I have noticed in the past few years, Canada Revenue Agency has increased the number of tax returns they are asking for additional information to support claims for credits or deductions.
It is possible CRA has increased its reviews and audits because there are more “do-it-your-selfers” each year. Tax software programs are available and the ads seem to make it easy to file your own tax returns. But just because you can doesn’t mean you should. If you are claiming some of the following commonly audited items, maybe you should seek professional help.
If you get a letter from CRA asking for information do not ignore it. You must respond, even if to ask for more time to get the information they are requesting. And my suggestion is to not to do it on your own. Ask for help from a professional tax preparer. We know more about what information CRA is asking for and how to get the full information to CRA.
I have met several taxpayers in the past six months that tried to respond to CRA on their own and it’s been a nightmare for them.
There are a few common deductions or credits that CRA seems to be focused on.
Employment expenses are one deduction that CRA needs every receipt and every supporting document in order to make the claim. First you need the T2200 Declaration of Conditions of Employment signed by your employer in order to claim any employment expenses.
And the biggest concern seems to be vehicle expenses, which tend to be large.
If you are required to use your own vehicle for the benefit of your employer, you may be able to claim the expenses. But you better have every single receipt for fuel and maintenance and insurance.
And you need to keep excellent records of every day the vehicle is used: you need perfect logs of use of the vehicle for every day. You need to prove how much the vehicle was used for employment purposes versus commuting and personal purposes. And you need to have the total kilometers used for the year (read the odometer at January 1 and December 31).
Another claim that CRA seems to be focusing on is the custody and the claim of children after a separation.
If you have separated from your spouse, you need to keep lots of records that prove you have sole, primary or shared custody of your children and that you are indeed living separated from your spouse.
If you are the spouse that stays in the home, you need to prove that you no longer live together. It can be tough to do if your departing spouse doesn’t change his or her address on anything (drivers licence, vehicle registration, bank accounts, mobile phone accounts, and lives with family). If you are the remaining spouse you need to have all mail “return to sender” so there is record that the other spouse no longer lives there.
And make sure all of the professionals in your life make notes about your separation: schools, daycare, doctors, dentists, bankers, and as many other people as possible in case you need “third party” letters from people who can confirm to CRA that you are indeed separated and what the custody arrangement are. If you are renting, make sure your landlord changes the names on the lease.
If you are paying for spousal support, keep all documents that show you paid the amounts and the payee (your ex-spouse). CRA needs to see the separation agreement and the cancelled cheques or copies of the direct payments (e-transfer or direct deposit).
Moving expenses are almost always reviewed by CRA. You need all the receipts for the amounts you have claimed. Include a letter from your new employer that you were not reimbursed for any of the expenses.
Most of the credits that CRA normally asks about are fairly easily to defend, including medical expenses and charitable donations. Medical travel seems to be the one item CRA is getting picky about. Keep appointment cards of your appointments or contact Manitoba Health for a full list of all your appointments for the year.
When you claim the deduction for child care, make sure the receipt clearly states who made the payment (especially in separation situations). And if your child care provider is an individual, make sure the receipt clearly states the person’s name and their SIN and the name(s) of the child(ren).
If you get a Notice of Reassessment that you disagree with, it’s important to file a Notice of Objection within 90 days so CRA cannot demand immediate payment. It buys you some time to get all your documents together to send in your “appeal”.
As we approach the beginning of the 2018 tax filing season (we can start e-filing February 18 2019), make sure that for every credit or deduction you are claiming, you have the full supporting documents you will need in case CRA asks for them.
You have until April 30 2019 to file your 2018 taxes. This date is important if you owe CRA. There are penalties if you are late. If you are expecting a refund, there is no penalty. If you are self-employed and claim your business net income on your personal taxes, you and your spouse have until June 15, 2019 to file your taxes and pay no penalty. And if you owe, the interest (6% per year) starts May 1 2019.
Anni Markmann is a Personal Income Tax Professional and Certified Financial Planner; living, working, and volunteering in our community. Contact us at 204.422.6631 or 36 Dawson Road in Ste Anne (near Co-op) or Info@SteAnneTaxService.ca