My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, July 16, 2018

The Best of The Blunt Bean Counter - Legacy Stocks - To Sell or Not Sell? That is the Question?

This summer I am posting the "best of" The Blunt Bean Counter blog while I work on my golf game. Today, I am re-posting a March, 2017 blog on whether to sell Legacy stock positions. People are often frozen into "in-action" because of the tax consequences of selling a legacy position, especially where you have a large unrealized capital gain.

Legacy Stocks - To Sell or Not Sell? That is the Question?


Some people, typically seniors/baby boomers have owned stocks for decades, either through direct purchase or an inheritance of some kind (stocks transferred from a deceased spouse pursuant to their will generally have an adjusted cost base equal to what the deceased spouse originally paid for the shares; shares inherited from a parent or grandparent will generally have a cost base equal to the fair market value on the day of inheritance). These stocks are commonly known as Legacy Stocks; more often than not, they will include shares of Bell Canada, the Canadian bank(s) and/or insurance companies.

In early 2017,  Rob Carrick, The Globe and Mail’s excellent personal finance columnist  mentioned to me that several of his readers had asked him about selling their legacy stocks (or as more typically is the case, not selling their legacy stocks). I told him I thought the issue would make a good blog topic and asked him if he was okay with me using his idea to write a post. He gave me his blessing, so today I am writing about the issues and considerations for those of you holding legacy stocks and similar type securities.

The Common Quandary


The issue with selling legacy stocks is that they:

1. Typically have huge unrealized capital gains and thus the sale of these stocks creates a large tax bill

2. The realization of the capital gain can result in a clawback of Old Age Security ("OAS"), which seniors are loathe to ever repay

I know some readers, especially my millennial readers are thinking to themselves “Is Mark really going to write about minimizing the large capital gains of baby boomers that have already benefited from the huge increases in real estate? Cry me a river that they owe some tax.” The answer is yes, since a tax issue is a tax issue and this blog, although meant for everyone, is targeted to high-net-worth individuals and owners of private corporations.

There Is No One Size Fits All Answer


If you have a legacy stock(s) you are considering selling, there is not a standard “one size fits all” answer. There are various investment and income tax considerations. I discuss these issues and considerations below.

Capital Gains Rates


The marginal tax rate for capital gains in Ontario for income in the $45-$75k range is approximately 12-15%. This rate jumps to 19-22% or so between $90-$140k in taxable income and hits 26.8% once your taxable income exceeds $220,000.

Capital gains rates are the lowest tax rates you get in Canada. So from my perspective, the taxes you would pay from the sale of a legacy stock should not be the determinant in deciding to sell. The key factor (subject to the discussion below) should always be what the best investment decision is. Watching a stock drop 15%, to save 20% in capital gains tax, makes absolutely no sense, when viewed in isolation.

There has been concern the last few years that the Federal government may change the taxable inclusion amount of a capital gain from 1/2 to 2/3 or even 3/4. However, as this is only conjecture, if you were to sell for this reason only, you would be accelerating your tax payable.

Old Age Security Clawback


As noted above, the capital gains tax tail should not wag the tax dog. However, there is one issue that complicates the matter for seniors and that is the Old Age Security Clawback.

As evidenced by many accountants’ scars and wounds, never cause even the sweetest senior to have an OAS claw back, because all hell breaks loose :). I am only half-joking; seniors really resent having their OAS clawed back. I assume it is because they feel they have an entitlement to this money and the government does not have the right to claim all or some portion back (even though, they did not directly fund this program).

Seniors must pay back all or a portion of their OAS as well as any net federal supplements if their annual income exceeds a certain amount. For 2017, if your net income before adjustments is greater than $74,789 ($73,756 for 2016) then you will have to repay 15% of the excess over this amount, to a maximum of the total amount of OAS received. The maximum repayment is hit around $119,000.

So if you have a capital gain on a legacy stock of $90,000 ($45k taxable) and you are right at the $74,789 OAS limit before the capital gain, the tax cost of the capital gain would be around $15,000 or 17% of the $90,000 gain. However, when you add the OAS clawback that would be applicable, the combined tax and OAS clawback could approach $22,000 or 25% or so. That is why you cannot look at the gain in isolation.

