As a rule, you can deduct any reasonable current expense you paid or will have to pay to earn business income. The expenses you can deduct include any GST/HST you incur on these expenses less the amount of any input tax credit claimed.
You cannot deduct personal expenses. Deduct only the business part of expenses from business income. In addition, you cannot claim expenses you incur to buy capital property.
For more information, see the List of expenses below.
When you claim the GST/HST you paid on your business expenses as an input tax credit, reduce the amounts of the business expenses you show on Form T2125, Statement of Business or Professional Activities, by the amount of the input tax credit. Do this when the GST/HST for which you are claiming the input tax credit was paid or became payable.
Similarly, subtract any other rebate, grant, or assistance from the expense to which it applies. Enter the net figure on the proper line. Any such assistance you claim for the purchase of depreciable property used in your business will affect your claim for capital cost allowance.
If you cannot apply the rebate, grant, or assistance you received to reduce a particular expense, or to reduce an asset’s capital cost, include the total on line 8230 in Part 3 of Form T2125.
Everyone wants to minimize the taxes they pay, but at what cost? If you’re dealing with a “professional” who lacks professionalism, you’re taking your chances. There is no amount of savings that is worth dealing with a company that doesn’t insist on doing things the right way.
Toronto tax preparer guilty of over million dollar tax fraud scheme
Toronto, Ontario, March 21, 2012…The Canada Revenue Agency (CRA) announced today that Christopher Paterson of Toronto pleaded guilty on March 19, 2012, in the Ontario Court of Justice in Toronto, to one count of fraud over $5,000. Paterson received an 18 month conditional sentence and 200 hours of community service. In addition, Paterson cannot prepare or file any tax returns or tax appeals on behalf of any person other than himself. Paterson must maintain employment and comply with other statutory conditions.
A CRA investigation revealed that Paterson prepared 144 false income tax returns for the 2004 to 2008 tax years on behalf of himself and 87 clients. He claimed a total of $1,094,559 in false charitable donation deductions on these fraudulent returns, reducing the amount of federal taxes owed. As a result, refunds totalling $313,992 were issued to Paterson’s clients to which they were not entitled. In addition, Paterson also attempted to claim another $154,148 in false charitable donations claims on 16 of his clients’ income tax returns, resulting in those clients attempting to understate federal taxes by $44,255.
Paterson operated a tax preparation business called TaxTips1. Paterson sold false charitable donations receipts of various amounts to his clients for a fee. He then used these charitable donation receipts to prepare his clients income tax returns, and submitted the false receipts along with the returns to the CRA.
The information in this news release was obtained from the court records.
Taxpayers who claim false expenses, credits or rebates from the government are subject to serious consequences. They are liable not only for corrections to their tax returns and payment of the full amount of tax owing, but also to penalties and interest. In addition, if convicted of tax evasion, the court may fine them up to 200% of the tax evaded and sentence them for up to a five-year jail term.
Individuals who have not filed returns for previous years, or who have not reported all of their income, can still voluntarily correct their tax affairs. They may not be penalized or prosecuted if they make a valid disclosure before they become aware of any compliance action being initiated by the CRA against them. These individuals may only have to pay the taxes owing, plus interest. More information on the Voluntary Disclosures Program (VDP) can be found on the CRA’s website at www.cra.gc.ca/voluntarydisclosures.
Did you know?
If you’re moving for school this year you may be able to claim a tax deduction for moving expenses when you file your income tax and benefit return. You may also be able to claim a non-refundable tax credit based on the cost of your transit passes. So don’t forget to keep your receipts!
In addition, there are other benefits and non-refundable tax credits that students may be eligible to claim. Non-refundable tax credits reduce your federal tax; however, if the total of these credits is more than your federal tax, you will not get a refund for the difference.
- Education amount: You may be able to claim a full-time education amount of $400, or part-time amount of $120, for each month or part of a month in the year in which you were enrolled in a qualifying program at the post-secondary level.
- Textbook amount: You may be able to claim a textbook amount for each month that you qualify for the education amount.
- Tuition amount: You may be able to claim the fees you pay for the courses taken at the post-secondary level or at an educational institution certified by Human Resources and Skills Development Canada. To qualify you must have paid more than $100 in tuition fees for the year.
