Category Archives for "Personal Income Tax"

A Brief History of Taxation

By Randall Orser | Personal Income Tax

All forms of government rule through control of taxation revenues, it has been a necessity of civilization since time began. If we grant prostitutes their claim to be the world’s oldest profession, we can be certain they had dealings with a tax collector. “It is not my due tax at all” are the words written on tablets by a scribe of Ancient Egypt in the Old Kingdom period, one of the earliest examples of tax frustration.

The keeping of accounts was the main purpose for developing a system of writing. The earliest cuneiform samples of Mesopotamia circa 2500 BC describe the relevant poll tax and the types of tolls and fees that merchants had to pay when transporting goods from one region to another. The law codes of Hammurabi, made famous in the Old Testament, deal with the penalties for smuggling to avoid paying tax as well as the punishments of citizens trying to avoid the obligatory government service. This form of tax could take the form of hard labor on civil projects such as digging a canal or, at worst, military service.

Although technically illegal, sending a hired surrogate to fulfill this obligation was a thriving trade in this ancient society, perhaps making getting out of paying your tax the world’s third oldest profession. Tax shelters have been documented as early as the fourth dynasty in the Old Kingdom of Egypt (2625-2500 B.C.E). The staff and the property of sacred temples, which were often funded through tax revenues, appeared to have been successful in gaining an exemption from paying taxes or compulsory labor

The tax collector truly became a villain in the Roman Empire, when the function was given over to ruthless profiteers who employed gangs of thugs to ensure the colonials had rendered Caesar his due.  By the time of the New Testament being written, tax collectors were considered to be amongst the lower professions. However Paul does put a divine induction on tax season saying in Romans 13:5 “This is also why you pay taxes, for the authorities are God’s servants, who give their full time to governing.”

In more modern times, as governments became more adept at collecting taxes, the revenue accrued increased dramatically. Unfortunately for the taxpayer, so did expenditure. As wars became more common and more expensive, the tax burden increased. Studies have confirmed that the tax burden of the eighteenth and early nineteenth centuries increased by 85% in England. No surprise then that this period gave rise to the first calls for what we know as Progressive Taxation. Adam Smith, in Wealth of Nations, wrote “It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.” The cry “No Taxation without Representation” was the shout heard around the world, the spark that ignited the American Revolution. The Declaration of the Rights of Man has this to say about taxation: “A common contribution is essential for the maintenance of the public forces and for the cost of administration. This should be equitably distributed among all the citizens in proportion to their means.”

Knowing that current taxation policies were founded on these principles should hopefully provide some reassurance when preparing to pay your taxes. When you are writing that check to the government consider that you are providing essential revenue to a system that is based on the highest principles of taxation theory, developed over centuries of evolution. Then be thankful you are not required to serve three months digging silt out of a royal canal instead!

Number Crunchers

Tips For Tax Success Before You Use A Professional Tax Preparer

By Randall Orser | Personal Income Tax

“We’ll get you a bigger refund.”

“Get your refund before you leave our office!*”

And the guarantees get more outlandish with each new firm of “tax professionals.” For anywhere between $99 to a couple hundred dollars, you too can drag all of your personal information to a complete stranger so they can type your information into their special tax software.

Before you use a tax professional to prepare your income taxes, there are steps you should take to protect yourself from mishaps. The biggest problems with using a tax professional are:

  • Paying high fees for a fairly simple preparation.
  • Miscommunication between client and tax preparer leads to penalties for the tax payer.
  • Signing up for unnecessary refund now programs or protection on an incorrectly prepared return.
  • Exposure of personal information to unscrupulous individuals.

Paying High Fees for A Simple Return Preparation

If addition, subtraction, multiplication, and division are not tough for you, and you only have a job and very few deductions, you could do your own taxes. The chain tax preparation services charge flat fees for tax preparation, so you may end up paying high dollar for something that could take you less than an hour to complete. Taxes only begin to get complicated when there are varied income sources, such as investment and self-employment or business income, and multiple schedules of deductions.

