Taxation has always been crucial for any business. With the changing laws and the General Anti-Avoidance Rule (GAAR), it has become imperative for Canadian tax lawyers to draw a clear line of demarcation between effective tax planning and tax avoidance. With the demarcation line being very narrow and dull, the probability of taxpayers getting stuck with the Canada Revenue Agency (CRA) is very high despite their compliance with the letter of the law. The most critical portion of the law where a vast majority fails to comprehend is tax avoidance. With no intent to violate the Canadian Income Tax Act, the violation of the spirit or intent of Act occurs when the taxpayer gets stuck in focusing only on the literal interpretation of tax law.Barrett Tax Law Toronto offers exclusive taxation help.
Knowing the key GAAR terms
The easy and safe way to skip this hassle of violation is by seeking support from Canadian tax law firm instead of struggling to handle things individually. Since GAAR applies to a series of transactions including the avoidance transaction, one should start with the basic knowledge of the key GAAR terms. They are “tax benefit”, “tax consequences” and “transaction” and are defined in subsection 245(1). But these terms are very broad and hence it exposes many transactions to scrutiny under GAAR making it an immensely powerful CRA Audit tool.
The Burden of Proof for Tax Litigation
Whether you have made the violation intentionally or it was an outcome of obeying the literal interpretation of tax law, it is the responsibility of the Canadian tax law lawyer to represent your case in the Tax Court with evidence sufficient to challenge the CRA’s factual assumptions. Visit Yelp for more information.
Common yet expensive mistakes for taxpayers:
Let’s peek into common yet expensive mistakes which most individual taxpayers make.
- Paying the taxes yourself is not that simple and easy since Income Tax is a game with complex rules. When we are attempting to save few pennies by handling the tax matters ourselves, the Canadian Tax Court sees it as stealing money with any violation happening. Thus it is best to view the Canadian tax lawyer service as an asset and not as an expense.
- Line 104 is often misused by people to avoid paying the CPP or EI premiums. In such cases, the CRA will issue a letter asking for explanation from you. Since it becomes challenging to handle the cases after they have been caught by the CRA, it is best to seek the counsel from the tax lawyer before entering income into this line. At Factual, you can get more information.
- Childcare expenses make yet another common mistake since one tends to save on taxes by paying the parents for babysitting. This holds more significance in case of new immigrants like grandparents who have no direct income and hence any money reflected in their hands in the account books will not be taxed.
- Business expenses may be big or small but a rounding up of numbers is seemingly an open invitation to the CRA auditor. Hence it is wise to break expenses down into multiple categories instead of a placing a big number on any particular line.
Use the above Quick Tips to stop risking yourself whilst playing the Tax Game.