If you do not have an investment reason to sell your stock, you may want to consider selling the stock over a few years to minimize the tax and OAS clawback, assuming you wish to keep the stock each year.

Holding Company


A “sexier” alternative, especially for seniors is to transfer your stocks to a holding company. You should be able to do this on a tax-free basis under Section 85 of the Income Tax Act. The benefit to doing this is any dividends earned and the eventual capital gain are taxed in the holding company and thus, do not affect your OAS clawback. In addition, if you have any potential U.S. estate tax exposure (see this prior blog post on estate tax), the U.S. stocks in your holding company will not be subject to U.S. estate tax if there is estate tax in place at the time of your passing (estate tax is a U.S. political issue that keeps changing depending upon the party in charge). So while you do not save any actual income tax, you can save your OAS from being clawed back and possibly gain some U.S. estate protection.

The downside to this strategy is the cost to transfer the stocks (legal and accounting) and ongoing accounting costs, which can be high for a holding company and thus, potentially a significant part of the OAS clawback savings is now paid to your accountant instead of the government, so you have to weigh the savings versus the costs.

Capital Losses


If you plan on triggering capital gains on legacy stocks, you should review if you have any capital losses you can apply against these gains. The CRA notes your capital loss carryforward balance on your notice of assessment and if you have a My CRA account, you can get this information online. It should be noted, the application of the losses only reduce the capital gains tax, not the OAS clawback.

Charitable Donation


Where you donate public securities to a registered charity, the capital gains inclusion rate is set to zero. Thus, there would be no capital gain to report on the donation of a legacy stock (have your accountant run the numbers, but this should minimize or eliminate the clawback) and you receive a donation credit. This is reported on Form T1170 . This strategy is effective if you make large donations every year or were planning to make a substantial donation and helps the charity since you have more funds to donate than with an after-tax donation.

The decision to sell a legacy stock is not a simple one. The overriding decision should still be an investment decision; however, where you are indifferent to selling, you need to consider the various issues and options I have noted above. Before undertaking any legacy stock selling, you should consult your investment advisor and possibly your accountant.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, July 9, 2018

The Best of The Blunt Bean Counter - Where are Your Assets?

This summer I am posting the "best of" The Blunt Bean Counter blog while I work on my golf game. Today, I am re-posting a February, 2011 post on where are your assets? It was probably my shortest blog post ever, but the message is succinct. Get your ass-ests in gear. Make sure you have a list of everything you own so that you do not leave your spouse and family a financial mess.

Where are Your Assets?


If you died tomorrow, would your family and advisors know where your assets are and what assets you owned?

I would suggest the answer in 50% or more cases would be a resounding no.

If you have answered no, take this one step further; consider the havoc you will cause your family and executors. They will be distressed having to deal with your passing, now you are compounding their stress by forcing them to deal with an estate when they have no clue what assets you own, what debts you have outstanding or where the assets are held. Most likely they will not have a duplicate safety deposit key or even know where your safety deposit box(es) is/are.

Whether you are just negligent or lazy, your actions are selfish and you should immediately take steps to rectify the situation.

All this can be averted very simply. Take a weekend and complete a personal information checklist (there are several on the Internet) and then put a reminder in your phone or Outlook calendar to review this checklist each year to ensure there are no changes.

Once completed, consider providing a copy of the checklist to your spouse, your accountant, lawyer or trusted third party. In any event, at minimum, put a final copy in your safety deposit box and ensure either your spouse of another person is aware of the location of the safety deposit box and the key.

I have on many occasions seen the aftermath of situations where a spouse has not provided a list of assets. It is not pretty and I am sure if you take a moment to ponder this, you do not want to leave your family in a similar situation. So, get to it and make a list! 

Bloggers Note: A couple years after writing the original post, I was told of a story of a well-to-do couple on vacation that got caught up in a natural disaster area. They ended up safe; but before they felt that security, they were trying frantically trying to call and inform their family what assets they had and where they were. I think this sums the theme of my post, just be prepared and if you get caught up in a natural disaster, worry about saving yourself, not telling your family where your assets are :)

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.