Protection: Give your own tax preparation the old college try before you see a tax professional. Even if you only prepare you own taxes once it can be valuable. Feeling nervous about your results? Pay for professional tax preparation after you finish and if you receive similar results to your own attempt, you now have confidence to do-it-yourself next tax season.

Miscommunication Between Client and the Tax Preparer Results in Penalties for Taxpayer

Ignorance of the law is never an excuse to break it. Even tax professionals with great reputations and flawless credentials make mistakes. One of the biggest sources of mistakes derives from misinformation from the client, you! The tax professional may ask questions about activities and purchases with the hope of securing additional deductions. Incorrect statements result in a tax return with ineligible deductions, a higher refund, but serious problems for the taxpayer when the return is reviewed by government officials.

Protection: Educate yourself in a general way about the types of deductions you have taken in the past, and the “What’s New for [this tax year]” page in the federal tax return instruction guide. If you are ever confused about why a tax professional is asking a question, speak up. Clarification about what qualifies for a particular line item could save you headaches and hefty penalties later on.

Signing Up for Unnecessary Refund Now Programs or Tax Return Mistake Protection

Both of these products are useless. The first is actually a loan product and if your return is less than you anticipated, you will face payday loan type interest rates on the difference. It is not worth the hassle to get your refund check that day from the tax preparation firm. You’ve lived without that extra money the entire year; a few more weeks won’t hurt you. Additionally, many chain tax preparation firms now scare clients with “audit protection.” What is the point of hiring a tax professional to complete your tax return if you still aren’t sure you can trust their results?

Protection: Use direct-deposit for any tax refunds. You won’t bother with any loan products, debit cards that tack on fees for use, and on average a direct-deposit refund arrives within two to three weeks. Currently, CRA is depositing refunds within 10 days from filing. The “audit protection” programs are a waste because you should always be truthful with your tax preparer. Keep your records, and if there is an audit, it is unlikely it will be a major mistake. Even when an adjuster finds an issue during an audit, it doesn’t automatically mean a charge of tax fraud. Most minor cases require a payment of any difference, and modest penalties. Still an extremely rare occurrence if both you and the tax preparer are vigilant, so skip the useless insurance policy.

Exposure of Personal Information to Unscrupulous Individuals

For anyone to prepare your taxes, they will need social security numbers, bank account information and statements, and T-slip records showing your employment. In the wrong hands, this sensitive information can be exploited for great gain. Many chain tax preparation firms rely on seasonal labor, making detection of any wrongdoing by disgruntled employees more difficult once tax season ends.

Protection: Only bring the information you know you need, and keep it organized in a folder or some other collection. As your tax professional works with you, only give him or her the forms needed for that particular step. Ensure the forms are returned to you, other than some records which must be sent to CRA, for your records. Other than your physical tax return and records, the tax preparer shouldn’t be making copies of bank statements and other supporting documentation, unless it will be submitted with the return.

The bottom line is even when you are using a professional tax preparer, it is ultimately up to your own common sense to make sure your taxes are filed correctly. If a deduction sounds odd to you, or too-good-to-be-true, question it! Unless you have had major life changes between tax seasons, such as a large shift in income, the birth of a child or marriage, there should not be a large difference in your refund or taxes owed. If you encounter a problem, do not hesitate to speak with a branch manager. After all, it’s your money and tax obligation to the government, not theirs.

Tips for Tax Success Before You Use a Professional Tax Preparer

By Randall Orser | Personal Income Tax , Small Business

taxform-tn“We’ll get you a bigger refund.”

“Get your refund before you leave our office!*”

And the guarantees get more outlandish with each new firm of “tax professionals.” For anywhere between $99 to a couple hundred dollars, you too can drag all of your personal information to a complete stranger so they can type your information into their special tax software.

