CPA Tax Package: Procedures and Administration, Returns and Payments – Individual and Corporations

Question 1

What form must be filed to increase withholding on employment income?

Answer 1

Form TD1

Question 2

What form must be filed to reduce withholding on employment income?

Answer 2

Form T1213

Question 3

Under Section 150(1.1)(b), when is an individual exempt from filing an income tax return?

Answer 3

An individual is exempt if none of the following apply:

Balance/tax owing

Disposition of capital property

A taxable capital gain to report

Outstanding balance under HBP/LLP

Question 4

What is the filing deadline for an individual not carrying on a business?

Answer 4

April 30th of the following year

Question 5

When are instalments required for individuals under Section 156?

Answer 5

Instalments are required if:

Tax owing is greater than $3,000 in the current year

Tax owing was greater than $3,000 in either of the two preceding years

Question 6

When are instalment payments due for individuals?

Answer 6

March 15, June 15, September 15, and December 15

Question 7

What penalties apply for not filing a return under Section 162(7)?

Answer 7

$25 per day for a max of 100 days (Cdn $2,500)

Question 8

What are the filing deadlines for corporations?

Answer 8

Filing deadline: 6 months from year-end

Payment deadline for CCPCs: 3 months from year-end

Payment deadline for non-CCPCs: 2 months from year-end

Question 9

What penalty applies for a false statement or omission under Section 163(2.4)?

Answer 9

The greater of:

$24,000

5% of the cost of the property subject to the penalty

Question 10

What is the instalment payment method for corporations under CRA formula?

Answer 10

Payments 1 & 2: 1/12 of the total from 2nd preceding year

Payments 3 to 12: (Preceding Year
Payments 1 & 2) divided by 10

Question 11

What forms are filed to adjust employer withholdings on employment income?

Answer 11

To increase withholding: File form TD1.

To reduce withholding: File form T1213.

Question 12

When must individuals file a tax return?

Answer 12

April 30th of the following year for individuals not carrying on a business.

June 15th for individuals carrying on a business.

Inter-vivos trusts: 90 days from its year-end.

Corporations: 6 months from its year-end.

Question 13

When must instalments be made for individuals under Section 156?

Answer 13

Instalments must be made on March 15, June 15, September 15, and December 15 if tax is payable:

Greater than $3,000 in the current year, and

Greater than $3,000 in either of the two preceding taxation years.

Question 14

What is the instalment payment schedule for CCPCs?

Answer 14

CCPCs must pay any outstanding tax balance 3 months after its year-end, even though filing is 6 months after year-end.

Non-CCPCs must pay any outstanding tax balance 2 months after its year-end, even though filing is 6 months after year-end.

Question 15

What is required for foreign reporting under Section 233 and 162?

Answer 15

Persons or partnerships who own foreign property with a cost of $100,000 or more must file Form T1135.

Question 16

Under Section 161, when will CRA charge interest?

Answer 16

CRA will charge interest if there is an outstanding balance or late instalments.

The interest is not deductible.

Question 17

When will CRA refund interest under Subsection 164(3)?

Answer 17

For all taxpayers, the date the overpayment occurred.

For corporations, 120 days after the end of its taxation year.

For individuals, 30 days following the return due date or the date the return is filed.

Question 18

What are the penalties for late filing under Section 162(1)?

Answer 18

First offence: 5% penalty on the amount owing + 1% per month for up to 12 months of the unpaid tax balance.

Second offence: 10% penalty on the amount owing + 2% per month for up to 20 months.

Question 19

What are the penalties for unreported income under Subsection 163(1) and 163(2)?

Answer 19

Subsection 163(1): 10% penalty for unreported income if warned and failure occurs within 3 years.

Subsection 163(2): Gross negligence penalty of up to 50% of the tax otherwise payable.

Question 20

What are the penalties for criminal offences under Sections 238 and 239?

Answer 20

Section 238: Fines between $1,000 - $25,000 or 12-month prison term for failure to comply.

Section 239: Fines between 50% - 200% of the tax sought to be evaded and/or up to a 5-year prison term for fraud.

Question 21

When must individuals file their tax returns under Section 150?

Answer 21

Individual not carrying on a business: April 30th of the following year

Individual carrying on a business: June 15th

Inter-vivos trusts: 90 days from its year-end

Corporations: 6 months from its year-end

Question 22

Under Section 156, when are individual tax instalments due?

