Pay up

Moving costs a bundle. In 2022 Dorothy and I relocated back to the Big Smoke, where I returned to my office in the clouds, perched over Bay Street.

So, there were moving costs – the truck and the crew; legal expenses – the lawyer; selling costs – the realtor commission; personal costs – transporting a vehicle and flights. All legit stuff, as far as the CRA is concerned. It came, in total, to over a hundred grand.

Yeah, moving sucks. But at least, I told my squeeze, we’re able to deduct most of this from my taxable income.

So I filed my 56-page tax return for the year (actually the accountant did), claimed the expenses, included the receipts and figured the Caada Revenue Agency – of which I was once the head – would be satisfied and impressed.

Then this arrived.

It was from Bob Hamilton, the Commissioner of Revenue, saying the entire claim was dismissed for want of a letter from my company confirming the move was indeed authorized and necessary.

Of course, I requested and obtained that letter. My accountant then filed a Notice of Objection, which was 28 pages in length.

Meanwhile pesky Bob was at it again. He sent me this:

The decision then: send $57,960 and hope Bob accepted my objection, applying the wad to next year’s tax bill, or keep my money, await the decision and have to pay interest and penalty on the disputed amount in care he didn’t?

I gambled. Ten months later came gthe response. Not a total win, but the bill went down to less than fifteen hundred bucks. I paid.

There are lessons.

First, even if you happened to have been Minister of National Revenue and the supreme political commander of 35,000 CRA employees, there’s no respite. These days the feds are desperate for tax revenues, with a $40 billion annual shortfall, a $1.3 trillion debt and interest charges that swamp what Ottawa pays for our health care.

Chrystia’s April budget included a plan to massively increase the CRA’s audit powers, and in excess of three million taxpayers (out of the 18 million who actually pay some tax – 10 million pay nothing) will be getting a letter from Bob saying their return is under review, or has been reassessed. So, we’re all targets. Don’t try any funny stuff, or risk being spanked.

Second, get a pro to do your taxes if you’re remotely like me – with employment income, business expenses, a B&D portfolio pumping out various forms of returns plus life events, such as moving. As I said, my T1 is routinely over fifty pages in length. The complexity is mind-blowing, and even with sophisticated tax return software (and my knowledge), mistakes are easy to make.

Third, if the tax guys get it wrong, or you feel unfairly targeted, object. Do not ignore the agency’s mail (and ensure you use myCRA to create an account) and respond within 30 days. Or, better, have your accountant do it. The objection is a formal document, filed in a specific way and must be truthful, factual and fulsome.

Who gets reviewed?

Anybody. Some people are selected at random. Others with a history of tax issues will be flagged. So will those who file returns missing data provided to the CRA independently by employers or banks.

Worse than a review, of course, is an audit. That’s when Chrystia sends someone to mouse through records, books and personal history and circumstances to sniff out abuse, deception, incompetence or failure to comply. Audits can be triggered by a lot of things, like a mismatch between personal and HST returns. Or owning a rental property on which you claim sustained losses. Or using a principal residence capital gains tax exemption on an unqualified property sale. Or driving a Lambo when you work as a barista. Or maybe a disgruntled former employee smeared you on the CRA snitchline.

The best possible policy in this age of hungry, ravenous tax cops is to be truthful. Pony up what you owe. Don’t be cute. Never try to game the system. You likely won’t win (and remember the CRA can go back six or seven years to ferret out wrongs). And if your financial affairs are out of the norm (one T4, an RRSP, tax-free account and some interest on your bank account) pay for an accountant. Especially if you’re self-employed. Or have a corporation.

Bob’s coming for you.

About the picture: “Here are Pink and Floyd,” writes Richard. “Money! It won’t solve all your problems.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.