Thinking like the Tax Folk

This week another chapter was written in my saga with my friends down at the CRA. Maybe I should just join the tax folks.

Previously you have read about:

Earlier this week I received an envelope with all my receipts (from the 2018 pre-assessment) along with a letter stating the CRA allowed all of my claims in my 2018 return. I assumed this meant I would receive my complete tax refund, but I was also wary.

Tales from the CRA

The CRA thinks I owe them $4K so what was going to happen?

The CRA gave me my full refund for 2018 minus the $4K “owed” for the 2017 return. While annoying, I suppose it is nice to get some money back.

I now have the following quandaries:

  1. For 2018 claiming my son’s school fees as a medical expense has been allowed (so far). I have no aspersions that I may get another request for justification about this, but that remains to be seen.
  2. If the school fees are allowed for 2018, will they be allowed for 2017 given:
    1. This is the same school
    2. The same evidence was submitted to the CRA and OK’ed for tax year 2018
  3. If the school fees are allowed for tax year 2017, the CRA now owes me over $4K, which they have already have taken as payment from my 2018 refund.

What to Do Now?

Do I dare call the CRA and ask about this? Yes, I should. If I do not follow up the 2017 tax situation will continue to drag on. Yes, it may trigger a review of my 2018 return as well, but that is a risk I will deal with, if it transpires.

When you have a child on the Spectrum, and you have a non-standard tax return, life is never dull.

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Income Tax Receipts

After posting my taxes on Sunday, I was wondering how things would go with my return. I am currently in a reassessment for the previous tax year, so what would the CRA do about this?

It did not take long, as they replied on-line with a message asking for receipts for the tax year for the exact areas where I am being reassessed for the previous tax year. This actually makes perfect sense, to me. This process is called a pre-assessment, which seems to imply, they want to verify my claims before processing.

Given my previous year reassessment is still in process, I will include all the information from that process, just to be thorough. I am attempting to make the same claims that I am having reassessed, so it is better to give too much information, than not enough.

Remember, in these situations, always have a complete cover letter. The cover letter must identify the process identifier, and should inventory all the documentation you are sending.  I am also having my wife check what I am sending, it never hurts to have another set of eyes check things for you.

The only interesting part is that they are asking for receipts for my charitable donations, which has nothing to do with my reassessment. The value has gone up, but I am curious as to why they are asking for that as well.

What to Do?

I will be submitting them all on-line (for speed), and shall see what comes of this.

This is all part of the whole tax process, but does seem to be how this year is going for me as well (i.e. things that can get complicated, do get complicated).

Remember to keep those receipts too!

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A Tax Quandary

Thanks to my issues with my son’s Medical Credit claim, I have had an income tax quandary.

Given the initial assessment refused my son’s Medical Claim for his schooling to be a medical expense (for last tax year), I have asked for a reassessment. The bill for the initial refusal is not insignificant, however I am hopeful that we will prevail in the end.

Given I currently owe the CRA a significant amount of money, and my taxes are due, what to do?

First question: Do I do my taxes this year assuming my son’s schooling expenses are a medical expense or not, given the CRA has denied this for the past year? My call is that I will try to claim it this year, assuming we prevail with our re-assessment. If this thing backfires, I assume I am going to have a world more problems with the CRA, but let’s remain optimistic.

Next question, given I should be getting a refund from the CRA, should I file before I hear about the re-assessment results? If I file, with no resolution, the CRA will simply take my refund to pay my “debt” to them.

  1. If the reassessment ends up against my claim, I receive whatever is left from my refund, and the CRA is paid
  2. If the reassessment ends up for my claim, and the CRA has already taken their “payment” I must then ask for my money back, which will mean delays and more paperwork.

We decided to simply file and see what happens. Currently my life is a bit chaotic (to say the least), so it would be better to tie off loose ends before things possibly go pear shaped.

Better to Act Sooner

Given I may be very distracted soon by other issues, it is better to file my taxes, and let the CRA decide how things will transpire.

Medical Expense Resources

Here are a few of the articles I have written about if your child has a valid Disability Tax Certificate (DTC), how you can claim their training or schooling as a medical expense.


Going Pear Shaped: An English colloquialism meaning things going very wrong.


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Pay Taxes or Your RRSP ?

