A tax professional can help you deal with Canada’s complex tax system. However, a tax professional will still rely on you to provide complete and accurate information regarding your income and expenses.
Ensuring you keep good records throughout the year will help you feel at ease and also help your tax professional at tax time. While reputable accountants and tax preparation firms will do their best to minimize your tax payable and maximize the benefits you’re entitled to, they can only work with the information you provide and within the law. And, occasionally, they do make honest mistakes.
Don’t forget to review your tax return before signing and filing with CRA.
Having a Tax Professional Complete Your Taxes Requires a Team Effort
Hiring an accountant or tax professional to prepare your tax return does not excuse you of any responsibility for the accuracy of the information on your return. You could face huge penalties if Canada Revenue Agency (CRA) finds any errors or omissions in your reported income.
Under the Income Tax Act, you are responsible for providing your tax professional with complete and accurate information to prepare your annual tax return. You must disclose all sources of income for the year, including:
- Employment income and benefits, whether or not they are included on T4 slips
- Investment income, even if some is not included on T3 or T5 slips
- Income from foreign property and the value of the foreign property
- Capital gains from the disposition of property, shares, mutual funds, etc.
Any deductions you wish to claim must have been incurred to earn income and all credits must be supported by receipts and/or logs such as vehicle mileage logs.
Penalties are compounded with each year that income is not reported. If you fail to report income during this taxation year and you also failed to report income in any of the three preceding tax years, CRA could automatically impose a penalty of 10% of the amount not reported.
For knowingly making false statements, or even in unintentional situations that result in excessive errors on your tax return, you could be fined 50% of the difference between your tax payable as reported and the tax that should have been paid if you had reported correctly. In such cases, the fine will never be less than $100. These fines will also take into account tax credits that were calculated based on the income reported.
The Crown must prove that a taxpayer has been willful or grossly negligent based on the circumstances in each situation. Court rulings on taxpayer appeals have varied – sometimes the taxpayer has been found to be negligent, sometimes the accountant was found to be responsible for errors, and in other cases both the taxpayer and accountant had to bear some responsibility.
Taxpayer Reports $985 of Interest Income and Forgets $275,000
One case involved a taxpayer seeking the Crown’s reversal of fines against him for omissions on his 2000 tax return. He had reported interest income of only $985, when the actual amount was $276,420.
He did not dispute the taxes owing, but he did object to the penalties imposed. He argued that the unreported interest was a small amount compared to his total income of more than $3 million and that was why he did not notice the omission. He also indicated that, since he had not prepared the tax return, he was not to blame for the error.
The court determined, since interest income appears on a separate line on the tax return, the omission of $275,435 in interest should have been obvious. By failing to ensure the correct amount of interest was reported, the taxpayer was not simply careless – he was indifferent to complying with the Income Tax Act. His appeal was dismissed.
FBC Will Represent You In Case of an Audit – At No Extra Cost
If CRA ever audits a member or challenges a tax return we completed, we will represent you – all the way to Tax Court if warranted, and we’ll cover the court costs and legal fees.