How To Handle A Tax Audit Notice From Canada Revenue Agency

Just hearing the word “audit” can be enough to make many people shudder when tax time comes around. Facing a Canada Revenue Agency (CRA) audit might seem scary, but if you understand how the process works and make an effort to follow tax rules, you can keep your stress levels in check. In this article, we’ll discuss how to deal with a CRA audit, ensure you’re compliant with taxes, and find out about any penalties for not following the rules.

Facing a CRA Audit

An audit by the CRA entails a meticulous examination of your financial documents and tax filings to ensure that your earnings have been accurately reported and that you’ve taken advantage of the appropriate deductions and credits. An audit might occur due to various reasons, including random selection, discrepancies in your tax submission, or details shared by third parties like employers or financial institutions.

If you receive notice of a CRA audit, it’s essential not to panic.

Review the Notice

Take the time to thoroughly examine the audit notice so you know precisely what information the CRA is asking for and when it’s due. The notice will also let you know if the audit will be done in person or through mail correspondence. Make sure you gather all the relevant financial records, receipts, and supporting documents that relate to the tax year being audited. Organize everything in a clear and sensible way for easy access.

Seek Professional Help

Consider consulting a tax professional, such as a personal tax accountant or tax lawyer, to guide you through the audit process. They can provide expert advice, review your records, and represent you before the CRA if necessary.

Respond Promptly

Adhere to the specified timeline for responding to the audit notice. If you need more time to gather documents or seek professional assistance, communicate with the CRA in writing to request an extension. Be cooperative and transparent with the CRA auditor. Answer their questions truthfully and provide any requested information promptly. If you’re unsure about something, it’s better to admit it rather than guess.

Appeal if Necessary

Should you find yourself in disagreement with the audit results, know that you possess the right to contest them. It’s advised to seek guidance from your tax expert to figure out the most suitable plan of action, which could comprise of lodging an objection with the CRA or taking your case to the Tax Court of Canada.

Penalties for Non-Compliance

Not following Canadian tax laws can lead to a variety of penalties, based on the type and seriousness of the breach. The CRA has the power to enforce penalties. If you fail to submit your tax return on time, the CRA may enforce a 5% penalty on the amount owed, plus an additional 1% for every month that the return is overdue, up to a maximum of 12 months. In case you have unpaid taxes and neglect to pay them by their due date, interest will be charged on the outstanding amount. The interest rate can change quarterly and is established by the CRA.

Making false statements or providing misleading information on your tax return can result in severe penalties. This includes underreporting income, inflating deductions, or hiding assets offshore.

Tax evasion, which involves willfully concealing income or engaging in fraudulent activities to reduce your tax liability, is a criminal offense in Canada. Convictions for tax evasion can result in fines, imprisonment, or both.

If you fail to maintain adequate records to support your tax claims, the CRA may disallow your deductions and credits, resulting in additional taxes owed.

While the prospect of a CRA audit and the penalties for non-compliance can be daunting, proactive tax planning and adherence to tax laws can help you navigate these challenges. If you ever find yourself facing an audit, approach it with transparency and seek professional assistance if needed. Ultimately, the key to a stress-free tax experience lies in staying informed, organized, and compliant with Canadian tax regulations.

15 minutes to a lower tax bill and smooth Tax Season 2019 (1 Mar – 18 Apr 2019)

Lower your tax bill by maximising the tax reliefs available to you, and pick up some tax filing tips for a smooth tax season.

Tax season 2019 has begun, and like most Singaporeans, you may once again be required to file your taxes this year. From filing your taxes to utilising the tax reliefs at hand, here’s a quick way to a breezy tax season.

5 minutes: Find out if you are required to file your taxes this year

To file your taxes or preview your Notice of Assessment, log in to https://mytax.iras.gov.sg using your SingPass.

10 minutes: Edit your tax return and claim the tax reliefs available to you

Your income information may have already been pre-filled in your tax return if your employer is under the Auto-Inclusion Scheme. This means that your employer submits your income information to IRAS on behalf of you. However, if you received additional income in 2018 or spot an error in your tax return, hit ’Yes, I need to edit my Tax Form’ to ensure that these are reflected in your return.

Tax reliefs and deductions are targeted at certain groups of people to encourage social and economic objectives, such as filial piety and the advancement of skills. If you are eligible for any of the tax reliefs below, be sure to make your claims for them in your tax return for a lower tax bill!

Find out more about the tax reliefs – the qualifying conditions and claim amounts – at https://www.iras.gov.sg/irashome/TaxSeason2019/

And you’re done for the year!

When you’re ready, hit Submit before logging out. An acknowledgment message will be displayed upon successful submission of your tax return. Your tax bill will be sent to you between end Apr and Sep 2019. In the meantime, sign up for GIRO if you have yet to for a hassle-free tax payment experience.

Remember, file your taxes at myTax Portal by 18 Apr 2019 to avoid the last-minute rush and late filing penalties.

How To Pay Zero Income Tax, Legally?

When the year is coming to a close, the taxman dress up as Santa Claus and comes knocking on your door. If you have earned at least $22,000 in a year, you will receive a notification from IRAS to file your tax return between February and March.

Nobody like to pay tax. Let’s admit it.

Fortunately, there is a way to not pay it or reduce the total tax liability payable. No and this guide is not going to teach you how to evade tax which is illegal in Singapore.

First thing first, before you learn the various ways on how to reduce your income tax, you need to know how the taxman calculate your taxable income.

