Mark Feldstein & Associates

The government has provided a number of incentives for first-time home buyers. These measures will help offset some of the costs of purchasing your first home and provide you with some of the cash to make a down-payment.

The Home Buyers Plan is a federal government program that allows for you to withdraw penalty-free from your RRSP account. This will give you access to some of your savings without having to pay tax on the withdraw as would normally occur if you pre-maturely withdrew from your RRSP account.

Regularly payments are made to repay the amount to your RRSP, but it does allow for you to access additional cash to make your purchase.

There is a First-Time Home Buyers’ Tax Credit available since January 27, 2009 that is a non-refundable credit of $5,000 for home buyers who have acquired their first home. The credit is determined by multiplying the lowest personal income tax rate by $5,000. This credit is non-refundable so the government will not pay you the money if you are already in a refund position, but if you currently owe taxes it will reduce your taxes owing.

If you are purchasing your first home in Ontario, you may also be eligible to receive a refund of part of your Land Transfer Tax. If you have entered into an agreement to purchase a home after December 13, 2007, then the refund is applied for all newly constructed or resale homes. Homes acquired before 2007 are only eligible for the refund on newly constructed homes. However, a condition of this refund is that you have not previously owned a home ANYWHERE in the world, not only Canada. As well, the home must be used as a primary residence and not as a rental property. The maximum refund is $2,000. The time frame is eighteen months to apply for this refund after the transfer date.

Mark Feldstein Personal Taxes, Tax Incentives & Shelters HBP, Home Buyers Plan, Land Transfer Tax, RRSP, Tax Credit

The Home Buyers Plan “HBP” is a Canada Revenue Agency “CRA” tax program that allows for certain individuals to withdraw money from their RRSP without penalty in order to buy or build a home.

In order to be eligible for this program, you must be a first-time home buyer or using the withdrawal to buy or build a home for a disabled related individual.

If you do own the home before the withdrawal, it cannot be for more than 30 days. And if the home is not yet purchased or built, you have until October of the year after the withdrawal to have the home bought or built.

This home MUST be used as a primary residence and NOT a rental property. If the CRA finds that you have withdrawn from your RRSP to purchase a rental property, they will add the withdrawal to your income and you will pay additional taxes as if the HBP were income.

It is not enough to have a pre-authorized mortgage to use the HBP. A written agreement must be in place that details the purchase offer or a contract with a builder or contractor.

Mark Feldstein Personal Taxes, Tax Incentives & Shelters CRA, HBP, Home Buyers Plan, RRSP

David R. Bucknell of Vienna, having pleaded guilty to eight accounts of failing to file tax returns, was fined $1,000 for each count, resulting in a total fine of $8,000. As well as paying the fine imposed, it is required that the taxpayer file their tax return, pay their taxes, any interest owing and any civil penalties charged by Revenue Canada.

Mr. Bucknell neglected to file personal income taxes return from 2000 to 2008. He was given five months to file these returns with the CRA.

It is possible to avoid tax problems by filing outstanding tax returns or reporting undisclosed income via voluntary disclosure. When individuals disclose this information voluntarily, prior to any action or investigation by the CRA they will not be penalized or prosecuted. As a result of voluntary disclosure the taxpayer may only be required to pay the taxes and any interest owing.

Mark Feldstein Personal Taxes Tax Amnesty, Tax Evasion, Vienna

On April 8, 2010, Antonio Amaral of Hamilton, Ontario pleaded guilty to two counts each of Income Tax evasion and GST evasion. He willfully evaded paying personal income tax in the amount of $23,709 and GST in the amount of $27,158. He was given two years to pay a fine of $38,152, the fine being in addition to any taxes and interest owed, as well as any civil penalties that may be assessed by the CRA.

