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5 BULLET FRIDAYS - Tax Mechanic News, Tips, Strategies
In this edition: Gross negligence by who? / How to pay yourself at year's end / You don't have to go bankrupt
Tax Mechanic
November 17, 2023
Bite size tax and finance related information that could save you $$$
Gross negligence on which side?
We are in the process of undertaking a rather dramatic appeal in the Tax Court Of Canada of a client who has been assessed by the CRA with approximately $308,000 in taxes payable including penalties and interest.
A 2011 audit examined reported business and gross capital losses of $308,000 that appeared to be personal living expenditures and debts. There were assumptions made due to insufficient records presented by the taxpayer, according to the CRA, also citing gross negligence.
Client claims that the CRA illegally and fraudulently classified expense claims to arrive at an amount of $90,000 owing in taxes, which compounded with penalties and interest to nearly $300,000 CDN. In his letter to the CRA he claims that the CRA is in breach of several sections of the Criminal Code of Canada, including breach of public trust, theft and perjury based on fabricated evidence. He claims the lien placed on his house is illegal and moneys seized from him have been taken illegally. The elderly client is a retiree living on a pension, and we are helping him get his case sorted out and at the minimum, get his penalties and interest reduced or eliminated.
Stay tuned as we will report on the progress of this case.
Do you have a court case? Call us!
How to pay yourself at year’s end
to save on taxes
A frequent question that comes up in tax planning conversations with incorporated business owners as the year end approaches is about the optimal method for paying yourself in 2023. The question pertains to how a corporation disburses income to a shareholder who also functions as an employee—either as salary or dividends.
Opting for corporate business income as salary (or a bonus) allows you to claim an income tax deduction for the salary, and payroll taxes like CPP and EI. Subsequently, you include the salary in your taxable income, subjecting it to personal tax rates.
Alternatively, your corporation can pay tax on its corporate income in the year it is earned and then distribute its after-tax corporate income to you as dividends in that year or a subsequent one. This allows for a lower tax rate (compared to salary) on eligible and non-eligible dividends, through the dividend tax credit. Read more!
Increased interest rates on overdue taxes in 2024
“The CRA has become increasingly aggressive when pursuing audits and frequently attempts to justify reassessments after the normal reassessment period on the basis of carelessness or neglect,” said recently Christopher Slade at a Canadian Tax Foundation conference in Toronto.
Come January, the CRA will start charging 10% interest on current or outstanding overdue taxes, up from the current 9%. This interest is calculated based on a prescribed rate, that is linked to the yield on Government of Canada three-month Treasury bills plus four percentage points, reevaluated each quarter. The last instance of the CRA imposing an increase to 10% interest goes back to 2001. Read more.
Helpful resources to stay on top of your tax game
Take Charlie on a ride but don't expect much...
Are your business taxes causing you a headache and you can’t find your way around all the different tax obligations, forms and deadlines? The CRA offers a complimentary Liaison Officer service to small business owners and self-employed individuals, offering assistance in understanding their income tax, GST/HST, and payroll responsibilities. Engaging in a virtual visit or webinar with a liaison officer is not only free but also completely confidential. Any information discussed during these sessions remains confidential and is not shared with other departments within the CRA or external entities. These sessions aim to provide personalized support, guidance, and reduce the stress associated with tax filings. Read more!
You don’t need to go bankrupt!
“In 35 years I’ve never had anyone file for bankruptcy, you never have to do that. Anyone who says that you have to do that is lying to you and is probably a trustee in bankruptcy and those guys…. “
Click here and watch my TikTok video to find out!