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.

Monday, April 1, 2013

Confessions of a Tax Accountant -2013- Week 1

In March of 2011, a rare idea pulsed through my brain - the brainwave? To create a series of posts called Confessions of a Tax Accountant, which would highlight contentious and/or interesting personal income tax issues that arise in my practice during income tax season. Now in my third year of confessions, I must confess, I have little to confess to. I have received so few income tax returns to date, that I have little to discuss. Ironically, the lack of returns provides one of my topics for today. Another is actually somewhat of an unusual issue, yet it is an issue everyone will most likely encounter at least once in their lifetime and has already arisen twice this year. The third issue is essentially a warning I have shared numerous times in this blog, but I think it worth repeating.

Tax Slip Deadlines

 

As of today, I have received 34% of the tax returns I will file this tax season, of which 11% came in the last 3 days and have not even been started. My reality is I still have to file 85-90% of my most complicated returns in the next 4 weeks. This year we are experimenting with using a portal for personal tax clients; while this makes things easier and quicker for our clients, we have had to develop and learn a whole new process. I know, you are thinking: Mark, stop whining, it's just April 1st. However, I am making these comments in the context of why have the CRA and professional accounting bodies not addressed the annual tax filing crunch?

Although many people do not gather their tax information until after the Easter weekend (no matter the date), many others cannot finish compiling their tax information as they are still waiting for their T3's for their mutual funds and income trusts and their T5013's if they have partnership income. Many of these forms have just arrived or are still in the mail.

The preparation of T3's and T5013's are often dependent upon the receipt of T5 information (February 28th deadline) before they can be completed. So I ask, why not simply move the T4 and T5 filing deadlines to Feb 15th and the T3 and T5013's to a March 15th deadline? I would suggest 80-90% of the T5's issued are from financial institutions that just need to press a button and the T5 is ready for mailing. Even if I am oversimplifying the process, a February 15th deadline is very reasonable. Just saying, this crunch could easily be eliminated to accommodate taxpayers who wish to file early and at the same time, help ensure their accountants are alive and healthy to pay taxes to the CRA. A win-win for everyone. I guess it makes too much sense.

CPP Death Benefits

 

When someone passes away, their estate can apply for a CPP death benefit. The benefit is paid as a lump sum and can be as high as $2,500. This benefit is paid to the estate. Twice this year I have been asked whether the estate or beneficiary reports this income. It is actually a very good question.

The CRA states on this information page that, "If you received this amount and you are a beneficiary of the deceased person's estate, you can choose to include it on line 114 of your own return or on a T3 Trust Income Tax and Information Return for the estate. Do not report it on the deceased person's individual return. The taxes payable may be different, depending on which return you use."

Where an estate will be required to file a T3 return because it has various assets to distribute and will have income, in almost all cases it will make sense to include the death benefit on the T3 return, as a testamentary trust is taxed at marginal income tax rates (at least until the government changes this as per last weeks budget proposals). But if the deceased had few assets and/or the assets were in joint ownership and there will be no need to file an estate return, the beneficiary and executors have to determine if the hassle of filing a T3 return is worth the income tax savings of filing a T3 trust return. The answer in most cases is yes.

20% Penalty

 

I have written several blog posts about how if a taxpayer fails to report income twice within a four-year period then he/she will be subject to a 20% penalty on the income not reported.  I thus urge you to double check that you have received all your income tax slips. If you receive a slip after you file your return, file a T1 adjustment even if the amount is very small. If you ignore that slip and miss a large slip in the subsequent three years, you will incur the penalty.

BBC Tweet of the Week


I tweeted this after last week's budget.

Friday Funny - Latest CRA Job Listing: International Tax Snitch. No experience required. Pays up to 15% of tax collected on liabilities>$100k :)

Thanks to my Readers


Last month my blog had 28,700 page views and almost exactly 15,000 unique views. Considering I typically post once a week, I am quite pleased with the growth in readership of my blog and wanted to take the time to thank you for reading my posts and sharing them with others. 

Comments During April


During April, I will only be answering questions submitted in the comments section of my current blog posts. Questions related to any prior blog posts will have to be answered in May. Sorry, but as discussed above, I just don’t have much time in April.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

5 comments:

  1. I'm enjoying the blog. I agree with your suggestion about moving the date up on the T slips...I have a fairly large refund due this year so I was motivated to complete my return early but I was handcuffed waiting for a T-5...which finally came last week. Looking forward to my refund so I can pay my March Break bills!!

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    1. Chuck, great minds think alike :) Seriously, T-slip system needs to be re-jigged IMHO

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  2. I have a couple of questions about an estate problem we're having. Each of the children (per stirpes) receives a (very)small distribution from a family oil and gas trust. My sister passed away in 2012 and I believe she wanted her portion to go to her daughter, who is age 11, but I don't know if there is anything in a will to verify this wish.
    The cheques are so small this year that the executors won't bother to distribute or issue T3s, but they will combine the payment with the 2013 amounts owed next year. The recipients will nevertheless report the income not received on their 2012 taxes.
    Questions: Can the 11-year old receive a trust payout, or does it need to be held in trust by someone until she's 18?
    Does she have to file a tax return to indicate that she's received the funds?
    Does the per stirpes legacy continue to the daughter with or without a will?
    I love your blog, thanks for taking the time to educate us!

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    Replies
    1. Please be advised that due to income tax season time constraints, I will not answer any questions until May that do not relate to the current weeks blog. Thx for your understanding.

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  3. BBC Tweeted so interesting text. I like that!

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