A cross reference check of Statement of Contract Payment Forms submitted by contractors who had hired Mr Amaral for masonry services determined that he had not declared this income on his personal Income Tax Returns. Furthermore, a search of Mr. Amaral’s residence, revealed that he deliberately failed to report income from his masonry business; Active Masonry on his personal income tax returns for 2005 and 2006. According to invoices discovered during the search Mr. Amaral had unreported income of $39,771 for 2005 and $84,125 for 2006.

Active Masonry began operating and was registered for GST in January 2003. However, the 2003, 2004 and 2005 personal income tax returns filed by Mr Amaral reported business income from a cleaning business “Azores General Cleaning” with no mention of a masonry business. Mr. Amaral reported the masonry business on his 2006 return but the income earned was significantly understated. Additionally, Mr Amaral failed to report and remit GST for Active Masonry, thereby evading $4,792 in GST for the period ending in 2005, and $22,366 in 2006.

When individuals or corporations are convicted of tax evasion, they have to pay the full amount of tax owing, plus interest compounded daily and penalties the CRA assesses. In cases of gross negligence, the Income Tax Act and Excise Tax Act allow the CRA to assess a penalty of up to 50%. In addition, on summary conviction there can be an additional penalty of up to 200% of the tax evaded. The court can also levy a jail sentence for up to two years.

Individuals who have not reported all of their income or are behind in filing their returns can apply under the voluntary disclosure program to correct their tax problem. There will be no penalty or prosecution if they make a full disclosure before the Canada Revenue Agency starts any action or investigation against them. The individual will still be required to pay taxes owing plus interest.

Mark Feldstein Corporate Taxes, Personal Taxes, Tax Convictions Tax Evasion, tax penalties

Your wedding day should be one of the happiest of your life; however it is possible for this event to end up causing you a lot of frustration with the CRA. After your big day, you will likely go to the bank and deposit all of your cheques and cash. What many people neglect to do is to record the guests and amounts, and even photocopy the cheques.

At this point, you may be confused and be wondering what your wedding gifts have to do with the CRA. Firstly, the bank notifies the government when an individual makes a deposit exceeding $10,000. This may make you a target for an audit. If the CRA does decide to audit you, they will consider any unsupported deposits to be income. This means that if you cannot support your wedding gifts, you may end up having to pay tax on them! Undeclared income will also land with you with gross negligence penalties of 50% and compounded daily interest.

This is a situation that no one wants to be in. In order to substantiate your deposits, keep evidence of the guests list, proof of the wedding date (ie. Contract for the venue), make photocopies of the cheques and keep a detailed list of amounts and names for all the gifts received in cash. By supporting your deposits to the CRA, you have proven to them that your wedding gifts are not in fact income and you should not be paying tax on these funds.

It goes without saying that this scenario is true for any event that you may have in your life that results in large deposits. Protect yourself against a future audit and take the time now to support all of your money. If you are currently in this situation and need help through your audit, please do not hesitate to give our office a call.

Mark Feldstein Personal Taxes

Mark Feldstein Personal Taxes, Video

Tax payers have disputes with the Canada Revenue Agency all the time. The problem is that if the CRA assesses or re-assesses you as having income and until the dispute is resolved, in most cases the CRA will pursue the money that they believe you owe.

Sometimes you may have claimed expenses or not declared income with the legitimate belief that it was okay. You may even be able to pay the tax debt in full, but out of principal, want to fight the CRA.

The CRA is the Federal Government with unlimited resources at their disposal. Here are some examples of what can happen if you are in the midst of a dispute where the CRA believes you owe them money and you are resisting.

1. Even if you have not filed your returns, the CRA can “arbitrarily” assess your income based on estimates.
2.  The CRA may assess penalties and will assess interest on the amount owed.
3. The CRA will pursue the collection of the debt and could garnish your wages, freeze your bank account and place a lien on your home (just to name a few enforcement remedies).

It is hard to be objective when you are in the middle of a tax dispute with the government. The best thing to do if you are in this situation is to hire a professional to deal with it. You want to choose a professional organization that has a good reputation and record for resolving tax payer disputes.

