Sound Too Good to Be True? It May Be a Tax Scheme

Did you know that between 2006 and 2017, 75 tax scheme promoters were convicted of crimes relating to tax schemes. The total of fines resulting from these prosecutions amounted to a total of 7.15 million and resulted in a total of 936 months of jail time for those convicted.
Tax schemes are promoted heavily during tax season and taxpayers need to have the facts regarding tax schemes in order to avoid them.

What is a Tax Scheme?

A tax scheme can be an individual or an organization that is deceiving a taxpayer into believing that they will be able to pay less taxes through unreasonably large deductions or that they will be able to receive an unusually large refund. Tax schemes often use illegal methods to get clients larger refunds and. When faced with a tax preparer who is promising an unusually large refund, be cautious.

What Should You Look Out For?

Beware of tax promoters that are promoting a return that is much higher than the initial investment towards it. Returns that are grossly disproportionate to the amount of money that is actually paid should be a red flag that there is something suspicious going on. You should also be cautious if the promoter is discouraging you from speaking to the CRA or getting a second opinion from another tax professional.

Common Schemes

A common scheme which resulted in billions of dollars in deductions being cancelled was the Charity Tax Shelter scheme which convinced Canadians that they could claim an amount equal to or greater than their charitable donation when filing their tax return. Donations paid to charities are only eligible to have a portion of the amount deducted. Charities must be registered with the CRA in order to issue official donation receipts and the CRA closely monitors charities and tax shelters to detect abuse of privileges. As a rule of thumb, donations for the purpose of only deducting taxable income are looked down upon by authorities and should be avoided.

Another common scheme involves promoters convincing unemployed individuals that they are eligible for the working income tax benefit(WITB) even if they have not worked during the year. The WITB is only available to low income individuals and families that have worked during the tax year. Schemes of these sorts take valuable tax dollars away from social programs and facilities for Canadians. The CRA takes participation in these schemes very seriously and invests large amounts of money towards preventing these schemes.

You Can Be Held Liable

Being a willing participant in a tax scheme can lead to serious consequences. If you knowingly participate in a tax scheme you can be prosecuted or penalized by the CRA to pay additional fees on top of the fees paid to a tax scheme.

Taxpayers that have knowingly participated in a tax scheme can visit the Voluntary Disclosures Program in order to disclose their information and fix their tax return. Disclosing involvement through the Voluntary Disclosures Program would allow for relief from prosecution in certain cases and limit the amount of penalties.

Be cautious of promoters that promise outrageous claims and practice due diligence in choosing a tax representative. Softron Tax has been a trusted tax preparation company for over 30 years. Visit one of our locations and have one of our friendly staff file your return for you today!

Federal Budget 2019

The 2019 federal budget has been released and the federal government is targeting investment in the middle class through many of the programs it is introducing. The expenditures in the budget aim to help young Canadians in gaining skills and purchasing homes. The total spending under the 2019 budget totals to $22.8 billion dollars. Here are some of the main areas the government will be targeting with the 2019 budget.

Skills Training

The government is introducing the Canada Training Benefit to help Canadians upgrade their skills in order to become more valuable to employers and competitive in today’s workforce. The Canada Training Benefit will allow for Canadians to receive a credit of $250 a year up to a lifetime maximum of $5000 which can be used against half the amount of training. The government is also dedicating a portion of the budget to helping young Canadians secure stable employment. The budget proposes to invest $49.5 million dollars over five years towards a modern Youth Employment Strategy. The government is also investing in the Canada Summer Jobs program as well as the Futurpreneur Canada program in order to assist future entrepreneurs and help students gain experience.

Affordable Housing

The First Time Home Buyers Incentive will allow eligible home buyers to finance a portion of their mortgage through the Canadian Mortgage Housing Corporation(CMHC) in order to reduce the amount of payments for their mortgage. The government is also increasing the Home Buyers’ Plan withdrawal limit from 25,000 to 35,000. The budget has also proposed to invest 300 million towards building new homes.

Pharmacare Initiatives

The budget is proposing to invest $35 million dollars over four years toward a “Canadian Drug Agency” in order to reduce spending on drugs. There will also be an investment of $1 billion over two years for increasing accessibility to high-cost drugs for rare diseases. These initiatives will assist in decreasing the burden Canadians face in paying for expensive drugs.

Seniors and Pension

The government is also introducing initiatives that will benefit seniors in retirement. The government plans to proactively enroll Canadians that are age 70 or over to receive benefits if they have not yet enrolled for benefits but are eligible to receive them. The budget will also enhance the Guaranteed Income Supplement(GIS) earnings exemptions to assist seniors with low income.

The Federal budget for 2019 promises to build a more secure future for young Canadians by targeting the areas which they are affected by significantly. Increased housing and initiatives to help home-buyers purchase their home and providing financing for greater employment will significantly help young Canadians. For more information on the 2019 budget, you can visit the government of Canada site.