Tuesday, July 3, 2018

Gone Golfing for the Summer of 2018

This summer, I will again be posting a “Best of The Blunt Bean Counter” blog each week; so, I can spend some time golfing and enjoying the good weather with my family.
Cabot Trail - Nova Scotia (pray it is not windy when hitting your shot!)

As this is now the fifth year in a row that I have posted my "Best of" during the summer, as I stated last year, maybe at this juncture, a more appropriate title should be; "The Sort of the Best of The Blunt Bean Counter".

Anyways, you can read them again if you so desire and if not, I won't take it personally. I wish everyone a great summer and thank you for reading the blog. Some of you now have been reading almost 8 years as of September. I appreciate your readership and the many nice emails I receive from you.

Note: On August 1st at noon I will be participating in a live webinar on Planning for Retirement for Small Business Owners based on this report. I will provide an update in the next week or two.

Monday, June 25, 2018

The Taboo of Asking for Money Within a Family – Part 2


Last week in part one of this two-part series, I suggested there are three reasons why people may ask their family for money. They are: need, seed and greed. Today I discuss these three reasons in greater detail.

Need - I Really do Need the Money


Some examples of need-based requests by a child are as follows:

a) They are in a bad and/or abusive marriage and need money to get out of the marriage.
b) They need money to help buy a home.
c) They lost their job

Parents may ask their children for money for the following reasons:

a) Medical issues
b) Elder abuse by another child or another individual
c) Poor retirement planning
d) Poor fiscal environment

One of the hardest decisions a parent will have to make is; the decision to gift or loan money to a child that is in true need of the money. These are factual requests in which the need for money can be substantiated. These requests leave no question that the money has a direct intended use and will not be used for personal gratification or discretionary purchases by your child.

The weight of one of these requests is often compounded by the fact emotional issues are attached to your child’s request for money. In the end, the decision to provide financial assistance must be determined in large part by a cold hard analysis of your financial situation and your financial wherewithal to provide assistance, especially where the request could jeopardize your retirement. I discuss this is further detail below.

Requests by parents (or more likely, non-requests, but you discover a need) tend to be more readily accepted. This is just simply because the person is your parent and typically you will want to repay them for everything they have done for you. But as with a child, you still need to consider your financial position before making any emotional decision. 

Seed - Psst, I have a Great Idea


Some examples of where a child’s request for money is seed based are the following:

a) They require money to start a business

b) They require money to expand an ongoing business.

c) They require money to go back to school to upgrade their education

Requests for seed money can carry significant risk. Often money advanced or loaned for a seed money request cannot be repaid. These requests can create significant internal turmoil for parents. Many parents have always told their children to think for themselves and to reach the stars. When a child wants seed money, it often revolves around the child starting a new venture or investing in a business. These requests are often gut wrenching for the parent, as they struggle with whether they a) can afford to lend of gift money to their child and b) often the parent has preached initiative and grabbing the brass ring when the chance presents itself and now they may be roadblock to following through on that initiative and finally c) parents are often aware many business start-ups go bankrupt, so practically it is a huge risk to loan or gift seed money for a new business.

Greed - I am a Money Leech, I Admit It


Some examples of where a child’s request for money is greed based are the following:

a) Need money for a vacation.

b) Need money for personal vanity (such as cosmetic surgery)

c) Need money for a discretionary purchase such as a large screen TV or car.

Requests for greed money are often rejected by objective parents, but many parents will do anything for their kids, even if it is detrimental to their financial future and for non-necessities. Many of these greed requests fuel the notion that some children just see their parents as a bank. Many of these same children are often characterized as the type of children that will hover over your body waiting for you to die. While this view is extreme, it is not without basis. We all have observed children who have had fractured or little or no relationships with their parents over the years, suddenly arrive on the scene asking for money or when their parents take ill.

Separating Emotion from Finance


The decision to acquiesce to a request for money from a child or a parent needs to be analyzed as a purely financial decision. Can you afford the financial request or not?