There are steps you can take, while resolving your dispute that will keep the CRA happy and enable you to avoid enforcement action all together. With this said, as long as you are perceived as “owing” money, the CRA will want to collect it, which is why you do not want to attempt to negotiate with the CRA on your own.

Mark Feldstein Personal Taxes

Mark Feldstein, Chartered Accountant, discusses some of the CRA’s tactics that even include the CRA publishing the names of those convicted of tax offences on their website.

Mark Feldstein Corporate Taxes, Personal Taxes, Video

Mark Feldstein, Chartered Accountant, discusses what can happen if you don’t declare your income to the CRA and what you can do to correct the problem if you are in this situation.

Mark Feldstein Corporate Taxes, Personal Taxes, Video

While an unresolved tax debt can wreak financial havoc on an individual and their family, what can be worse is the potential medical implications. Many Canadians who have left a tax problem (undeclared income or past due tax returns) unresolved for many years, begin to feel mounting anxiety, stress and often have physical side effects.

In 2008 the Associated Press reported on an AOL Health poll. According to the Associated presses report on the AOL poll, people dealing with mountains of debt are much more likely to report health issues like ulcers, anxiety, panic attacks, severe depression and even heart attacks. According to the AP/AOL poll and among the people reporting high debt stress:

• 27 percent had ulcers or digestive tract problems, compared with 8 percent of those with low levels of debt stress.
• 44 percent had migraines or other headaches, compared with 15 percent.
• 29 percent suffered severe anxiety, compared with 4 percent.
• 23 percent had severe depression, compared with 4 percent.
• 6 percent reported heart attacks, double the rate for those with low debt stress.
• More than half, 51 percent, had muscle tension, including pain in the lower back. That compared with 31 percent of those with low levels of debt stress.

People who reported high stress also were much more likely to have trouble concentrating and sleeping and were more prone to getting upset for no good reason.

In our business we primarily work with taxpayers, resolving tax problems that have existed for many years.

Here is one example of a common cycle we see:

1. A tax payer doesn’t file one or two years of returns. They don’t worry about it, usually because they may not have been contacted by the CRA and they think “it’s only a year or two”.
2. Another year passes and they realize maybe it is time to get the tax returns filed. Some will even go to an accountant, review their records, try to go backwards and estimate income, expenses and what they will end up owing. At this point, they think “uh oh, this is quite a bill”, not even considering how much it will be once the CRA assesses interest and penalties and applies it to balance.
3. One more year passes and along comes a demand to file from the CRA. Now the problem has quickly become serious. The CRA is after them and after all, what’s easier – filing the tax returns and facing the payment of the large tax debt that has been accumulated, or just ignore it a little bit longer? Some hope that, “maybe in another year they will be in a better financial position to pay the debt”.
4. Year five rolls around. They can’t sleep at night. They are getting demand after demand from the CRA. It is too embarrassing to ask family or friends for help. The CRA and the stress and anxiety associated to the tax debt becomes too much to bear.
5. Year 6 arrives and the CRA wants their file closed! The CRA proceeds to assess what they believe the taxpayer owes and demands payment of their estimate of the debt. Even worse, the CRA will freeze the tax payer’s bank account or place a lien on their home in an effort to force the tax payer to file their later returns.

This is a vicious and personally destructive cycle. A tax debt can be brought under control and it is important that an individual who has this type of problem, seek a professional to handle it. Our tax management practice places great emphasis on not only assisting the taxpayer to become compliant with the taxing authority but also to deal with the financial debt that will be left over once all income has been declared and past due returns are filed.

We see the physical consequences of avoiding and allowing a tax debt to get out of control every day.

If you are in this situation you don’t have to hide anymore and you should make a commitment to yourself to stop avoiding your tax problem. In the case of a tax problem, time is your enemy.

Mark Feldstein Corporate Taxes, Personal Taxes