Stress Testing your Spouse's Financial Readiness if you were to Die Suddenly

I have written about several morbid estate planning topics on my blog. However, I think today’s post easily ranks as #1 on the morbidity scale.

I will have the impertinence to suggest that you should stress test how financially and organizationally ready your spouse would be should you die suddenly, or vice versa. Essentially I am telling you to take a financial and organizational walk through your death.

As I don’t want to be known as Morbid Mark, I am going to provide a side benefit of undertaking this morbid task. Girls, instead of the usual headache excuse, tell your guy sure, but first lets stress test your death. I guarantee you will have the night off. Guys, if your wife is taking you to the ballet, just before you are about to leave, tell her you just want to financially stress test her death and I don’t think you will have to attend the Nutcracker.

Seriously though, even with today’s modern families, where both spouses often have some level of financial acumen, most families really give little thought to what would happen if god-forbid one of them passed away unexpectedly.

It is important to understand that this post is not intended for older readers, but to anyone married or in a common law relationship, no matter their age. A 40 year old can get hit by a car anytime, just as much as an elderly person can pass away due to old age. The idea for this blog came about because I realized if I passed away suddenly, I had only partially provided my wife a financial road map or our assets, insurance polices etc. Why I am even cognizant of such a morbid concern is that my father passed away suddenly 25 years ago and if I was not an accountant, my mother would have been overwhelmed trying to find insurance polices, bank accounts and various other investments at a time of intense grief and shock.

Many of the comments I make below were discussed in Roma Luciw's Globe and Mail article Why you should stress-test your finances for a sudden death, so I apologize for any duplication if you read that article, but there are additional links below.

Some of the issues that need to be stress-tested:

1. If you have pre-paid your funeral or have certain wishes, ensure your spouse is aware of where this information is located.
2. Does your spouse know where to find a copy of and/or the lawyer who drafted your will? More importantly, is your will up-to-date? If you own your own company, do you have two wills?
3. Do you have a folder for all your insurance policies? Does your spouse know where it’s located? While in good health, you should prepare a summary of all insurance policies you have on an excel spreadsheet; list the policy number, the insurance company, the type of insurance as well as the value of the insurance and staple it to the front of your insurance folder. You may also want to create a special password protected file (let’s call it the “Information Folder” for lack of a better name) on your spouse’s computer that contains this summary information.
4. Do you have a list of the assets you own and where they are located? As I discussed in my blog Where are the Assets, you should complete and update yearly a basic information checklist. Again, I suggest a PDF placed in your Information Folder.
5. As I discussed in this blog on Memory Overload, the use of multiple passwords is so prevalent that you should consider making a list of your key passwords for your spouse, that again is either put into the Information Folder or another more secure location. The objective of this exercise is to ensure your spouse will not be locked out of your various financial accounts because he/she does not know the passwords.
6. Do you have a contact list for your spouse with the phone numbers and contact information of your accountant, lawyer and financial advisor? Again, consider creating a PDF and putting it in the Information File.
7. Consider any accounts, safety deposit boxes, etc. your spouse may not be aware of. There are various reasons one spouse does not make another spouse aware of these items. However, the reason for their existence is not relevant here, what is important is that you somehow ensure that someone will become aware of the existence of these accounts or safety deposit boxes if you die. 

The above list is far from comprehensive. However, the intention of this blog was not completeness, but to get you to take a step back and consider the unthinkable and whether or not you have prepared the proper trail to allow your grieving spouse to move forward financially with the least amount of stress. I know this is morbid and people tend to procrastinate or ignore anything related to death, but look at this as selfless instead of morbid and maybe you will be moved to act.

Sheldon from The Big Bang Theory at the Emmys

After the above post, I thought I would lighten the mood. I tweeted this a couple weeks ago, but if you have not viewed this clip, it is very funny as Sheldon Cooper at the Emmy's gives some love to accountants.

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.

Punitive Income Tax Provisions

The Income Tax Act ("Act") contains numerous punitive provisions that can catch taxpayers off-guard. Today I will review some of those provisions.