Where it is determined you have the financial wherewithal to grant a request for money, you must then make an emotional decision as to whether you feel the request is warranted or of such an urgent nature you need to seriously consider granting the request. Where you have the financial ability to provide funds, the decision can easily be rationalized as an early inheritance or money you can afford to lose. The issue is these cases is often more philosophical, do you make the child stand on their own or assist them?

The more typical and gut-wrenching cases are where it is determined you do not have the financial wherewithal and you must decide if you are you willing to jeopardize your retirement to assist a child financially.

Let me speak to my Accountant and Financial Planner

Any parent or child considering granting a request for money to a child or parent needs to review the issue with their accountant and/or their financial planner or engage such. Your accountant or financial planner has the ability to be detached and provide objective advice from both a financial perspective and emotional perspective.

For some people, money is never the issue. But for most, it is a significant issue, even where you have saved enough for retirement. Your accountant or financial planner can run several financial scenarios that will consider the impact of making a loan/gift on your retirement funding and allow you to review the financial consequences of advancing the money (assuming you will never see it back). For many people, the answer will never be entirely clear from a financial perspective, as the elephant in the room is always longevity. It is difficult enough to plan for retirement when you don’t know how long you will live, but that decision is further complicated when you must reduce your retirement nest egg for an unexpected cash request from a child or parent. However, at minimum you need to review the impact of making any significant gift upon different retirement scenarios.

Surprisingly, the few times where I have been involved in these type situations, it is often not just my financial expertise that is of value, but the fact I can relay my experience in other similar situations. As I am not emotionally attached, I can coldly state on a no-names basis what I have that observed in other similar family situations.

You mean I Must Speak to my Lawyer also?

If it is not bad enough I have already told you to pay an accountant and/or financial planner for objective advice, you likely will also need to spend more money to amend your will to account for the gift or loan. Your lawyer may do this via a Hotchpot clause, see this blog post on the topic or a simple promissory note.

The Tugging at my Heart (Purse) Strings is too Much

Some people will realize after meeting with their accountant or financial planner that they cannot afford to assist their child or parent. They often feel guilty and/or sad they cannot assist; or in some cases dejected they did not achieve a greater level of financial successes such that they could assist their child or parent. But, for financial reasons, the discussion ends as it is clear they cannot afford to assist their child or parent.

Yet, over the years, I have seen several parents assist a child financially when they cannot afford to do so. I call this the "blood is thicker than water” scenario. These parents cannot stand to see their child suffer financially or health wise and despite the objections of their accountants, friends, family etc. make the gift or loan. There is not much you can do or say in these circumstances, except try and help assist the child or parent to reduce costs where plausible and to review if there are any ways to make up for the loss of retirement funds. In the end, their child’s or parent's well-being far outweighs their concern for their own financial well-being.

There you have it, my discussion on asking for money. I still think someone should write a book on the topic, it just will not be me.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, June 18, 2018

The Taboo of Asking for Money Within a Family

In May of 2017, I noted that I had given up on writing a book on The Taboo of Money. In that post I noted I would be posting part of the second intended chapter on "Asking For Money: The Intergenerational Communication Gap". Today and next week I post an edited down version of this intended chapter.

Asking For Money: The Intergenerational Communication Gap


The Taboo!

Probably one of the most frowned upon money taboos is asking for money, whether as a loan or a gift. This can be a child asking a parent for money or surprising to some, a parent asking a child for money. This taboo can encompass everything from a child in an abusive marriage who is dependent upon the abusive spouse’s income and thus cannot leave the marriage, to a parent too proud to admit they do not have the necessary funds for retirement and are reverse mortgaging their house to survive.

Broaching the money taboo by the party in need requires a leap of faith that their family will not judge their current financial or living situation and not consider the request a money grab.

I have broken down this taboo into three categories, which will be explained in greater detail in the second post:

1. Need
2. Seed
3. Greed

Reasons for the Taboo

This taboo is all about our pride and possible embarrassment. Most of us are brought up to be self-sufficient and responsible for our own financial well-being. To ask for money is admitting we have failed at being self-sufficient, at least in the short-term. We may be embarrassed because we are asking a parent or a child for money, but in many circumstances, the issue that has caused the necessity to request money is embarrassing.