Before you use a tax professional to prepare your income taxes, there are steps you should take to protect yourself from mishaps. The biggest problems with using a tax professional are:

  • Paying high fees for a fairly simple preparation.
  • Miscommunication between client and tax preparer leads to penalties for the tax payer.
  • Signing up for unnecessary refund now programs or protection on an incorrectly prepared return.
  • Exposure of personal information to unscrupulous individuals.

Paying High Fees for A Simple Return Preparation

If addition, subtraction, multiplication, and division are not tough for you, and you only have a job and very few deductions, you could do your own taxes. The chain tax preparation services charge flat fees for tax preparation, so you may end up paying high dollar for something that could take you less than an hour to complete. Taxes only begin to get complicated when there are varied income sources, such as investment and self-employment or business income, and multiple schedules of deductions.

Protection: Give your own tax preparation the old college try before you see a tax professional. Even if you only prepare you own taxes once it can be valuable. Feeling nervous about your results? Pay for professional tax preparation after you finish and if you receive similar results to your own attempt, you now have confidence to do-it-yourself next tax season.

Miscommunication Between Client and the Tax Preparer Results in Penalties for Taxpayer

Ignorance of the law is never an excuse to break it. Even tax professionals with great reputations and flawless credentials make mistakes. One of the biggest sources of mistakes derives from misinformation from the client, you! The tax professional may ask questions about activities and purchases with the hope of securing additional deductions. Incorrect statements result in a tax return with ineligible deductions, a higher refund, but serious problems for the taxpayer when the return is reviewed by government officials.

Protection: Educate yourself in a general way about the types of deductions you have taken in the past, and the “What’s New for [this tax year]” page in the federal tax return instruction guide. If you are ever confused about why a tax professional is asking a question, speak up. Clarification about what qualifies for a particular line item could save you headaches and hefty penalties later on.

Signing Up for Unnecessary Refund Now Programs or Tax Return Mistake Protection

Both of these products are useless. The first is actually a loan product and if your return is less than you anticipated, you will face payday loan type interest rates on the difference. It is not worth the hassle to get your refund check that day from the tax preparation firm. You’ve lived without that extra money the entire year; a few more weeks won’t hurt you. Additionally, many chain tax preparation firms now scare clients with “audit protection.” What is the point of hiring a tax professional to complete your tax return if you still aren’t sure you can trust their results?

Protection: Use direct-deposit for any tax refunds. You won’t bother with any loan products, debit cards that tack on fees for use, and on average a direct-deposit refund arrives within two to three weeks. Currently, CRA is depositing refunds within 10 days from filing. The “audit protection” programs are a waste because you should always be truthful with your tax preparer. Keep your records, and if there is an audit, it is unlikely it will be a major mistake. Even when an adjuster finds an issue during an audit, it doesn’t automatically mean a charge of tax fraud. Most minor cases require a payment of any difference, and modest penalties. Still an extremely rare occurrence if both you and the tax preparer are vigilant, so skip the useless insurance policy.

Exposure of Personal Information to Unscrupulous Individuals

For anyone to prepare your taxes, they will need social security numbers, bank account information and statements, and T-slip records showing your employment. In the wrong hands, this sensitive information can be exploited for great gain. Many chain tax preparation firms rely on seasonal labor, making detection of any wrongdoing by disgruntled employees more difficult once tax season ends.

Protection: Only bring the information you know you need, and keep it organized in a folder or some other collection. As your tax professional works with you, only give him or her the forms needed for that particular step. Ensure the forms are returned to you, other than some records which must be sent to CRA, for your records. Other than your physical tax return and records, the tax preparer shouldn’t be making copies of bank statements and other supporting documentation, unless it will be submitted with the return.