Late Filed Income Tax Returns

Many taxpayers who cannot afford to pay their income liability on April 30th or June 15th (if you are self-employed) do not file their income tax returns on time. That is the worst possible decision. The Canada Revenue Agency ("CRA") imposes a late-filing penalty of 5% of the balance owing for late filed returns and then tacks on an extra 1% a month for each full month your return is late to a maximum of 12 months. For those mathematically challenged, that is a potential  17% penalty for simply not mailing in your income tax return by the deadline. If you file on time, you will owe interest, a small cost to avoid the penalty.

If you have incurred a late-filing penalty in either of the three preceding taxation years, your late filing penalties are doubled and apply for up to 20 months for a maximum penalty of 50%. Yes, fifty percent, that is not a typo. You may be able to apply for Taxpayer Relief ("Fairness") on your penalty; however any reduction in the penalty relies upon the discretion of the fairness committee. My advice, always file on time even if you cannot afford to pay your tax liability.

Interest on Taxes Owing and Refunds

As noted above, you can easily avoid a late-filing penalty by just filing on time. Unfortunately, you cannot avoid interest on  taxes owing. Interest compounds daily at the prescribed rate on any balance of tax owing after April 30th, currently at 5% as per this CRA schedule of interest rates.

Some may find this hard to believe, but as per the above schedule of prescribed rates, the CRA only pays taxpayers filing personal income tax returns 3% on overpayments and refunds, yet charges 5% on deficient payments. Go figure.

Instalments

Per this CRA instalment guide the CRA will charge interest at the prescribed rate of 5% if you did not make instalment payments or made payments that were less than the required amounts.

You may also have to pay a penalty if your instalment payments are late or less than the required amount. The penalty only applies if your instalment interest charges are greater than $1,000. The penalty is calculated as follows:

The higher of:

■ $1,000; or
■ one-quarter of the instalment interest that you would have had to pay if you
had not made instalment payments for 2012.

The CRA then subtracts the higher amount from your actual instalment interest charges for 2012 and finally, they divide the difference by two and the result is your penalty. Since no one can follow that calculation, the CRA provides the following example:

Example

For 2012, John made instalment payments that were less than he should have
paid. As a result, he has $2,500 of actual instalment interest charges for 2012. If
John had not made any instalment payments in 2012, his instalment interest
charges would have been $3,200. Since one-quarter of $3,200 is $800, we
subtract $1,000 (the higher amount) from $2,500. The difference is $1,500. Then,
we divide $1,500 by two. John’s penalty would be $750.

There you go, clear as mud. Just pay your instalments on time, since your accountant has no clue if the instalment penalty is calculated correct or not :)

Penalty for Unreported Income (missed tax slips)

Under Subsection 163(1) of the Act, where a taxpayer has failed to report income twice within a four-year period, she/he will be subject to a 20% penalty of the amount you failed to report the second time. It is important to note that the amount of income that was unreported the first time is not relevant in the calculation. If you failed to report $100 the first time and $10,000 the second time, the penalty will be $2,000, a somewhat ludicrous result considering if the slips were missed in the reverse order the penalty would only be $20. In addition, the reality of the situation is that it is very easy for a T3/T4/T5 slip to be misplaced or lost in the mail.

I find this penalty insidious and have previously written on this issue in a couple different blogs.

T1135 penalty

Where you hold certain types of foreign property with a cost over $100,000, you must file the required T1135 Foreign Reporting Form. Where the form is not filed as required, the CRA can levy a penalty equal to $25 a day to a maximum of $2,500. The quantum of this penalty is just unconscionable where the income has been reported, but the form not filed. I can understand this penalty where the income has not been reported, however, where the income is reported, how can a penalty of such magnitude be charged?

Wow, that's all I can say when I read back my post and digest the various punitive provisions. While these provisions are necessary to ensure compliance with the Act, the quantum of many of these penalties is just obscene.

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.

Update on IRS Amnesty Provisions for U.S. Citizens Living in Canada

On June 27th, I wrote about the proposed Internal Revenue Service ("IRS") amnesty procedures for United States ("U.S.") citizens living in Canada, who have not previously complied with their U.S. income tax filing requirements and are considered "low compliance risk". Today I will provide an update of the amnesty procedures.

