and non-legal tax…

If you feel as though the CRA has not interpreted the law correctly in their tax audit, it is within your rights to challenge it through the Income Tax Objection process.  An objection of an audit can be filed either…

There are a number of steps you can take if you suspect the CRA has made a mistake in their audit regarding the legitimacy of your tax return.  It might be an issue with a personal tax-free savings account (TFSA),…

Depending on your employment position, it should not be a surprise to find yourself the target of a CRA audit.  If you are self-employed, the owner of a small business, managing a successful TSFA, or have an income that does…

Forgetting to report income is a common issue pertaining to tax returns and audits.  If you are reporting numerous employment incomes, have a plethora of stocks that have done well, and are putting a percentage of your income into an…

If you want to begin saving for retirement, but are not maxing out the tax-sheltered savings accounts offered by the Canada Revenue Agency, you will face a trade-off between stashing your savings in a Tax Free Savings Account and a Registered…

On July 18, 2017, Canada introduced draft legislation that, if implemented, will significantly change the way business owners and professionals pay tax. In particular, the draft legislation is attempting to close alleged “loopholes” in the current tax regime, which the…

Do you have unfiled tax returns, or have you incorrectly reported income? If so, you may be eligible for the Voluntary Disclosures Program. The Voluntary Disclosures Program incentivizes taxpayers to correct previous non-compliance by offering relief from penalties, a reduction…

Realtors in Ontario have traditionally been left out in the cold when it comes to taking advantage of the tax benefits of professional corporations.  Under the definition section of the Real Estate Brokers Act, real estate brokers and salespersons are required…

Taxpayers aren’t perfect, and quite frequently circumstances beyond their control prevent them from meeting their tax obligations. While the Canada Revenue Agency (“CRA”) won’t come to arrest you (in most circumstances), they can penalize taxpayers through the use of penalty…

The Federal Government has announced that they are looking into making changes to what they perceive as unfair tax advantages provided to individuals who own their own corporations. The changes focus on three major areas: income sprinkling, holding passive investments…

Do you own a corporation? Have you updated your corporate records each year as required by the Business Corporations Act (Ontario)? Have you routinely filed information returns in accordance the Corporations Information Act when you have moved offices or changed directors?…

Every year, many taxpayers are unhappy with the Notices of Assessments they are issued. If you’re in such a position, you do not need to accept the outcome. You may be able to fight your assessment by filing an objection with the Canada Revenue Agency…

The Tax Court of Canada is a unique Court in Canada. It only hears tax cases, and there is no fixed location where the judges reside. Rather, Tax Court Justices come to you. When you have already been through the audit,…

You might be like thousands of Canadians who have not filed their taxes for the past few years. Whether it is just missing one year, or missing ten years, the pressure from not filing can make for some serious stress….

On April 20, 2017, a number of measures were announced by the Ontario Government in their attempt to make housing more affordable.   Rent Control The Residential Tenancies Act limits the increase of rent on buildings built prior to November 1,…

An amalgamation (sometimes called a merger) is the combination of two or more corporations to form one corporation and to continue on in existence as one corporation, often referred to as the “AmalCo’” (Business Corporations Act, (Ontario) “OBCA”, s. 174)….

Professional Corporations Legislation in Ontario specifically permits certain professionals to practice their profession in a corporate form even though the professional is the sole employee of the professional corporation (PC). The Ontario Business Corporations Act (OBCA) permits a professional to practice…

When a taxpayer decides to start their own business, he or she must consider the type of business structure best suited to their individual needs. The most common forms of business arrangements are either a sole proprietorship, or a corporation….

What is a Section 85 Rollover? The Income Tax Act (“ITA”) contains several provisions that allow a taxpayer to transfer ownership of property without any immediate tax consequences, with section 85 being one such provision. The general rule is that transfers…

With the recent explosion of marijuana dispensaries in Vancouver and Toronto, the Canadian government is having a hard time coming up with new laws to regulate the industry. One of the most complicated areas to deal with in regards to the dispensaries…

The Principal Residence Exemption is Canada’s most lucrative tax break. When a taxpayer sells his or her personal residence, providing the conditions are met, the gain from the sale is non-taxable. This provides a very large incentive for taxpayers to claim the…

When the Canada Revenue Agency (“CRA”) audits a taxpayer, there are many different auditing methods or techniques that may be used. One of the most widely used of these methods is the bank deposit analysis, which is normally completed as…

Taxpayers will always try and pay the lowest amount of taxes possible. That is why the difference between business income, and capital gains is so important. Business income is taxable on the full amount, where only half of the capital gain…

The Canada Revenue Agency (“CRA”) is currently conducting a massive audit program looking into taxpayers who have used cheque cashing services between the years 2006 and 2015. If you used a cheque cashing service between these years, and the CRA…