The bottom line is even when you are using a professional tax preparer, it is ultimately up to your own common sense to make sure your taxes are filed correctly. If a deduction sounds odd to you, or too-good-to-be-true, question it! Unless you have had major life changes between tax seasons, such as a large shift in income, the birth of a child or marriage, there should not be a large difference in your refund or taxes owed. If you encounter a problem, do not hesitate to speak with a branch manager. After all, it’s your money and tax obligation to the government, not theirs.

Tax Fundamentals for Home Business Owners

By Bonnie Sainsbury | Personal Income Tax , Small Business

Presentation of structure of taxationOne of the most important things that new business owners need to learn is how to file the proper taxes for their business. When you were employed in a regular office, all you probably had to worry about was your income tax. But now that you own a business, you will have to learn a little bit more about the tax system.

Qualifying for Tax Exemptions

The good news about being a home business owner is that you can qualify for certain tax exemptions or deductions. The only major requirements are that you should be running the business from home and that you have a clearly defined office area within your home. These tax breaks are specifically designed to help home businesses prosper despite limited resources. To learn more about them, inquire with your local government.

Keeping Business Records

In every kind of business, having an organized system for keeping records is absolutely essential. Every single document that has something to do with your business should be properly filed. And yes, that includes the seemingly insignificant receipts for office supplies or the gas you used for business travel.

Deducting from Home Expenses

Since you are running your business from home, and you have a legitimate office area inside your house, you can enjoy some tax deductions on your home payments and utility bills. For instance, if you are using about a fifth of the total floor area of your home for your business, you can claim a fifth of your total utility expenses. Even if you are just renting your space, you can still claim a portion of your rent.

Taking Care of Self-Employment Taxes

Being self-employed means you have to take care of paying your own medical and Canada Pension Plan taxes, which would typically be the responsibility of your company if you were employed in a regular office. You are responsible for both portions of CPP, which is 9.9% of your net income up to a maximum for the tax year. There may also be other taxes you need to pay, depending on regulations.

Getting Assistance

For most new business owners, dealing with all these taxes can be very confusing, especially if they don’t have any prior experience in the matter. In you find this tax business confusing, you can make the job a lot easier by using a tax software that will do all the computations for you. Many of these programs are available for free and are very easy to learn.

Another option is to hire a bookkeeper and/or an accountant. You’ll have to pay him for his services, of course, but oftentimes, the money you pay a bookkeeper or an accountant is more than worth the savings he can help you realize. You may want to hire both, the bookkeeper to perform the daily entering and reconciling, and the accountant for taxes. With an accountant’s knowledge and expertise, he can reduce your total tax by a significant percentage — much more than you can ever get by just relying on a tax software.

The Importance of Filing Taxes on Time

One of the common mistakes new business owners make is undermine the importance of paying their taxes before the deadline. Even a single late payment will not look good on your record so make sure you keep track of tax deadlines at all times. If you find come tax time that you don’t have the funds to pay, still file. That avoids a late filing penalty, which can be substantial if you miss year after year.

tax breaks

Five Tax Deductions for Owners of Rental Real Estate

By Randall Orser | Personal Income Tax , Small Business

Whether you already own a piece of rental real estate or are looking to jump into the market, it is important to understand the many tax breaks for owners of rental real estate. In fact, properly deducting all of the expenses that rental real estate can provide can add greatly to the profitability of a rental property investment. Here are five ways that rental real estate can lower your tax bill.

Interest Deductions

Most rental real estate owners realize that the interest that he or she pays on a mortgage is tax deductible. However, it is not just mortgage interest, but almost any interest paid for the rental property that is deductible. This generally includes credit card interest for purchases for the property, interest charged on bills due to service providers and other related interest charges.

Repair Deductions

Expenses paid for repairs to the property which maintain the property in rentable condition are deductible expenses. For example, painting the interior or exterior of the building, replacing worn flooring and repairing a leaking faucet are all deductible expenses. However, those same expenses incurred when getting the property into a rentable condition are considered capital expenses, and added to the original purchase cost of the property. When an owner performs the work, he or she can only deduct the costs for materials and not labor.