To briefly review, in contrast to Canada, the U.S. imposes a requirement to file income tax returns and information returns based on citizenship rather than residency. This requirement has caught many U.S. citizens living abroad (especially Canada) off guard who believed that their U.S. tax filing obligations would cease once they departed. In the past, the penalties associated with catching up on late filings were very severe despite the fact many filers would owe little to no tax; therefore, many individuals were deterred from filing.  

On August 31st, the IRS announced a new streamlined filing program to allow qualifying U.S. citizens living abroad to catch up on outstanding U.S. tax returns and related information returns without penalties being imposed. Under this new program, which came into effect on September 1, 2012, individuals who qualify must:

1. File tax returns for the 2009, 2010, and 2011 and pay any balances owing plus arrears interest. Each return must show no more than $1,500 of taxes owing.
2. File Foreign Bank Account Reporting (“FBAR”) forms for the six previous years (a separate disclosure form to be filed if the balance of all the non-U.S. bank and investments accounts is more than $10,000 at any time during the year).
3. Complete an IRS questionnaire that will be used to assess your “compliance risk”.

In order to qualify for the streamlined filing program, affected U.S. citizens (including dual-citizens) must have been living abroad since January 1, 2009, have not filed U.S. tax returns for 2009, 2010, and 2011 and are considered low-risk based on the completed questionnaire in #3 above. The IRS will look at the following non-exhaustive list of factors to determine if an individual is considered low- or high-risk:

· If any of the filed tax returns claims a refund.

· If there is any significant economic activity in the U.S and/or has U.S.-based income.

· If the taxpayer reported all their income in Canada.

· If the U.S. citizen is under audit or investigation by the IRS.

· If FBAR filing penalties have been previously assessed or if a warning letter was issued.

· If the U.S. citizen has bank accounts or investments outside his/her home country.

· If there are indications of sophisticated tax planning or avoidance.

The compliance risk is an estimate by the IRS of an individual’s risk that there may be additional taxes owing and/or disclosures required that may not have been captured based on the required filings above in #1 and #2.

Individuals identified as high-risk will not be eligible for the streamlined filing procedures. They will likely be subject to a more detailed follow-up from the IRS and may be asked to file returns for earlier years. In this situation, the IRS does have the ability to impose penalties and even pursue criminal prosecution if the high-risk individual’s package is not accepted.

A benefit of this streamlined program is that U.S. citizens in Canada with Canadian RRSP and RRIF accounts will be able to file the appropriate forms to elect to defer the income in the event that these forms were not filed on time in the past. Canadian registered accounts that allow the deferral of income are not treated the same way by the IRS.

For U.S. citizens, it is about time the IRS put in place a well-publicized and documented tax amnesty program, under which U.S. citizens are not treated like Al Capone. The program should be effective for the vast majority of Americans living in Canada, although, the arbitrary nature of the risk assessment will leave some U.S. citizens wanting. The cost of preparing the required U.S. tax returns and FBAR forms will be expensive, but the potential of avoiding thousands of dollars of penalties still makes this streamlined filing program very attractive for U.S. citizens that want to come clean with the IRS.

Bloggers Note: I am posting this blog to update U.S. citizens living in Canada. I am not a U.S. income tax expert and may not be able to answer many questions you may have on the amnesty.  

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.

I am all A-Twitter

I have embraced social media and social networking through The Blunt Bean Counter blog and LinkedIn respectively. Twitter is another story. I found Twitter to contain a lot of drivel. However, I am now beginning to grasp the benefits of Twitter where it can be used as an information network to support and help me share my income tax, estate planning and business expertise. Thus, last week (with a little arm twisting), I started to tweet relevant income tax and other professionally related articles that may interest you, my readers.

If you want to follow me, my twitter handle is @Bluntbeancountr (yes, no E in Countr, Twitter restricts the letter count). I am also told my hashtag is #bluntbc, which is pretty cool. If you want to communicate with/about me on Twitter, I’ll be keeping an eye out for that hashtag.

If you decide to follow me, don’t worry; I will not be tweeting details of the sauce on my pasta, or how bad the Leafs are (hmmm, I may recount that one) but information relating to my business expertise.

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.

