Tax Returns Cannot Be Changed After Ten Years!

Taxpayers often think that it is possible to add in additional old receipts that have been uncovered in their basements, or to file personal tax returns going back decades. This is not the case. The Canada Revenue Agency will only accept changes and filings of tax returns within a ten year time frame.

This can be particularly dangerous when it comes to notional assessments. If you do not file a tax return and the CRA issues an arbitrary assessment, essentially filing the return on your behalf, you can only have the amounts adjusted to actual by filing your tax return during the ten year period. Once that period is exceeded, you are out of luck.

For example, the CRA notionally assessed a taxpayer for their 2002 personal tax return in 2012. The 2002 personal tax return will only be accepted until December 31, 2012. If the Canada Revenue Agency arbitrarily assesses you for taxes of $100,000and you do not file your own return within the ten year limit, that $100,000 of taxes owing will remain on your account. There will also be penalties and interest applied on top of the tax. You may need to use the equity in your home to pay it, or even result to a consumer proposal or bankruptcy just to remove this amount from your tax balance, even though you may have actually owed nothing for that year.

  Don’t let time pass you by. It’s time to get around to filing those outstanding tax returns, before it really is too late. 

2013 Budget Announces New FOREIGN INCOME SNTICH LINE

When the 2013 budget was released this past March, there was a new measure put in place to help the government find major tax cheats.

There is already a snitch line for people to call and get someone audited, but this new line is directly aimed at individuals hiding amounts abroad and this time, the CRA is willing to pay for results.

If an amount over $100,000 is recovered by the Canada Revenue Agency as a result of your tip, you will be REWARDED BY THE GOVERNMENT WITH 15% OF THE FUNDS COLLECTED

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And there are many people out there that would call on their neighbours, ex-spouses, ex-business partners, former employers or that person who is always taking weekend trips to the Bahamas.

If the prospect of someone calling the government on you scares you, it should. There are huge penalties and interest associated with under-reporting your income. Even if you are not earning any income on your overseas money, you still will be hit with severe penalties if you had not submitted a T1135 Foreign Income Verification Statement with each annual tax filing.

There is also the possibly to be charged with a gross negligence penalty or even criminal prosecution.

Once the CRA is alerted to your activities, you are caught.

If you decide to come forward and declare this income before the government finds you, you may be eligible to file a Voluntary Disclosure which will waive the penalties and any criminal prosecution. You will still owe taxes on any foreign income earned, but without the penalties the amount will be greatly reduced.

Tracking the Cost of your Share Purchases

Many investors buy, hold, sell stocks and never pay much attention to the information that they need to be tracking for reporting purposes on their tax returns. Simply put, to calculate the gains or losses on the sale of your shares, you subtract the average cost of the shares from the proceeds.

Unfortunately, many institutions do not continually put the cost of the shares on your monthly statements. Then when it is time to sell, you are forced to start searching for statements from years earlier in order to determine what you paid for the shares in the first place.

Then the taxpayer is left in a difficult situation. Do you estimate the costs of the shares sold? Do you try and order the statements and hope you don’t miss the tax deadline? Does your bank even still have copies of the statements?

The best option is to keep ALL of the paperwork detailing the cost of each share purchase, until those shares are sold. And if possible, create a spreadsheet for yourself on Excel to keep track of the average costs of the shares held. This is important because if you buy the same shares at different prices, you may end up using the wrong price to calculate the cost base.

Your accountant can track your capital gain/loss balances for you if you provide the right information, and are willing to pay for it. Keep in mind, the more share transactions you have, the work it will be for someone else to summarize.

And if you do have a lot of transactions, it would be wise not to wait until April 20^th to start preparing your income tax return as you risk filing late and being charged with late filing penalties which are calculated on the tax owing. So if it was a good year for you in the market, your penalties will be that much larger.