Travel Expenses

Operating a rental property often includes a lot of travel. This may include trips to the property to show it to prospective tenants or to inspect repair work, driving to a hardware store to pick up needed supplies or going to a newspaper office to place an ad in the paper. With the high costs of gasoline and other travel costs, these little trips can eat up a lot of cash. However, owners of a rental property can deduct these expenses and recapture some of the money spent running around town.

Maintenance/Management Costs

The costs to maintain and manage a rental property can quickly add up. From advertising the property for rent to paying for lawn care and snow removal, these small expenses will quickly turn into a significant cost. However, these expenses are deductible to the owner of the rental property. Any charge directly related to keeping the property in good working condition or managing the rental of the property is a tax deductible expense.

Property Depreciation

When a person buys a rental property, CRA allows the owner to depreciate the cost of the buildings and other structures (not the land) over time. This means that over time an owner can deduct the entire purchase cost of the buildings. The rate at which an owner can depreciate a rental property will vary depending on a number of factors such as whether or not the property is a residential or commercial rental. Improvements to the property, such as the construction of an addition, are also eligible for depreciation.

An owner of a rental real estate property should carefully track any expenditure related to the property and save all related receipts. By saving this information and using the services of a tax professional, an owner can save a lot of money.

Tax

Choosing a Tax Preparer

By Randall Orser | Personal Income Tax , Small Business

Halloween is considered the scariest time of the year, but April 30th is a close second.  The tax season can induce nightmares in even the bravest of Canadian citizens.  You can ease your tax fears by working with a tax preparer.  Qualified preparers are up-to-date on recent tax changes, and they can potentially save you money.  But if you want your tax return to be fully legal, you need to choose your preparer wisely.

First, never trust a tax preparer who “knows a guy” at CRA.  If a preparer claims he has a contact in CRA who can overlook your tax indiscretions, he is lying.  Also, be wary of any preparer who guarantees you a generous refund without knowing your financial information.  A qualified preparer will never guarantee anything without first looking at your financial documents.

The tax preparer you choose should have a complete understanding of all tax matters. If you are trying to find a preparer, ask for a referral from trusted friends and coworkers.  The best way to determine a preparer’s qualifications is to ask her a few questions regarding your specific financial situation.  Can she answer all of your questions?  Are you comfortable with her fee structure?  Does she know about recent tax changes?  And most importantly, do you feel at ease telling her personal information?  You need to trust your tax preparer; if you have any doubts about her skills or qualifications, keep searching for a preparer you can trust.

Before hiring a preparer, ensure that you will be able to contact him after he finishes your return.  CRA may examine your tax return in detail; if any problems arise, CRA will need to question your tax preparer.  Make sure to keep a record of your preparer’s full name, address, and business phone number.

A preparer must complete section 490 of the T1 General return, which includes their name, email address, and Efile® number.  Even though your preparer signs the forms, you are the one held accountable for the truthfulness of your return.  If your preparer makes false claims on your return, CRA could hold you responsible; this could lead to serious financial and legal problems.  Always review every page of your return before you sign the T183.  Ensure that all information – your name, address, and social security number – is correct.  And it never hurts to double check the numbers, either.  If you make $50,000 a year, you don’t want your tax return to state your salary as $500,000.

It is a good idea to give your tax preparer consent authorization to talk to CRA on your behalf. If there are any errors, or questions, then they can talk to CRA, and deal with the issue.

Once your preparer has completed all the forms, she will present you with a copy of your return; this is required by law, digital copies are acceptable. You are required to sign the T183 Efile® form, however, the return itself no longer has to be signed, even if it’s paper filed.

Note that a tax preparer that is registered for Efile® must electronically file your return, unless otherwise directed by CRA, even if you request it be paper filed.

