By RANGA RAJAH
Special to SAF
If you haven’t already filed your tax returns, you need to do so right now! The deadline’s April 30… you have been warned!
But even after this warning, we’re sure there are many of you out there who have yet to file. We know. It’s an onerous task. But it’s got to be done.
As the old saw goes, there are only two certainties in life: Death, and Taxes. So file ’em, and get ’em over with. At least for this year.
Filing taxes equates to organizing documents. Half the battle is won here — but what if one forgets a T4 from one company or another person thinks $300 is too small an amount and not worth declaring? They get penalized, they learn an important lesson, and they adhere to the deadline…
And some people like Yasar Shaikh, a film professional from Mississauga (currently working on Safar, a Punjabi film) end up cutting short their family vacation just to be here in time to file their taxes. “In 2009-2010, we’d planned this vacation and things had worked out as per our plans and we’d left. But after reaching India, I realized we had the tax deadline approaching. Obviously, we had to cut short our vacation” to get here and file in time that year.
According to Shaikh, more than getting the taxes filed, it was the running around to collect all the documents including the T4s, T5 (Return of Investment Income) and supplementary documents that was high stress. “There is a reason why we cut short our family vacation in 2010. There was a mishap in 2007, I did not feel it was important to file my T5 because the amount was just $300. The next thing I get is a mail from Canada Revenue Agency asking me to pay $700 as a penalty for not declaring $300. I ended up paying $700 which included the undeclared amount.”
No one wants a letter from the Canada Revenue Agency asking the taxpayer to dole out $25,000. Nadeem Malik, driving instructor, AAA Teen Drivers, Mississauga, faced this problem. A few years ago, Malik received a letter from the CRA stating that he owed $25,000. Shock was his instant reaction. The next stop for Malik was his accountant. He was informed that his accountant had moved to Vancouver. “Then I asked the CRA representative to check my file — and she said it showed that I was a realtor.”
Nadeem had apparently bought a house while working earlier in Future Shop and had tenants paying him rent. But now he had to prove he wasn’t a realtor.
Armed with the invoices and other documents Malik approached the Canada Revenue Agency. The officer there informed him that the Employment Insurance department had sent the Canada Revenue Agency a letter stating that since he was a realtor, he was not supposed to claim Employment Insurance.
“I had worked in Future Shop and had been laid off, and that meant I was eligible for Employment Insurance. But the filing mistake erroneously stating that I was a realtor created the problem for me.”
Don’t think everything’s just fine if you don’t get a letter right away either. It was three full years after receiving his Employment Insurance payments that Malik was sent the CRA love letter. In fact, tax experts suggest you should retain your documentation going back at least seven years, to be on the safe side.
Oblivious to what was brewing inside his files, Malik had regularly been filing and paying his taxes on time. Phew!
A lower refund?
Tax refund amounts are welcome anytime, but what if the figure is lower than one had expected?
Meherooz Kelawala, studying Travel, Tourism and Hospitality at Seneca College, says he has one tax story to share. It was his first year in Canada as a student and there were these other students who mentioned the four-figure refunds they had received from the Canada Revenue Agency.
With expectations sky-high, Kelawala collected all his papers and armed with his bills and receipts in a file, he hit the H&R Block, hopeful of the big fat cheque he would be receiving a few weeks later. “Finally the cheque arrived in my mailbox and it was less than $400. Oh boy, I was disappointed. You see, I had planned to use part of that money to buy books and keep some to pay my fees the next semester. That is when I realized filing taxes and receiving refunds is more individualistic than a collective experience.”
Juggling jobs is easy it seems, but juggling T4s from different companies one works in is not an easy thing says Hemraj Pandey. He works in the hospitality industry and has recently moved back to Mississauga from Saskatoon where he lived for over a year.
Pandey worked three different companies in Mississauga before going to Saskatoon. And he had a few more months to file his taxes. He called the managers of the three companies and requested that his T4s to be mailed electronically to him since he was in Saskatoon.
