Canada Revenu Agency Audit is Up This Year

CRA Tax Audit

CRA Tax Audit

Canada Revenue Agency audit is up significantly for tax payers all across the board. And if you are a self employed or independent contractor, you are more likely to be audited to provide proof of certain expense deduction claims. It is very important to have not only sufficient but 100% backups of expense claims with original documents or third party proof. Here are some of the expense deductions that CRA is primarily auditing from Canadian Tax Payers. If you have any of these deductions in your 2012 tax returns, you could be asked to provide supporting documents to support your claim.

1. Education/Tuition fees expense.
2. Transfer of Tuition fees to spouse or parents.
3. Professional Membership dues
4. Donation Claim receipts
5. Medical expense claims
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How to Read Notice of Assessment and Reply to Request for Documents

Canadians tax filing deadline has passed on April 30th, 2011. And if you are one of those who have filed their tax return on time, you have probably got back your refund or if you owed taxes, paid your tax bill by now, to avoid penalties and interest.

You also probably got a Notice of Assessment from Canada Revenue Agency, explaining, how much carry forward you have for the next tax year and what is your TFSA and RRSP contribution limits for the next tax year. NOA is a very important document for you to understand and keep in file. If you do not agree with the NOA, you must file your objection in due time. If you fail to file your objection to CRA’s NOA, by law you are obligated to abide by the NOA information and data. Get help of your Tax Advisor to understand your NOA.

If your tax return was a bit complicated and you have lots of medical, tuition expense, business loss, etc., CRA will not send you a NOA. CRA will send you a 4 to 9 page letter, requesting supporting/additional documents to support your deduction claims. This letter is usually sent from CRA’s preassessment review section.

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What is Old Age Security Benefits and How to Apply?

The Old Age Security (OAS) program provides income security to Canadian seniors who are 65 years or older.

Many Canadians from the Baby Boomer age will be reaching the retirement age starting 2011 and if you are or you know someone who is retiring, let them know about these government benefits available to them.

Old Age Security benefits include:
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How Much Tax Do You Pay on $50 Million Jackpot Winning?

After a $50 million Jackpot was won in Vancouver, people are curious as to how much tax do you pay for that Lotto winning?

The winners should thank their luck that they have won the Jackpot in Canada.

If they had won the Lotto in USA, they would have to pay 38% or more of their winning to IRS.

Since they have won it in Vancouver and are not U.S. citizens, their Tax liability to the Canada Revenue Agency is, “0”.

Lotto or any other lottery winning is not taxable in Canada.

As per Canadian Income Tax Act “Income from a source” of employment, business or investment is taxable income. Since lottery winning is not a regular source of income, not a single penny of the winning is Taxable under Canadian Income Tax Act.

Unfortunately it is a different situation for U.S. citizens or lottery winning in USA.

If you are a U.S. citizen, it does not matter where in the world you win a lottery; you must report and pay income tax on your lottery winning.

If you are not a U.S. citizen and you win lottery/gambling in U.S.A. 30% to 38% of your winning will be taken out and sent to IRS, before you are given the winning proceeds. You must file a Non-Resident Income Tax Return, to get the tax deducted at source back. How much you will get back, depends your foreign residential status and any tax treaty agreement between the USA and your country of residence.

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Annual Contribution to CPP is Raised to $185 a Month

The CRA has increased the maximum pensionable earnings to $48,300. There is a CPP exemption on earnings up to $3,500. You do not pay any CPP if your annual earning is $3,500. The current CPP rate is 4.95% for both the employer and employee.

Since the CPP premium rate is unchanged, and the pensionable earnings went up, net CPP is up for both employees and employer. Maximum CPP premium will be $2,217.60 for employees and $4,435.20 for the self employed annually.

From Jan 1, 2011 EI premium is going up also.

So, expect to see a smaller pay cheque if your earnings remains the same in 2011.

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