If you are unwilling to spend your time pouring over T-slips, RRSP slips and other receipts, hire a qualified tax preparer.  You will never fear April 30th again.

How to Reduce Your Small Business Taxes

By Randall Orser | Personal Income Tax , Small Business

You may be paying too much in taxes and not realize it. Small businesses sometimes fail to take advantage of the tax deductions available to them, costing their businesses hundreds if not thousands of dollars in tax payments. You can reduce your small business taxes by following several proven steps.

Establish your business

One way that small businesses miss out on tax deductions is by not formally setting up the business legally. By incorporating your business, you begin to formally separate your business and personal management to enjoy the tax deductions due you. Contact your province’s corporate registry for filing information and work with the CRA to secure your business number. Many provinces this is done automatically once you incorporate.

Keep thorough records

When you formally established your business, you were given a business number by the CRA. That nine-digit number should be used by you as you open up checking accounts, seek credit and for obtaining your business credit scores. Keeping your personal records separate from your business is important if you are a corporationas your business dealings will not be attached to your personal dealings.

Enjoy tax deductions

As an individual you enjoy certain tax deductions. Such as RRSPs, charitable donations and certain family credits. As a business, there are deductions available to you including what you pay for rent, equipment amortization and the payment of provincial sales taxes. You can also enjoy tax deductions for cost of goods sold, capital expenses, the business use of your car, insurance, interest, taxes and rent.

Depreciate with care

There are several ways that you can take advantage of income tax depreciation deductions for your business, especially with the property your business owns. Although land is not depreciated, your building is. Moreover, improvement to same can be deducted. You can turn land into a deductible asset by leasing the property separately instead of buying it. Try accelerating your depreciation deductions by separating your real property from personal property.

Advertise with abandon

Clearly, you have an advertising budget in mind. Did you know that your advertising expenses are deductible? That is one reason why businesses large and small advertise heavily: your advertising expenses are directly deductible from your taxable income.

Explore your compensation options

Employee costs are tax deductible. While you may think that you cannot afford to pay your key employees more, you may find that you really have no choice. Especially if you want to retain your best workers. The greater expense in increased compensation is tax deductible and can be more than countered by the increased work your most loyal workers will provide.

Your Accountant/Bookkeeper

Work with your accountant/bookkeeper to find additional tax deductions available to your small business. Find one that’s worked with your industry before, as then they may know certain deductions only related to that industry. Provincial and local incentives vary and may provide additional relief to your small business.

What is the CRA’s MyCRA Mobile App?

By Randall Orser | Personal Income Tax , Small Business

apps-magnifiedThe Canada Revenue Agency (CRA) has joined the 21st Century and created apps for taxpayers to use to find information on their refund, benefits they receive from CRA, and business tax payment reminders. Many people use apps to find out information from their favourite companies, and to purchase items from them. The CRA has decided that many taxpayers want to find out information about their taxes while on the go, maybe they’re at their accountants and need to find out something while getting their taxes done. Here is what the MyCRA Mobile App is all about.

MyCRA is a new mobile app for individuals. The app lets you securely access and view key parts of your tax information, wherever you are, on your mobile device. You can access and view information such as:

  • your tax information (log in required)
    • notices of assessment;
    • return status;
    • RRSP deduction and tax-free savings account (TFSA) contribution room;
  • benefit and credit payment dates;
  • a directory of EFILE tax professionals, and a listing of free tax filing software;
  • the date and location of Community Volunteer Income Tax Program clinics; and
  • the CRA’s Charities Listings — making it easier to choose and donate to a charity.

MyCRA is a prime example of the CRA’s efforts to offer taxpayers secure, modern, and efficient ways to manage their tax affairs. The CRA will continuously update MyCRA, and in the future will let users update their contact information, enroll for direct deposit, and check the status of their benefit applications.

MyCRA is available on all mobile devices with Internet access. Since you may be using your mobile data when using MyCRA, your carrier’s standard data charges may apply.