When the Canada Revenue Agency (“CRA”) processes a tax return, they produce a document detailing the results known as a Notice of Assessment. If you modify your filings, or if the CRA makes changes on their own, they will then issue…

There are a number of scammers contacting taxpayers around Canada and scaring them into believing they owe the Canada Revenue Agency (“CRA”) money. This tax scam has been around for years now. These scammers claim that if the amounts owing are not…

  A tax shelter is defined in subsection 237.1 of the Income Tax Act as an arrangement that provides a taxpayer tax benefits or deductions which are greater than the net cost of participation in the shelter. Tax shelters may be gifting…

Canadians, other than non-residents of Canada for tax purposes, are taxed on their worldwide income. However, Canadians who pay taxes in another jurisdiction, may be able to claim a foreign tax credit so that double taxation does not occur. Section 126…

Under subsection 70(5)(a) of the Income Tax Act, when a taxpayer passes away, they are deemed to sell, and re-purchase all non-depreciable, and depreciable capital property. This can create a very large tax bill for the estate of the taxpayer.  …

Replacement Property Rules – Deferring a Capital Gain Normally, if you sell a property at a higher amount than the purchase price, there will capital gains taxes payable. However, sections 44, and 44.1 of the Income Tax Act allow for…

A Registered Retirement Savings Plan (“RRSP”) is a tax deductible way of funding your retirement. Contributions made are deductible from your income, which lowers the overall amount of taxes you are going to pay that year. Withdrawals from the account…

The Lifetime Capital Gains Exemption (LCGE) is an incentive created by subsection 110.6 of the Income Tax Act. It allows taxpayers the opportunity to sell certain qualified shares or property on a tax-free basis. Depending on what is being sold, taxpayers…

If you rent out property, there are a number of expenses that may be deducted from your rental income to lower your overall tax bill. Some typical expenses include: Mortgage interest; Property taxes; Utility costs; Insurance; Advertising; Maintenance; and Property management…

A business investment loss is a capital loss from the sale of shares of a small business corporation, or it can be a debt owed to someone by a small business corporation. Capital losses may be deducted against Capital gains except…

If you have an incorporated business you are able to pay yourself in any way you would like. There are various methods of getting money out of your corporation. Some examples include: Salary; Dividends; Loans; Director Fees; Management Fees; and…

A shareholder loan is money given by a corporation to a shareholder, or to someone who does not deal at arm’s length with the shareholder. If certain conditions are not met, the loan amount may become a taxable benefit to the…

According to subsection 123 of the Excise Tax Act, a precious metal is part of the definition of “Financial Instrument”. This is important because “Financial Instruments” are not subject to GST/HST on their sale.     Precious Metals Precious metals are bars,…

Subsection 152(7) of the Income Tax Act and subsection 299(1) of the Excise Tax Act both state that the Canada Revenue Agency (CRA) is not bound by the information provided by any person. This means that if taxpayers provide their…

The small business deduction provides Canadian Controlled Private Corporations with a tax break on their first $500,000 of active business income.   Canadian Controlled Private Corporations (CCPCs) A CCPC is a private corporation which is controlled by resident Canadians.   Active Business Income…

Why Split Income? If only one spouse works in a household, then that individual is usually tempted to try and give some income to his or her spouse or children in order to pay less taxes. This is known as…

Subsection 160 assessments under the Income Tax Act, and its Excise Tax Act counterpart subsection 325 assessments are the most powerful enforcement mechanisms that the Canada Revenue Agency (CRA) is able to use against taxpayers. The reason for this is simple. These…

It can be a complete shock to taxpayers when they learn that any money they made from illegal activities is still subject to tax. If an individual is caught committing a crime, and the police suspect that the person has made money…

When a vehicle is used for both personal and business purposes, it is necessary to keep a log to record the business use of the vehicle. The Canada Revenue Agency (CRA) will allow a taxpayer to deduct the business use…

The benefit of the principal residence exemption is obvious. As long as the sale qualifies, you will not pay tax on the profit you made from selling your principal residence. When you normally sell a property, you are subject to tax on the gain…

Typically in Canada, your debts are your own. However, where corporations are involved that is not always the case. The Canada Revenue Agency (CRA) can assess directors of a corporation for certain kinds of corporate debts. The most common are…

If you, knowingly or under circumstances amounting to gross negligence, made a false statement or omission on your tax return, the Canada Revenue Agency (CRA) may charge you with gross negligence penalties. The penalty is equal to the greater of:…

Canada allows its citizens to be residents of Canada for tax purposes, and non-residents of Canada for tax purposes. This is an important distinction as a non-resident of Canada for tax purposes will only be subject to Canadian taxation on…

Many individuals choose to categorize themselves as an independent contractor (self-employed) rather than an employee because of the various tax advantages. The Canada Revenue Agency (CRA) has its own rules regarding whether a person is in a business relationship (independent…