Debt - An Ugly Four Letter Word

Personal debt in Canada has reached its highest level in history. As reported by Statscan, the ratio of debt to personal disposable income (all your debt divided by your annual after tax income) hit a high of 154.34 per cent for the first quarter of 2012, up from 149.22 per cent for the first quarter of 2011. This extreme level of debt is a result of an extended period of historically low interest rates, a sluggish economy and, to some extent, an “I see it, I want it, even if I can’t afford it” attitude amongst many people.

No matter the reason, if you have debt, you need to step-back and determine if you can organize and consolidate your debt and/or make your debt income tax effective. The comments I offer below are mostly organizational in nature and are not intended to help those with serious debt issues. If you are overwhelmed by debt, I strongly suggest you consider engaging a professional debt counsellor who will not only try and help reduce your debt, but will try and address the personal habits that often create or accentuate debt problems.

Organize and Consolidate

A good first step to managing your debt obligations is to summarize your debt. Create an excel spreadsheet and list all the debt you have down the left hand side of the spreadsheet. This will include your mortgage, any lines of credit, all credit cards and any other debt you may have accumulated along the way.

Then, across the top of your excel schedule, have the following columns:

Name of creditor - company or individual to whom you owe your debt
Amount of debt outstanding
Credit limit related to the debt
Interest rate or where floating, terms of debt (i.e. Prime +)
Terms of repayment and date due
Pre-payments - Where term is fixed, what is the maximum pre-payments allowed
Penalties- Are there any penalties for paying off debt early
Deductibility - Is the debt deductible for income tax purposes (see discussion below)
Notes - This will be a catch all for any information not noted in the other columns and for notes on whether debt is connected to other debt or assets (e.g. is your interest rate lower because you have a mortgage, line of credit and investment account with an institution or is the debt or debt rate contingent on any other factor).

Finally, lower on the page, below the debt summary, create a new heading called assets. List all your assets including your house, non-registered accounts, registered accounts, rental properties, TFSA, etc. Create three columns across the top; value of asset, debt related to asset and tax deductibility (in general if the asset is an income producing non-registered asset, any associated debt will be deductible).

As basic as the above sounds, sometimes having everything written down and organized allows you to gain some perspective and take a 10,000 foot view.

Once you have completed the above task, review the interest rate column to determine which debt has the highest interest rates. In most cases, this will be your credit card debt. You should then review whether you have the capacity to use a line of credit or other debt instrument with a lower interest rate to pay off your credit cards and effectively lower your rate of borrowing.

If you have debt at various institutions, ask your main institution for a lower rate on the total debt if you consolidate the debt at that institution.

Tax Deductibility

Finally, you should review whether you have any assets denoted as tax deductible, for which you have no related debt. For most people, those assets would include shares of your own business, non-registered investment accounts that hold stocks, bonds, ETF’s etc. and rental properties. There may be other assets; however, these are the most typical. If you have any of these type assets and they are not encumbered by debt, you may be able to make some of your debt deductible for income tax purposes. Typically, this involves circulating monies; you liquidate interest deductible assets for which there is no related debt (taking care to ensure you are not creating any capital gains) pay off the non-deductible debt and then borrow to replace the original investment assets, making the interest expense deductible. Before undertaking such a transaction, professional advice should be sought.

There is no panacea for eliminating debt. However, at a minimum, you will want to undertake the various steps and review processes noted above, to start consolidating and reducing your debt as well as ensuring your debt is income tax effective to the greatest extent.

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.

Holy Hotchpot—Equalizing Uneven Advances to Children in your Will

Many parents stress unnecessarily, over how thy will equalize their wills, where they have made unequal gifts to their children during their lifetime. Don't fret; today I will discuss a simple "hotchpot clause" that can alleviate your concerns.

Families with the financial wherewithal often advance funds to their “financially dependent” children to fund their living expenses or help with the purchase of a house, to the exclusion of their financially "independent children". In many cases, parents assisting financially dependent children, have the expectation that when they pass away, the funds they have advanced during their lifetime to financially dependent children will be considered advanced on account of those children’s inheritances, not separate gifts above and beyond their inheritances.