MyBenefits CRA is a web-based mobile app for individual benefits recipients that offers a quick view of your benefit and credit payment details and eligibility information. The Business Tax Reminders mobile app lets business users create custom reminders and alerts for key CRA due dates related to instalment payments, returns, and remittances.

CRA Business Tax Reminders mobile app is recommended for small and medium-sized businesses with annual revenue of $20 million or less and fewer than 500 employees. CRA created the app based on consultations with small and medium-sized businesses, and allows business users to:

  • create custom reminders for key CRA due dates related to instalment payments, returns, and remittances; and
  • customize and tailor the reminder system for their personal business deadlines with either calendar or pop-up messages.

The app is designed to benefit businesses. It is not intended for individual use.

For the individual the MyCRA mobile app is a great way to check in on your tax information, and one-day change information that CRA needs from you. For businesses, this is a great way to remind you about upcoming due dates for those ever important tax filings.

Tax Write-Off Red Flags to Avoid for Small Business Owners

By Randall Orser | Personal Income Tax , Small Business

BudgetOne of the distinct upsides of owning a small business is the ability to write off various expenses. Good accountants can get creative while still staying within the bounds of the increasingly complex tax code. The truth, though, is that small business owners are often ill-equipped to deal with the challenges of an audit or other Canada Revenue Agency (CRA) investigation. Unlike large companies that have huge tax and legal departments, small business owners are often paying out of pocket for assistance when things go wrong. With this in mind, avoiding problems is as big a priority as saving money. Here are some tax write-off red flags to avoid if you want to stay solvent as a small business owner.

Be wary of the home office deduction

If you do work from home, then you might be tempted to take a home office deduction. This means deducting some of your Internet and phone expenses, too. There are distinct rules on what counts as a home office, though. If you’re just working out of your bedroom, you’ll have a harder time justifying a home office write-off. More importantly, home offices can trigger an audit, raising harmful red flags with CRA. Ensure that your home office is legitimate if you’re going to try to earn savings in this way.

Small business “Schedule T2125”

If you’re filing as a small business owner, you might find that Schedule T2125 offers the opportunity to take ample deductions. While this is a place you might save money, it’s also where CRA agents spent the bulk of their time. Taking excessive deductions on Schedule T2125 in relation to your income can trigger a CRA audit. More and more these days, CRA is spending time on small business owners. Be careful with how you treat your Schedule T2125 deductions and activity.

Issues with charitable donations

Giving to charity can make you feel warm inside, and it can benefit your business or brand. Be prepared when you decide to make donations, though. If you claim too many charitable donations, you can be subject to audit. CRA understands how much money people donate at a given income level, so massive amounts of giving can cause agents to ask questions. More important is getting appraisals for the non-cash donations you make. These property donations are a hotbed for tax fraud, so having no appraisals for the value of your donations can make you a hot target for CRA investigation.

Large deductions of meals and travel

Small businesses do have legitimate costs that can be deducted. CRA understands, though, that many small business owners will look to skirt the rules by writing off personal dinners and travel. Keep these expenses in check if you’re looking to avoid an audit. If you start writing off vacations by claiming that they were for a business purpose, you may find a CRA agent knocking on your door. Smart small business owners will err on the side of caution in reference to these costs, understanding that the risk of an audit outweigh the benefits of the write-off.

Small business owners must be smart in their tax preparation. With more people than ever going out on their own, CRA is now geared up to investigate people who play around with the tax code. An audit can be a headache and a financial nightmare. Taking these tips into account can save money over the long run. I believe that CRA truly hates self-employed people, and wants everyone to be an employee.

What is Online Mail from CRA?

By Randall Orser | Personal Income Tax , Small Business

Canada Revenue Agency (CRA), our glorious tax collectors, are on a push to go completely digital in the very near future, and online mail is the next step. Part of that has been getting taxpayers to get their refunds via direct deposit, and paying any monies owed via online banking. They’ve also been pushing to get people to apply for My Account, which allows you to track your refund, view or change your return, check your benefit and credit payments, view your RRSP limit, set up direct deposit, and so much more.

