Ch .3 Tax - Administration

Question 1

What circumstances is it required for individuals to file a return?

Answer 1

• tax is payable
• the individual has a taxable capital gain or disposes of taxable Capital property in the year
• the Minister of National Revenue has issued a “demand to file”
• the individual has a positive Home Buyers’ Plan or Lifelong learning plan balance at the year end
• non-resident individual has a taxable capital gain

Question 2

What circumstances is it required for corporations to file a return?

Answer 2

• Tax is payable (or would be, in absence of treaty)
• At any time in the year the corporation:
  1) resident in Canada
  2) has realized taxable capital gain
  3) is carrying a business in Canada
  4) disposes of a taxable Capital proeprty

Question 3

What are the filing dates for individuals?

Answer 3

1) April 30 (also balance due date)
2) June 15 if taxpayer our spouse carried on a business
3) later of six months after the date of death and normal filing deadline, if the taxpayer passed away during the year

Question 4

What are the filing deadlines for corporations?

Answer 4

6 months after year end

Question 5

When are the belances due for individuals and corporations

Answer 5

Individuals - apirl 30
Corporations:
- 2 months after year end
- 3 months after year end for certain CCPC’s

Question 6

What are the criteria’s for an individual to pay their balance using instalments?

Answer 6

If it is greater than $3,000 in the current year and for one of the two previous years. Installments are due o the March, June, September, and December 15th.

Question 7

How is the installment price determined for individials

Answer 7

I) 1/4 x estimated tax payable for the current year
2) 1/4 x tax payable for the immediately preceding year
3) first two installments: 1/4 x tax payable for the second preceding year, last two installments: 1/2 x tax payable for the preceding year minus the first two installments for the current year.

Question 8

How are installment payments determined for CCPCs?

Answer 8

It is the lesser of:
- 1/4 x estimated tax payable for the current taxation year
- 1/4 x taxpayments for the immediately preceding tax year
- first instalment (1/4 x tax payable for the second preceding year ); last three installments 1/3 x tax payable for the preceding year minus first installment for the current year

Question 9

What is applicable to eligible CCPCs instead?

Answer 9

Eligible CCPC’s are defiend as
did not exceed taxable income of 500,000
had TCE of no more than 10,000,000
Claimed a small business deduction this year or last
has a perfect compliance history (throughout the 12 months)

If they’re eligible, then they can pay instalments at the last day of each quarter vs monthly

Question 10

What is the installpayment calculation for corproations?

Answer 10

Can choose, but generally is the smallest of:
- 1/12 x estimated tax payable for the current year
1/12 x tax payable for the immediately preceding year
- first two instalments (1/12 tax payable for the second preceding year); last 10 (1/10 tax payable for the preceding minus the first two installments fo rhte current year)

Question 11

Arrears interest - missed payment deadline

Answer 11

Interest is charged on taxes owining at the prescribed rate + 4% until the amount is paid in full.

Note: amount is compounded daily until the amount is paid in full. Beginning May 1 (Payment is due April 30)

Question 12

Late or deficient installments

Answer 12

Charged at 4$ + Prescribed interest rate

Interest applies from the date it was due to the earlier of:
- Date installment is finally paid
- balance due date for the taxpayer’s taxation year

Penality is 50% of the amount by which the interest on the late or deficient installments exceed the greater of:
- $1,000
- 25% of the interest that would have been payable if no instalments had been made.

Note: you will pay the interest owing as well as an additional penalty. The penalty is only applicable if interest charges are greater than $1000

Question 13

Refunds owed to the taxpayer from the CRA

Answer 13

Individuals:
Interest paid to an individual = refund amount x (prescribed rate +2%)

Interest is calculated at the latest:
i) 30 days after the balance was due
ii) 30 days after the return is actually filed
iii) the day on which the overpayment arose

Corporations:
Interest paid to a corporation = refund x prescribed

Latest:
i) 120 days after the end of the relevant taxation year
ii) 30 days after the return is actually filed
iii) the day on which the overpayment arose

Question 14

Failure to file return by due date

Answer 14

1st occurence:
Total of:
- 5% of unpaid tax
- 1% x unpaid tax x number of months return is outstanding (not more than 12)

Demand for second late returns +
- 10% x unpaid tax
- 2% x unpaid tax x number of total months of return is outstanding (not more than 20)

ITA 235 - additional penalty for large corporations equal to 0.0005% per month of the corporations TEC for a maximum of 40%

Question 15

Repeated failure to report income equal to or greater than $500

Answer 15

Penalty is the lesser of:
10% of the amount of unreported income

an amount equal to 50% of the difference between the understatement of tax and the amount of tax paid in relation to the unreported amount

Question 16

False statement or omissions, knowing or gross negligence

Answer 16

penalty is greater of:
$1000
50% of understated tax

Is waived if taxpayer tells CRA amount that was not reported

Question 17

Failure to e-bile by taxx prepared at least 10 T1s or 10 T2’s per year

Answer 17

$25 per T1
$100 per T2

Question 18

Misrepresentations in tax planning arragements

Answer 18

Penality is greater of:
$1000
100% of gross revenue dervied by person from activity

Question 19

Participating in misrepresentation

Answer 19

Penalty is greater of:
$1000
50% of tax sought to be avoided (maximum of $100,000)

Question 20

What are the steps to object to CRA’s assessment

Answer 20

Deadline to file a notice of objection is the later of:
Individuals:
- 1 year after filing date
- 90 days after the date of mailing of the notice of assessment

Corporation:
- 90 days after the date of mailing of the notice assessment
Can be done using a T400A or online thorugh the CRA website

Question 21

What if you disagreement with the reassessment?

Answer 21

You can file an appeal to the Tax Court of Canda at the later of:
- 90 days after the new mailing of CRA’s reply
- 90 days after the objection was filed

if still not appy, it can be appealed to the federal court of appeal within 30 days of court ruling

Question 22

How far back can you amend a tax return?

Answer 22

10 years