Later he filed for returns and the much-awaited refund cheque also came. But six months later he received a letter from the Canada Revenue Agency. The letter stated that he had worked for three companies but his files showed T4s submitted for only two. This meant he owed money to the taxman.
“Apparently I owed $208 according to their assessment. The other interesting thing about the amount is, from the time they print and mail the letter to you, the interest starts to kick in and each day it goes up by a few cents. You have to pay the amount by a certain date set by Canada Revenue Agency. If you miss it, you end up paying some more interest.
“I decided to not take a chance and paid $210, thinking it is better to pay a few dollars extra than less,” said Pandey ruefully.
To avoid future confusions Pandey has opened an online account with the Canada Revenue Agency. “This helps anyone filing their taxes to track down their financial history and T4s of the present year they are filing taxes,” he adds.
The first-time taxpayer
Radha Tailor, New Media Coordinator at Quartet Service Inc, shares her experience filing taxes for the very first time. All these years, her parents were sorting it out for her, but this year she decided to do it on her own.
Tailor started by preparing for all the essentials she would require to file her taxes. “I had to get examples of previous tax income sheets, finding proper references online to fill in phone numbers, getting my T4, education documents and public transit records. Butterflies? No, just frustration, because you always want to make sure you cover every expense possible and research every way to get a tax deductible. When you have a very small income every penny matters.”
Were there any last minute additions? “Yes, it happens every year and I always forget about it. I have a TFSA and it’s considered ‘income’. As a result, I didn’t put this into my calculations and I still have to find out how to submit this properly. I was audited previously because of this and I don’t want the same mistake to happen again.”
Newcomers depend on advice from people who have seen a few tax seasons in Canada. When Rama Shrestha, a lecturer in Sociology from Nepal came to Canada a few years ago, she was asked to find an accountant from Nepal. This piece of advice was not enough for filing taxes. Therefore Rama gathered information as to what documents to collect, where to find tax advisors, etc. “I found all the information I needed on the CRA website. Armed with all that information, I went well prepared to file my first tax return in my new home.”
Though she had read the website for details on tax returns, etc she did not know until very recently that one could file taxes on their own. “I had a good laugh after I realized what I had completely overlooked. I am not planning to file on my own yet, because I am not an expert and I am worried I might end up missing some vital details while filing,” adds Shrestha.
Tax Advisor Sanjeev Jhanji from Vancouver says, “Remember if you are not filing your taxes you are not fulfilling your obligation. It is a requirement by law. If my clients are away on vacation, I ask them to worry if they owe money to the government. But if it is a refund they are waiting for, they can always come back and file after the deadline.”
Quick tax primer
* Tax for all provinces (except Quebec) and territories is calculated the same way as federal tax.
* Form 428 is used to calculate this provincial or territorial tax.
* You no longer have to fill out your income tax return by hand. Download the fillable/saveable PDF from the CRA website and save it to your computer. You can then fill in your information, and save your work as you go. Once your return is complete, print it and mail it to the appropriate tax centre.
* Not filing taxes will mean Canada Revenue Agency can stop benefits, best thing is to file taxes as soon as possible because benefits are attached to it.
* You can file it online by yourself or an accountant/tax advisor can do it for you.
* For self-employed people the deadline is June 15; though there is no penalty, the interest kicks in after April 30 if you owe money.
* It is important to know the tax bracket you fall under.
* According to Canadian federal marginal tax rates of taxable income, if you have made $10,822 per year you do not have to pay taxes.
* If you make $10,823 to $42,706, you owe 15 per cent to the government; and, as your income increases, your tax percentage will follow suit.
* Income that is not taxed includes gifts, inheritances, lottery, death benefits paid from life insurance, strike pay, etc.
* Self-employment income is reported on the T1 general return and it may be earned from a business you operate yourself as a sole proprietorship or with someone else as a partnership.
* Self-employed individuals can choose to pay Employment Insurance premiums to be eligible to receive Employment Insurance special benefits. These can include maternity, parental, sickness and compassionate care benefits.
* Business that is incorporated is reported as business income on a T2 corporate income tax return.
By RANGA RAJAH