The Canada Revenue Agency now offers an online mail service that allows individuals to receive some correspondence from the CRA online through My Account. Once you are registered for online mail, the CRA will send an email to the address you provided when new mail is available for you to view in My Account. For security reasons, the email notification does not contain any links. Correspondence available through online mail will no longer be printed and mailed.

What are the advantages of registering for online mail?

Paperless—viewing your correspondence online means less paper clutter around the home. The CRA even sends you an email notification when there is new mail in your secure online account, so you won’t miss a thing.

Convenient—when there is correspondence to view, you only need to log in to My Account to see it. You can access your tax information whenever you need it, wherever you are. To register, go to My Account.

Secure—the CRA takes the protection of Canadians’ tax information very seriously. The CRA uses the same high levels of security that financial institutions use to protect your banking information.

What correspondence can I receive electronically?

The CRA will send an email notification when eligible correspondence is ready to be viewed in My Account. Some examples of correspondence currently available through online mail include:

  • Notices of assessment (NOA);
  • Notices of reassessment (NORA);
  • Tax Free Savings Account (TFSA) letters;
  • Benefit notices;
  • T1 adjustment notices; and
  • Instalment reminder.

CRA will continue to add more correspondence to their online mail service every year. As they become available, you will receive an email letting you know when they are available to view in My Account. For other correspondence items, you will continue to receive them from CRA through the mail.

How do I know if the email notification is from the CRA?

The CRA will never use aggressive language or tone, ask for prepaid credit cards, threaten arrest, or send police in any correspondence. A CRA email notification will only advise you that you have correspondence to view in My Account. It will never ask for you to confirm information or click on a link.

How do I register for online mail?

There are five ways you can register to receive online mail from the CRA:

  • log in to My Account and select the “Online mail” service;
  • use the MyCRA mobile app and select “Manage online mail”;
  • enter your email address on your paper T1 Income Tax and Benefit return or through NETFILE;
  • provide your email address to your tax preparer who is filling out form T183 or who uses EFILE; or
  • contact our Individual Income Tax and Trust Enquiries at 1-800-959-8281.

What email should I use?

Individuals should provide the email address of an account they regularly access.

The email address you provide is the one CRA will use to advise you that you have new mail available for viewing. While the CRA will not share any personal information by email, it is highly recommended that you provide your own personal email address to protect your privacy.

In other words, don’t use a work email as someone else has access to this, such as your boss, an IT person, or even your assistant.

What happens after I register?

Once you are registered, the CRA will send a registration confirmation email to the address you provided. Depending on the method you used to register, you should receive your confirmation email within the following timelines:

  • immediately if you used the “Online mail” service in My Account or MyCRA.
  • immediately if you called the Individual Income Tax and Trust Enquiries call centre.
  • within 8 business days if you filed your return electronically (NETFILE/EFILE).
  • within 4-6 weeks if you filed your return by paper.

If you do not receive a registration confirmation email, log in to My Account or MyCRA and review the email address in your profile. If the email address is incorrect, update it. If it is correct, check your junk mail or trash folder for an email from the CRA.

As with your mailing address, it is your responsibility to ensure we have your correct email address at all times.

Similar to the system employed by banks, no sensitive or confidential information is sent to you by email, nor does CRA request to receive such information from you through email.

When your new mail is available online, you will be advised to log in to My Account and select “View mail” to view and, if required, print it. My Account is the only place to view your online mail. To register, go to My Account.

I believe that the Online Mail is great, and that everyone should sign up for it. With all the mail theft going on, and the potential of identity theft from that, it makes perfect sense to have this all stored safely and securely on CRA’s servers. Also, most people end up losing these documents, and with it online, you always have access.