The reasons a child may ask a parent for money range from the fact they have lost their job, to they have a substance abuse or gambling problem, to they are involved in an abusive marriage, to they require money to start a business, to finally, they just want money to enjoy themselves.

A parent may need money because of poor retirement planning, physical or medical issues, elder abuse and economic situations beyond their control, such as the low interest environment we have faced for the last several years.

Some of the excuses I have heard for children not asking their parents for money include:

1. They will think me a complete failure.
2. My parents told me to get a profession as a fallback; now that my business has failed I don’t have a fallback. I will just be asking for a “told you so”.
3. My parents worked their whole life for what they have; I have no right to infringe upon their retirement earnings.
4. My parents will think I am just trying to “steal their money from them”.
5. My parent’s perception of me will be shattered.
6. The reason I need money is personal, I don’t really want to discuss it with my parents.
7. My father regaled me with stories of how he was given nothing from his parents and was self-made. He will not be able to understand that I am not from the same cut of cloth as he.

Some excuses I have heard for parents not asking their children for money (these have been few and far between):

1. I am my son’s/daughter’s role model, if I ask him/her for money he/she will think less of me.
2. I have told my children their whole life to not spend more than they earn and to save for retirement. How can I now ask them for money?
3. I can reverse mortgage my house and they will never know until I pass away that I had financial issues.
4. My children have their own job and family issues; I do not need to burden them with mine.
5. I lived through the war with very little; I can do it one more time.
6. I have lived to provide my children a better life than mine; I will not do anything that impacts that objective.

Next week I finish this discussion looking into why people may ask for money.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, June 4, 2018

BDO Canada LLP Retirement Survey Report - More Financial Survey Results

You may remember my November post highlighting the initial results of a financial survey conducted by BDO Canada LLP. These findings offered a trove of valuable information on the wealth management journey for Canadian business owners. They confirmed much of what I had been hearing in conversation with clients but also offered important new insights.

The financial survey produced such robust data that BDO created two reports. The second one — The Retirement Planning Report — is now available as a free download and reveals additional insights on how all Canadians manage their wealth and plan for retirement.

The survey that produced these two reports has strong ties to The Blunt Bean Counter. Many of you took part in this study — thank you very much for your tremendous participation and input. Some of you received a free copy of my book Let’s Get Blunt About Your Financial Affairs as a token of thanks for responding to the questionnaire. In total, almost 1000 Canadians took part in the study.

Summer beckons from just around the corner. For those taking time away from the office, the break provides a great opportunity to reflect on the big picture: how we envision retirement, how our finances align with that vision, and where family fits into the picture.

This new BDO report will help you focus on what matters to you in retirement and on your preparedness. Jonathan Townsend, the National Wealth Advisory Services leader for BDO Canada LLP, provides a synopsis of the report in his guest post below.

In conjunction with the BDO report, you may want to read, re-read or reference the six-part series I had on "How Much Money do I Need to Retire? Heck if I Know or Anyone Else Does!" The links for the blog posts are down the right-hand side of this page under the Retirement heading.

Retirement Planning Report   By Jonathan Townsend


Retirement sometimes appears to Canadians as a moving target. Like all plans for the future, it depends on variables that we can’t fully control. We do our best to cover all the circumstances, but life intervenes and renders our financial plans out-of-date.

“How much do people actually need to save?” Mark Goodfield in the report says the following: “That is the million-dollar question — with no clear-cut answer. At the end of the day, Canadians need to evaluate their individual needs with the help of a trusted advisor.”

That is why expectations play such a large role in successful retirement planning. In the 1980s, many Canadians believed their investments would support retirement at 55. Today’s pre-retirees have adjusted their retirement dates upward to fit the changing times. The average age of retirement climbed from 61 in 2005 to 63 in 2015, according to Statistics Canada.

BDO’s new Retirement Planning Report reveals valuable data on a topic that can be difficult to access: how Canadians themselves see retirement. By turning the spotlight on expectations, we can better understand the entire planning process.