I have clearly stated in two of my most read blogs, “Is it Morbid or Realistic to Plan for an Inheritance?” and “A Family Vacation – A Memory worth not Dying for" that where parents have the financial means, it is my opinion that they should consider making partial advances on account of an inheritance while alive. Some readers have stated that they do not agree with my views. However, for today, let’s suspend the debate on whether parents should or should not provide partial advances to their children and assume a situation where a parent has made unequal advances to their children during their lifetime and they want to equalize these advances in their will.

Over the years, a legal concept now commonly known as a “hotchpot clause” has evolved to deal with the equalization of the beneficiaries of an estate, where one or more of the beneficiaries have already received money during their parent’s lifetime. When a hotchpot clause is inserted in a will, the clause will prevent a beneficiary (typically a son or daughter) from “double dipping” where the parent intended any money advanced during their lifetime to be considered a pre-payment of an inheritance, rather than an advance over and above an intended inheritance.

This concept is best illustrated by an example.

Richie and Betty Rich have three children; RJ, Archie and Veronica. Richie and Betty have an estate of $1,000,000. Their son RJ runs a successful comic book store and makes a good living, but is by no means wealthy. Archie, the youngest, suffers from an entitlement issue and has never finished school nor held a full-time job. However, he has always been the apple of Betty’s eye and can do no wrong in his mothers' eyes. Veronica gave up a promising blogging career when she married, but unfortunately her marriage fell apart and her husband left her with two young children.

Over the past few years, Betty has advanced Archie over $100,000 to fund his snowboarding lifestyle. Furthermore, Richie and Betty both have felt the need to advance $200,000 to Veronica to fund the private school education of her children.

It is Richie and Betty’s intention to have their $1,000,000 estate split equally when they pass away, however, they want the funds previously advanced to Archie and Veronica to be accounted for, such that RJ gets 1/3 of their estate, including amounts previously advanced to Archie and Veronica.

If Richie and Betty were to die in a car accident today, their current will stipulates that their estate is to split equally amongst RJ, Archie and Veronica, such that each child would be entitled to $333,333 each ($1,000,000/3), which is not the intention of Richie and Betty.

However, if Richie and Betty had met with their lawyer before they died in the car accident, their lawyer could have inserted a hotchpot clause, such that their estate would be considered to have been $1,300,000 ($1,000,000 plus $100,000 advanced to Archie and $200,000 advanced to Veronica). Thus, when the estate was settled, RJ would receive $433,333 ($1,300,000/3), Archie would receive $333,333 ($433,333-$100,000) and Veronica would receive $233,333 ($433,333-$200,000).

To view an example of what a hotchpot clause may look like, please follow this link. A word of caution; you should always engage a lawyer to draft the clause, as a hotchpot clause must mesh with the rest of your will. 

“From the basis of equitable treatment between beneficiaries, a hotchpot clause is a useful tool” comments Albert Luk, a lawyer at Devry Smith Frank LLP and past contributor to my blog. “However, one must always be aware that a hotchpot clause requires evidence of provable advances to the beneficiaries. Bad (or no) book-keeping may render a hotchpot clause ineffective. The key is to keep good records.”

There is obviously no requirement for parents to be equal and fair to their beneficiaries. However, where parents intend to split their estate equally amongst their children/beneficiaries and yet, have made loans, advanced funds for house down payments or just advanced funds to their children in unequal amounts while alive, their estate planning must include the consideration of those gifts and loans (with proper evidence as noted by Albert Luk above) and they should ensure their lawyer has drafted a hotchpot clause.

Bloggers Note: If you are interested in delving deeper into this topic, Corina Weigl of Fasken Martineau DuMoulin LLP wrote a great paper on this topic in 2001.

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.

Should the CRA Reward Tax Snitches?

John Greenwood of the National Post recently wrote a two-part series contrasting how the Internal Revenue Service (“IRS”) and the Canada Revenue Agency (“CRA”) deal with income tax evaders and cheaters. In my opinion, the CRA should implement a "whistleblower program" similar to that of the IRS.

In Mr. Greenwood's first article titled, “UBS Whistleblower gets $US104-million award from the IRS”  he details the astronomical $104,000,000 settlement paid by the IRS to UBS whistleblower Brad Birkenfeld; whose detailed information provided the IRS with enough ammunition to cause UBS of Switzerland to pay the IRS a $780,000,000 cash settlement and to hand over details on thousands of U.S. citizens holding offshore bank accounts. As the Swiss have always protected their banking secrecy (bankers can be criminally charged for revealing a client’s identity), one can only imagine the devastating information Mr. Birkenfeld (who was sentenced to 40 months in prison and was only recently released) provided the IRS to cause the Swiss to breach their historical secrecy.

