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Moncton Times & Transcript ~ Tax Help Plus ~ Do you agree? ~ January 16, 2007 - 25 Feb 2007 by TaxHelp
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While the snow has a nice effect, on the landscape, and it certainly is expected in January, at the end of the day the driveway has to be shovelled. Whether it’s the owner of the house, one of the kids, or the fellow with the plow, someone ultimately has the responsibility to make sure it ends up clear. It’s like that when you file your tax return, whether you take a stab at it or you hire someone.
This fact was brought to my attention again last week when a news release from the good folks at the Canada Revenue Agency (CRA) crossed my desk. And since the message is important, it probably bears repeating here in this space.
Some 23 million of us (give or take) are going to be filing our personal tax returns to Ottawa in the next few months. In the myriad of documents involved, some will specifically require you to attest to the accuracy of the information. Most of us at some time in our lives make errors and the process of completing a return is inherently filled with opportunities to make a mistake. And in the simple case of omission or mis-interpretation, no one is going to place you on the bus to Dorchester.
However, there are some unscrupulous individuals and organizations that look at the issuance of tax refunds as an easy and accessible portal to government money. Current and prior year tax returns are processed almost year round except at this time. The upcoming tax season (which represents the calendar year 2006) does not go live until mid-February. Effectively, this means that even if you have all your slips and your return is complete and mailed now, you will not receive a refund before February 20. Tax professionals cannot even file their client’s tax returns electronically yet.
So what’s with the cautionary tone?
Every year some people make the mistaken impression that they can get away with bilking the system in some way. You should be aware that the checks and balances are extensive and eventually these people are found out. The CRA advises that “If you hear about a tax preparer offering larger refunds than other preparers, don't be fooled! While most preparers provide excellent service to tax filers, a few unscrupulous return preparers file false and fraudulent tax returns and ultimately defraud their clients.”
These schemes take on many forms. Sometimes a preparer offers to complete a return using an “educated guess” instead of waiting for the official T slip issued by the proper authority, and then advancing a reduced tax refund, only to inflate the numbers later and pocket the difference. Others override the software making the calculated rebate appear smaller, shortchanging the client and keeping the excess. Let’s be clear – there is nothing wrong with assertively filing a tax return. Many professionals advise their clients of various interpretations of the rules and then take an aggressive stance recognizing that it’s subject to review by the Agency. After all, this ‘pushing of the envelope’ is a legitimate approach to the filing. But destroying the fibre of the paper of the envelope is hardly confidence inspiring – no matter how attractive the refund is.
By signing your tax return, you take responsibility. While it may mitigate the situation if you inadvertently are some innocent party to a fraudulent venture, you will still have to pay the bill.
How does someone protect him or herself? Most professionals are going to encourage you to file with all the correct documentation. Pay stubs while helpful are often inaccurate relative to the T4. And most slips are not issued until we are well into February. In fact, issuers legally have until the end of February at the earliest to legally disperse the information. Our experience has been that refunds actually tend to be larger (by what seems to be hundreds of dollars) for those who wait for all the correct documentation. Most professional firms have a quality control department, so that another set of eyes can review all the entries to make sure there are no mistakes and the refund is the legal maximum. Other ways to protect yourself is to ask for a full copy of your tax return – after all, you’ve paid for it! And then, make sure you receive a copy of your Notice of Assessment from Ottawa, particularly if you’ve sold your refund. That way, you can compare how much was paid to you versus how much was claimed and eventually paid out to the preparer.
Every year there are hundreds of convictions for tax evasion and fraud. And these are just the ones prosecuted. There are a myriad of earlier settlements where taxpayers instead agree to penalties, fines and interest in addition to the original tax liability. In the last year the cumulative amount of jail time represented decades and 94 per cent of all prosecutions resulted in convictions.
It isn’t worth it. As the CRA says, “Don't get involved. You will be caught.”
By the way, we still have a few times left for any group looking to have someone come out and offer a session where we discuss the newest tax changes. These events usually run somewhere around an hour once a question-and-answer is completed and are offered both during the day and evening. Most important, there is no charge for this service.
Roger Haineault is with Tax Help. His column "Tax Help Plus ..." appears each Tuesday. For questions, comments or column suggestions he can be reached by calling 388-9000 or by emailing roger@help4taxes.ca
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