Here are some key report findings that caught my attention:

  • On preparedness — About half of survey respondents have prepared a financial plan. Of those respondents with a plan, almost three-quarters had a professional advisor prepare the plan.
  • On health care — Long-term health care placed second on the list of respondents’ retirement concerns, but almost 4 of 5 of respondents have done nothing to prepare for health care costs in retirement.
  • On family — Canadians in the so-called sandwich generation raise their children while looking after their parents. Fifteen percent of respondents in our study say they are supporting their parents financially. As longevity continues to increase, Canadians may need to calibrate their retirement plans to account for both slices of bread in the family sandwich. Rob Carrick of The Globe and Mail found this topic of interest, especially the fact that 10% of Canadians support both their parents and children and discussed the study here in his Carrick on Money newsletter.
  • On pension plans — Companies have shifted more of the savings burden to employees by moving to defined contribution plans. In the longer term, more and more Canadians may have no employer-sponsored plan at all. Contract and part-time work are accounting for a larger share of the labour market.
The findings and strategies highlighted in the report provide actionable tips that you can incorporate into your own successful planning. I invite you to download the report here.

Jonathan Townsend is the National Wealth Advisory Leader at BDO Canada LLP. If you have any questions, please contact him at 519-432-5534 or jtownsend@bdo.ca.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.

Monday, May 28, 2018

Post Tax Season Assessment and Filing Issues

This year I have had multiple client queries in respect to their Notice of Assessments (“NOAs”) which reflect tax balances owing, despite the fact the taxes were paid in April. Today I discuss this matter and a couple other issues, that have arisen after April 30th.


Notice of Assessments


Typically, taxpayers file their personal tax returns, pay their tax owing (or wait for their refund), start golfing and gardening and probably don’t give much more attention to their taxes until they receive their NOA. Upon receipt, they may take a quick glance to ensure no tax is owing, maybe make note of their RRSP contribution limit and then throw the NOA into a file.

This year, many taxpayers have done a double-take when reviewing their NOA, since their assessments are reflecting tax still owing. I have had a several clients call me in a panic asking if their return was incorrectly filed since the CRA has assessed them more tax? I quickly put their minds at ease. I tell them that what has happened is the CRA is moving to “express” NOAs and has issued the notice so quickly that their system has not yet had time to match the tax payment (this applies more specifically to people who pay their balance owing at the same time or within days of  filing their return). I would bet that many of you who owed tax this year had the same issue with your NOAs.

While the NOA expediency is impressive, they are actually being issued too fast (imagine that, complaining the CRA is too fast :) and are leading to some confusion. Perhaps the CRA should consider waiting a little longer to issue NOAs, so that for those people who pay their tax owing right away, the payment can be reflected, such that the NOA will not reflect a balance outstanding, where there is in fact, no tax due.

The assessment wording has also caused some confusion for those taxpayers who have filed T1135 Foreign Income Reporting Forms. The NOA states that if you indicated you owned foreign property, you have to fill out Form T1135 and send it to them if not already done so. Several of my clients have called to ask if we forgot to send in their T1135, when in fact, the NOA is just reminding people that if they said yes, they had to file the T1135.

Alimony


I have also had a couple clients who pay alimony receive NOAs that have reduced their alimony claim. The NOA says the agreement the CRA has on hand shows they are not entitled to the alimony deduction claimed. It is a little unclear at this time whether this is just an issue where agreements have been amended to change alimony and the CRA has not been provided the new agreements, or the CRA is factoring in non-deductible child support to reduce the alimony claim. In any event, I think both the CRA and taxpayers would be best served if where an alimony claim is made that differs from the CRA records, the CRA does not issue a NOA, but sends an information request asking the taxpayer to explain the variance and support the claim. This would save a lot of time and frustration on both the taxpayer and CRA side and reduce a number of T1 Adjustment Requests and Notice of Objections.

Information Requests


Finally, just a reminder: if you receive an information request to provide the CRA back-up for any expense or claim you made on your return, you typically have 30 days to respond. Either do so within the 30 day time period, or request an extension far in advance. Do not ignore the information request or your return will be assessed without the deduction or expense.

Hopefully you had a refund in 2017 and have not had to deal with any of the above concerns.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.