Mr. Greenwood in his article also discusses how the IRS uses financial rewards to catch tax evaders (the reward can be as high as 30% of the income tax collected) and then uses that information to prosecute and/or go after the tax evaders. In comparison, the CRA provides no financial incentive to step forward, and in some cases punishes the whistleblowers. Critics of the CRA suggest the agency rarely pursues tax fraud even when provided with detailed information and names.

In Mr. Greenwood’s second article,  he alleges that Mr. Birkenfeld provided the CRA with copious notes, even though Mr. Birkenfeld had no incentive to do so. When asked what it had done with this information, a spokesman for the CRA states "the agency does not comment on specific cases, and nor does it discuss investigations it may be conducting". However, it appears the CRA has yet to prosecute anyone criminally.

I suggested in one of my most popular blog posts titled Will I be Selected for a CRA Audit, that “there is nothing worse than a scorned lover, a business partner you have had a falling out with or a dismissed employee to trigger a CRA audit.” However, the aforementioned whistleblowers are typically snitching about “small potato” tax evaders and in some cases, they may be more concerned with being vindictive than in providing honest information. So how can the CRA find multi-million dollar business evaders?

Mr. Greenwood suggests that “the best way to infiltrate the greed business, is by greed itself” and by offering whistleblowers financial incentive to turn in their colleagues and clients.

The CRA would argue otherwise and states that 611 Canadian taxpayers have come forward under the voluntary disclosure program and declared income relating to offshore UBS accounts and that 531 of these cases have been processed revealing $109 million of unreported income.

Personally, I think Mr. Greenwood and the IRS have it right; financial reward trumps loyalty or morality. The only reason the CRA has 611 voluntary disclosures is because the IRS broke down the Swiss secrecy wall and this caused Canadians with Swiss bank accounts to become concerned that their information was not safe with the Swiss.

So, what type of person would snitch out a “tax evader” given that many people seem to condone tax cheating or evasion as a national pastime in both the U.S and Canada?

In this CNN Money article, titled Rat out a tax cheat, collect a reward, Tim Gagnon, an academic specialist of accounting at Northeastern University, suggests that “the most common informants tend to be dissatisfied middle-ranking employees in big companies”. Gagnon states that "I think it happens more in middle management than upper management, they're workers in the middle ranks who feel frustrated about what's going on and are not advancing or don't think they have a shot of moving up, because otherwise, it's hard to break loyalty."

Based on the discussion above, we know vindictive ex-spouses, former business partners and middle management employees fit the whistleblower profile, but how about my own kind, accountants?

Accountants know the most intimate financial details of their clients and even where their clients have hidden the details of an offshore account from their accountant; their accountant may have a sixth-sense and suspect possible evasion.

It is interesting to note that the first person to make a claim under the whistleblower program was an accountant in public industry, as detailed in this article. In this case, the accountant tipped off the IRS about a tax lapse his employer ignored and he received a $4.5million award.

The in-house accountant's tip netted the IRS $20million in taxes and interest from the company. The IRS paid the tipster, $3.24million, net of 28% for tax purposes. Nothing like giving a reward and then taxing back 28%.

Buy the way, if you ever get such a reward, you report the income on line 136 of your income tax return under "snitch income" and report the expenses relating to personal protection under line 236, under "bodyguards".

So, should the CRA go to a whistleblower program? Would you turn in your employer or client if you could receive 15-30% of the evaded taxes?

As a tax accountant, I have no issue in assisting people minimize their income taxes in a legal manner. However, I feel all Canadians should pay their fair (even if minimized) share of income taxes and I cannot condone tax evasion. That being said, I would have a hard-time becoming a whistleblower if I found out a client was evading income tax. I would feel that I was breaching the confidentiality of my relationship with the client and I would probably just fire the client. Nevertheless, whistleblower legislation of any kind would surely change the accountant/client dynamic.

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.