Lecture Two - Devin Fraser PDF

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Devin Fraser...

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BUSI 2005 Lecture Two Filing & Payment Due Dates - Filing due date – when is your tax return paperwork due - Failure to file by due date leads to penalties - Payment due date – when is the actual tax payment due - Failure to pay on time leads to interest - CCPC – Canadian Controlled Private Corporation - Individuals only need to file taxes if certain circumstances exist, this is not the case for corporations Payments & Installments - For a lot of individuals throughout the year, payments happen constantly due to withholdings off of their paychecks - Total tax liability – federal and provincial tax payable - Irene Installment Example o Alternative One – ¼ of estimated current year installment base  Base - $30,000  Installment – $30,000/4 = $7500 quarterly o Alternative Two – ¼ of prior year installment base  Base - $38,000  Installment – $38,000/4 = $9,500 quarterly o Alternative Three – ¼ of 2nd preceding year installment base for March & June Installments. ½ of (prior year installment base net of March & June Installments) for September and December.  Base - $25,000  Installment – $25,000/4 = $6,250 for March and June  Base - $38,000  $38,000 - $6,250 - $6,250 = $25,500/2 = $12,750 for September and December - CRA does not know what your estimated installment base is, so they will calculate based on actual installment base - CRA will send a notice to make installments based on alternative three because of the timeline of it all - Perfect compliance history – no compliance irregularities within last 12 months Interest and Penalties - Basic prescribed rate has been 1% for a while as taxes are so low - If there is a delay in getting you your refund, they will pay interest on the refund - Refunds are to be paid within 30 days of filing your tax return or 30 days after the filing due date, whichever is later - Maximum penalty, first time – 17% - Maximum penalty, repeat – 50% - Seven years to destroy books and records or seek CRA approval Prescribed Interest Rates & Your Tax Appendix - Published Prescribed Interest Rate for 2020 – 2% for Jan1 – Jun30, 1% for Jul1 – Dec31

Interest and Penalties Example - Jeff was not required to make installments because although his tax liability is greater than $3,000 in the current year, it is less than $3,000 in the two years preceding - So, there is no installment interest to assess - His deadline to file was April 30, 20x7 – so he faces a penalty - His deadline to pay was April 30, 20x7 – so he faces an interest - For penalty we need the number of complete months late – May and June (2 months) - For interest, it compounds daily, we need number of days late – 31 + 30 + 23 = 84 days 84 0.05 =$ 4147.45 - Interest calculated as – $4,100 1+ 365 - Interest = $47.45 - Penalty o If first time offender – $4,100 x (5% + 1% (2)) = $4,100 x 7% = $287 o If repeat offender – $4,100 x (10% + 2% (2)) = $4,100 x 14% = $574 - Interest doesn’t change in a repeat offender situation - If the number of months is above 12, then the repeat offender penalty will be more than double of the first-time offender penalty After the Return is Filed - Notice of Assessment – A summary of your tax return numerically, your return assessed as file if it was made or not, changes made by CRA to your return, any carry forwards, RRSP contribution room, cheques attached - The notice is just a check for completeness and arithmetic accuracy - CRA tries to send it out as quickly as possible so that they are within their required 30 days, so they do not have to pay an interest on your refund, if any - Notice of Reassessment – a more detailed review - T1-ADJ – Identifies what the difference is. Shows how that flows through the tax return and what changes to other things occur, and the changes to the tax owing - Notice of Objection – a more formal letter. Used to state the fact and reasons for the objection and provide support for your case - You can appeal to the Tax Court of Canada within 90 days of the mailing date of CRA’s response to your Notice of Objection - You can appeal to the Federal Court of Canada within 30 days of the Tax Court’s decision - To appeal to the Supreme Court, they have to authorize the appeal of the Federal Court has to refer the appeal up to them

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