Given my love for the RRSP (or the Tax Deferral Savings Plan), I was wondering whether folks use it to defer owed taxes? The simple question is Pay Taxes or Your RRSP ?

If you received my T4 early enough that you could estimate my taxes, what would you do if you estimated you owed $500 taxes?

You have two options:

  1. Give the CRA their $500 and forget about it
  2. Put enough money into your RRSP (before March 1st) to counteract the owed taxes. This means you would then owe $0 in taxes.

The argument I keep hearing is that if I put money away in an RRSP now, I’ll just end up paying a higher tax rate on it when I take the money out. There is a school of thought that you might be in a higher tax bracket when you retire. To me, it seems an odd statement given the money will grow (hopefully) in your RRSP. This mean you’ll have more money to be taxed, albeit at a higher rate ?

I tried very hard to find what your nominal tax rate might be in Ontario, but let’s just assume it’s 50% for you.

This means you need to put about $750 into your RRSP to not pay $500 in taxes to the CRA. To do this exercise, if you have Quicktax or something similar, you can simply plug numbers into their RRSP estimator. This might be a better way to estimate, how much to pay.

Now you have $750 in your RRSP, and say you are 32. You have about 30 years until you want to take your $750 out. Assuming a simple growth 4.5% year over year, it will be about $3100.

Why not Put It in an RRSP ?

You now take $3100 out at a higher tax rate (say 60% again hopefully taxes in 32 years are not that brutally high), but it is still about $1300 dollars net. The bonus is you didn’t have to pay the CRA $500 32 years ago (an added bonus).

A net investment of $250 (you were going to have to spend $500 no matter what) you end up with $800 ? Seems like a winner to me.

Why wouldn’t you do this? If you didn’t have $750 dollars I suppose that might stop you, but are there other reasons?

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Get Your Taxes Done Dammit !

In Canada, you should have your taxes and in to the CRA by April 30th. Occasionally there are extensions, but it does not appear to be the case for 2018. Get on with it, and get your taxes done.

If you are ill, disabled or unable to file your taxes, you can ask for an extension, but it is better to get your taxes done on time. Why is it important? Let me quote the Canada Revenue Agency directly:

If you do not file your return on time (see exception to the due date of your return), your goods and services tax/harmonized sales tax (including any related provincial credits), Canada child benefit payments (including related provincial or territorial payments), and old age security benefit payments may be delayed or stopped.

I know a few folks who don’t usually submit their taxes on time and here are some of the excuses I have heard about not doing your taxes on time.

I didn’t get my T4

Doesn’t matter, you are supposed to go to the CRA site and see what data they have for you. Yes, employers not getting important data to you on time is annoying, but this is not a valid excuse. You can log onto your CRA account on line and see if they have your T4 information.

If you get incorrect information, all you can do is file with the information you have and send in a correction later. This year many Civil Servants are getting Phoenix’ed again, by getting T4 receipts with incorrect information (including CRA employees). Not ironic, but interesting.

The dog ate my T4 is also not a valid excuse.

Saying you are waiting for data so you can get a bigger refund is foolish as well. You can always file for a correction later, get it done now.

I don’t owe money, so I can do it later

So you enjoy making long-term no-interest loans to the Government? You also enjoy not getting your Government benefits? Are you really sure that you don’t owe money? The assumption that your employer did your tax forms correctly is admirable, but are you sure? If you are a Civil Servant I would never make that assumption.

Not enough time to get it done

So you are one of the 1% and your taxes are really complicated? If you have a job, a wife, kids and little or no investments, your (and your spouses) taxes can take less than an hour to do. There are plenty of free community workshops that can help you get it done. Spend the hour or two and get it done.

It is far too complicated for me

When I first did my taxes, I was petrified of the whole process. I had to manually calculate and fill out (in pen) my entire tax form. These days, you can get free software to get your taxes done. You can do it all for free, and most of the software are relatively straight-forward to use.

You don’t need a calculator, white-out, erasers, pencils or anything else, just a computer or access to someone who can do it for you. Ask a family member who may have a copy of Quicktax, they can typically submit for you (at not extra charge). Our Church offered a tax clinic that helped you fill in your tax return (if you make < $40K).

Fast Cash Back?

Please don’t go to the Fast cash back scams run by a few companies. Wait for your refund, and get all the money you deserve, when you get your taxes done!

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