- Goods and services tax/ harmonized sales tax (GST/HST) credit: The GST/HST credit is a tax-free quarterly payment that helps individuals and families with low or modest incomes offset all or part of the GST or HST that they pay.
Interest on student loans: You may be eligible to claim an amount for the interest paid in 2012 or the preceding five years on your student loan if you received it under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or a similar provincial or territorial government laws.
Keep your receipts!
It is important for Canadians to keep all their records and receipts after filing their income tax and benefit return in case the Canada Revenue Agency (CRA) asks to see them later. Each year, the CRA looks at income tax returns to review deductions and credits and ensure that various income amounts have been correctly reported. Keep your receipts and supporting documents for six years.
Most registrants claim their input tax credits (ITCs) when they file their GST/HST return for the reporting period in which they made their purchases. However, you may have ITCs that you did not claim when you filed the return for the corresponding reporting period.
If so, you can claim those ITCs on a future GST/HST return as long as it is filed by the due date of the return for the last reporting period that ends within four years after the end of the reporting period in which the ITC could have first been claimed.
You are a quarterly filer and you buy office furniture in the reporting period October 1, 2011, to December 31, 2011, for which you can claim an ITC. The due date of the return for this reporting period is January 31, 2012.
The last reporting period in which you can claim an ITC for the tax you were charged on the office furniture is the reporting period October 1, 2015 to December 31, 2015. The due date for this return is January 31, 2016. This means that you can claim the ITC in any return due and filed by January 31, 2016.
To support your claim for ITCs, the invoices or receipts you use must contain specific information. See the chart in Sales invoices for GST/HST registrants, for more information.
The time limit for claiming ITCs is reduced to two years for:
- listed financial institutions (other than a corporation that is deemed to be a financial institution because it has made an election to have certain supplies deemed to be financial services and that election is in effect); and
- persons with annual taxable supplies of goods and services of more than $6 million for each of the two preceding fiscal years.
However, the two-year limit does not apply to the following persons even if they fall into the second category listed above (these persons have four years to claim their ITCs):
- charities; and
- persons whose supplies of goods and services (other than financial services) during either of the two preceding fiscal years are at least 90% taxable supplies.
Under the two-year limit, you can claim your ITCs on any future return that is filed by the due date of the return for the last reporting period that ends within two years after the end of your fiscal year that includes the reporting period in which the ITC could have first been claimed.
You are a monthly filer with a fiscal year end of December 31. You buy goods in the reporting period September 1 to 30, 2011, for which you can claim an ITC. The fiscal year that includes the September 2011 return ends on December 31, 2011. You can claim the ITC on any later return for a reporting period that ends by December 31, 2013 and is filed by January 31, 2014.
Brampton, Ontario, August 21, 2012 … The Canada Revenue Agency (CRA) announced today that on August 17, 2012, Jim Payne, of Bolton, was fined a total of $12,000 in the Ontario Court of Justice in Brampton. Ontario. He pleaded guilty to five counts of failing to file personal income tax returns and seven counts of failing to file corporate income tax returns. He was given four months to pay the fine. All outstanding returns have been filed.
Mr. Payne failed to file his 2006 to 2010 personal income tax returns. In addition he failed to file the 2006 to 2008 corporate income tax returns for Pashin Holdings Inc., a real estate development company as well as the 2007 to 2010 corporate income tax returns for V2R Group Inc. which performs general contract consulting.
The preceding information was obtained from the court records.
In addition to the fines imposed by the courts, individuals or corporations convicted of failing to file tax returns are still obligated to file the tax returns and pay the full amount of taxes owing, plus interest, as well as any civil penalties that may be assessed by the CRA.
Taxpayers who have not filed returns for previous years, or who have not reported all of their income, can still voluntarily correct their tax affairs. They may not be penalized or prosecuted if they make a valid disclosure before they become aware of any compliance action being initiated by the CRA against them. These taxpayers may only have to pay the taxes owing, plus interest. More information on the Voluntary Disclosures Program (VDP) can be found on the CRA’s website at www.cra.gc.ca/voluntarydisclosures.