Answer 22

March 15, June 15, September 15, and December 15 if tax is payable and greater than $3,000 in the current year or either of the two preceding years.

Question 23

What are the instalment deadlines for CCPCs under Section 157?

Answer 23

CCPCs must pay outstanding tax 3 months after year-end, while non-CCPCs must pay 2 months after year-end.

Question 24

What is the penalty for failing to file the T1135 form under Section 233.3?

Answer 24

$25 per day for a max of 100 days ($2,500)

$500 per month for a max of 24 months if filed knowingly or with gross negligence ($12,000)

$1,000 per month for a max of 24 months if demanded by CRA ($24,000)

Question 25

When does CRA refund interest on overpayments under Subsection 164(3)?

Answer 25

For corporations: 120 days after the end of the tax year

For individuals: 30 days following the return’s due date or when the return is filed

Question 26

What are the penalties for late filing under Section 162?

Answer 26

First offence: 5% of the amount owing + 1% per month (up to 12 months)

Second offence: 10% of the amount owing + 2% per month (up to 20 months)

Question 27

What are the penalties for unreported income under Section 163(1)?

Answer 27

A penalty of 10% of unreported income if the taxpayer fails to report income after being warned by CRA.

Question 28

What are the penalties for gross negligence under Section 163(2)?

Answer 28

A penalty of up to 50% of the tax otherwise payable on the unreported income.

Question 29

What are the penalties for criminal offences under Section 238?

Answer 29

Fines between $1,000 to $25,000 and/or 12 months in prison.

Question 30

What is the penalty for criminal offences involving substantial fraud under Section 239?

Answer 30

A fine between 50% to 200% of the tax sought to be evaded and/or a prison term of up to 5 years.

Question 31

When must a taxpayer file a Notice of Objection under Sections 164 and 180?

Answer 31

90 days from the Notice of Assessment

1 year from the filing due date for individuals and trusts

Question 32

What are the conditions for informal procedures in a tax court appeal?

Answer 32

The tax subject to appeal is no more than $25,000, or the income item subject does not exceed $50,000.

Question 33

What collection actions can CRA take if a taxpayer fails to pay under Sections 222 to 226, 231, and 232?

Answer 33

Seize taxpayer’s assets

Force debtors to make payments directly to CRA

Question 34

What is tax evasion under subsection 239(1) of the Income

Answer 34

The willful act or knowing omission of an act that would result in criminal charges (e.g., not reporting sales, claiming personal expenses, maintaining false accounting records, or destroying books and records).

Question 35

What is tax avoidance?

Answer 35

Legal minimization of tax. An avoidance transaction is one undertaken solely or mainly to derive a tax benefit.

Question 36

What are the 3 requirements for applying the General Anti-Avoidance Rules (GAAR)?

Answer 36

1) A tax benefit results from a transaction or series of transactions.

2) The transaction is an avoidance transaction, not primarily for a bona fide purpose other than obtaining a tax benefit.

3) The transaction involved abusive tax avoidance, inconsistent with the object, spirit, or purpose of the provisions relied upon.

Question 37

Who bears the burden of proof in GAAR cases?

Answer 37

The burden is on the taxpayer to refute the tax benefit and avoidance transaction, while the Minister must establish the abusive tax avoidance.

Question 38

How does the court determine if a tax benefit was abusive under GAAR?

Answer 38

The court conducts a unified textual, contextual, and purposive analysis to determine whether the benefit conferred aligns with the object, spirit, or purpose of the provisions.

Question 39

What is a reportable transaction under section 237.3?

Answer 39

A specific type of tax avoidance transaction undertaken alone or as part of a series of transactions to avoid paying taxes.

Question 40

What are the criteria for a transaction to be considered reportable under section 237.3?

Answer 40

It must meet at least one of the following criteria:

The promoter or advisor for the transaction is entitled to a fee based on:

a) the amount of the tax benefit,
b) getting the tax benefit,
c) the number of people participating or having access to advice about the tax consequences from the promoter or advisor.

Question 41

What is “confidential protection” in a reportable transaction?

Answer 41

An arrangement where the promoter or advisor obtains a guarantee that prohibits disclosing the details or structure of the transaction to any person.

Question 42

What is “contractual protection” in a reportable transaction?

Answer 42

Any form of protection against failure of the transaction or coverage of expenses (including tax, interest, penalty) incurred during a dispute about the tax benefit.