There is a nifty calculator in Excel on IRAS website that you can download. There is also an iPhone App call IRAS SG that you can use to calculate your income tax payable.

In short, your chargeable income is calculated as (Employment Income – Employment Expenses) + (Other Income) – (Approved Donations) – (Personal Reliefs). If you are a parent, you can further reduce the tax by claiming Parenthood Tax Rebate (PTR).

From the equation, it is obvious that besides being poor, there are three things you can work on – approved donations, personal reliefs and rebates to reduce or eliminate your income tax payable.

1. Approved Donations

If you are not aware, you can claim 2.5 times the donated amount. For example, if you have made donation of $10,000 to an approved Institutions of Public Character (IPC). Your tax deduction would be $25,000. You can check if an organisation is an IPC here.

Things that you can donate are cash, shares, computer peripherals, artefacts, public art, land and building.

2. Personal Reliefs

There are many reliefs which you can claim to reduce your income tax payable. Let’s take a look at the various reliefs.

a. Earned Income Relief

This is basically a relief to recognise individuals who receive income from work. This will be automatically deducted if you are eligible up to a certain cap. You do not need to claim for this.

b. Spouse/handicapped spouse relief

You can claim for this if your spouse is earning less than or equal to $4,000 a year. You can claim $2,000 for spouse relief and $3,500 if your spouse is handicapped. (From YA2015, you can claim $5,500 for handicapped spouse)

c. Qualifying/handicapped child relief (QCR/HCR)

Likewise, if you have kids you can claim $4,000 per child or $5,500 for handicapped child. (From YA2015, you can claim $7,500 for handicapped child)

d. Working mother’s child relief

This relief is to encourage women to remain in the workforce after having children. The amount you can claim ranges from 15-25% depending on the number and order of children. Please note that there is a cap of $50,000 per child, which includes QCR/HCR.

e. Parent/handicapped parent relief

This relief is to promote filial piety and you can claim for this if the dependant shared the same roof as you. If the dependant is staying in a different household, you must have incurred at least $2,000 in supporting him/her to be eligible for a claim.

If dependant is staying in your household, you can claim up to $7,000 per dependant (or $11,000 for handicapped parents). If dependant is not staying in your household, you can claim up to $4,500 per dependant (or $8,000 for handicapped)

f. Grandparent caregiver relief

This relief is for mother who are working and have engaged their parents/grandparents or in-laws to look after the children. The amount claimable is $3,000 on one parents/grandparents/in-laws.

g. Handicapped brother/sister relief

If your siblings are handicapped and you are supporting them, you can eligible to claim $3,500 for each sibling. (From YA2015, you can claim up to $5,500) Note: If your parents have claimed HCR on your brother/sister, you cannot claim for this relief.

h. CPF Relief

CPF relief is given to encourage individuals to save for their retirement. You can claim on your compulsory employee CPF contribution and any voluntary contributions to your Medisave account. If your employer is in the Auto-Inclusion Scheme then this will be automatically calculated. If not, you will need to claim this yourself. Please note that you can only claim if your employee CPF contributions has not exceeded the Ordinary and Additional Wage Ceiling. OW is currently $5,000 a month. Additional wage refers to annual bonus and leave pay and the formula used to computer AW ceiling for 1 Jan 12 – 31 Dec 13 is $85,000 minus total OW. AW is subject to a cap of $37,000.

For more details on the calculation, refer to IRAS website.

i. Life Insurance Relief

You can claim for this if you have bought insurance for yourself and your wife. If you are a married female and satisfy the various conditions, you can only claim for your own life policies and not your husband’s. The amount claimable is the lower of $5,000 less your CPF Contrition or up to 7% of the insured value. Note: If you contributes more than $5,000 for CPF, you are not eligible for this.

j. Course Fee Relief

The government wants the workforce to be equipped with the necessary skills and encourages individuals to constantly upgrade themselves through course so as to enhance employability. You can claim up to a maximum of $5,500 per year.

k. Foreign Maid Levy Relief

Foreign Maid Levy (FML) relief is given to encourage married women to continue to be in the workforce. Thus, if your household has employed a maid, you are eligible for this levy. You can claim twice the amount of levy on one domestic worker paid in the previous year.

l. CPF Cash Top Up relief

This relief is to encourage individuals to top up their Retirement or Special Account under the CPF Minimum Sum Topping Up Scheme. You are also entitled to the relief if your employer made the top-up for you. You can claim up to a cap of $7,000 for self and an additional $7,000 if you top up the account of your spouse, siblings, parents, grandparents and your in-laws.

m. Supplementary Retirement Scheme (SRS) Relief

If you have contributed to SRS, you can claim the amount up to the maximum cap of SRS contribution of $12,750 if you are a Singaporean/PR or $29,750 if you are a foreigner.

n. NSman (Self/Wife/Parent) Relief

For the guys, here’s another bonus for you if you have completed your national service. The general population can claim up to $3,000 if you have performed NS activities in the preceding years or $1,500 if you haven’t. For key appointment holders, you can claim up to $3,500 and $5,000 respectively.

For the ladies and parents of Neman, you can claim a deduction for $750 for the support you have given to your husband/son.

3. Parenthood Tax Rebate (PTR)

Lastly, you can claim a rebate from your tax payable if you qualify for PTR. This should be differentiated from tax relief which reduce your chargeable income. It is offered to married Singapore tax residents as an incentive to encourage them to have more children. You can claim up to $5,000 for the 1st child, $10,000 for the second and $20,000 for the 3rd and beyond. This amount can be shared between you and your spouse to offset the tax payable.