Chapter 2

Procedures And
Administration

© 2007, Clarence Byrd Inc. 1

Source Deductions
 Salaries And Wages
 Major payment form for
many individuals
 Can request increase in
amounts.
 Other
 Retiring Allowances
 Death Benefits
 Withdrawals from
RRSPs
 Payments from RESPs

© 2007, Clarence Byrd Inc. 2

Source Deductions
 Amounts
 Quarterly Remitters – Less than $1,000 per
month.
 Regular Remitters: $1,000 - $15,000 per month.
 Accelerated Threshold 1: $15,000 - $49,999 per
month.
 Accelerated Threshold 2: $50,000 + per month.

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Returns And Payments
Individuals (T1)

 Filing The T1
 When Required
 Taxes Payable
 Capital Gain
 Disposition Of Capital
Property
 Positive HBP Or LLP
Balance

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Electronic Filing
 EFILE
 NET FILE
 TELEFILE

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Returns And Payments
Individuals (T1)
 Filing Date

 April 30 Of Following Year

 June 15 Of Following Year (Business Income)

 6 Months After Date Of Death (After October,

Before May)

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Instalments
Individuals
 Timing:
 March 15
 June 15

 September 15

 December 15

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Instalments
Individuals
 When Required – ITA 156.1(2)
 Net Tax Owing
(Federal + Provincial - Withheld)
 Instalment Threshold ($3,000)
 Instalments Not Required
net tax owing for the particular year, or for each
of the two preceding years, does not exceed the
individual’s instalment threshold.

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Instalments
Individuals
 Instalment Amounts
 Estimate For Current Year
 Actual For Preceding Year
 Combination:
 1 & 2 - 2nd Preceding Year
 3 & 4 – 50% (Preceding Year - Payments 1 & 2)

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Late Instalments
 Interest  Penalties
 Prescribed Rate  Only On Very Large
Amounts
 Amounts From  ITA 163.1
Government (+ 2%)  Should You Pay
Instalments?
 Amounts To
Government (+ 4%)

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Late Filing
 Interest  Penalty
 Prescribed Rate + 4%  1st Offence:
5% + 1% Per Month
 Only On Taxes
Payable  2nd Offence:
10% + 2% Per Month

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Returns And Payments
Corporations (T2)
 When T2 Required
 Always
 Filing Dates
 6 Months After Year
End
 Final Payment
 CCPC: 3 Months
 Other: 2 Months

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Instalments
Example Corporation with:
- 2005 Taxes Payable of $60,000,
- 2006 Taxes Payable of $90,000, and
- estimated 2007 Taxes Payable of $120,000.

1. $120,000/12 $10,000/Month

2. $90,000/12 $7,500/Month

3. 1 & 2: $60,000/12 $5,000/Month

3 - 12: ($90,000 - $10,000)/10 $8,000/Month

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Corporate Interest And Penalties
 In General: Same as for
individuals
Should The
 Further penalty for large Corporation Pay?
corporations

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Returns And Payments
Trusts (T3)
 Filing
 90 Days After Year End
 Instalments
 Testamentary
 Inter Vivos

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Reporting Foreign Assets
 Types of assets  Penalty - $500 per
 Bank accounts month for failure to file
 Shares of non-resident  Penalty – 5% of cost
corporations
of unreported property
 Foreign real property
 Other

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Interest On Refunds
 Individuals – Later of 30 days
after return is filed and the
balance due date (April 30)

 Corporations – Later of 120

days after corporation year
end and 30 days after return is filed

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Other Considerations
 Information Returns
 T3 – Trust Income Allocation
 T4 – Employment Income
 T5 – Investment Income
 T4RSP – RRSP Contributions
 Books And Records
 General Rule: 6 years

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Assessment And Reassessment
 Initial Assessment
 Individuals
 Corporations

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Assessment And Reassessment
 Reassessment
 Normal Period
 3 Years
 4 Years - Corporations (Not
CCPCs)
 Fraud
 Signing A Waiver
 6 Year Extended

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Settling Disputes
 T1-Adj
 Notice Of Objection
 90 Days From Mailing
Of Assessment
 1 Year From Due Date
Of Return (Individuals
And Testamentary
Trusts)

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Settling Disputes

 Tax Court Of Canada

 Informal Procedure (Tax < $12,000, Loss < $24,000)
 No Lawyers
 No Appeal
 No Precedent
 General Procedure

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Settling Disputes

 Federal Court Of Appeals

 Supreme Court

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GAAR
 The Background
 Stubart And The Business Purpose Test
 ITA 245(2) to 245(5)

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GAAR
 Meaning Of GAAR
 that, but for this section, would result, directly or indirectly,
in a tax benefit, unless the transaction may reasonably be
considered to have been undertaken or arranged primarily
for bona fide purposes other than to obtain the tax benefit;
or
 that is part of a series of transactions, which series, but for
this section, would result, directly or indirectly, in a tax
benefit, unless the transaction may reasonably be
considered to have been undertaken or arranged primarily
for bona fide purposes other than to obtain the tax benefit

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GAAR
 IC 88-2 Excludes
 Transfers In Consolidated Groups
 Estate Freezes

 IC 88-2 Includes
 Conversion Of Salary To Capital Gain

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Penalties
 Taxpayer Property
 Entering
 Seizure – Books And
Records
 Collection
Procedures
 Informal
 Garnishment
 Seizure – Taxpayer
Property

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Penalties
 Examples

 Information Return ($25/day)

 Partnership Information Return ($25/day)
 False Statements/Omissions (50% of tax)
 Failure To Withhold (10%)
 Evasion (50% to 200% of tax)

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Penalties
 Tax Preparers And Promoters
 Applicability
 Culpable Conduct
 Intentional
 Indifference To Compliance With Act
 Willful Disregard Of Law
 Excluded Activity
 Promoting Avoidance Arrangements
 Accepting Consideration For Such Arrangements

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Penalties
 Tax Preparers And Promoters
 Penalties
 Gross Entitlements From
Planning Or Valuation Activity
 50% Of Tax Payable –
Capped At $100,000

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Fairness Package
 Late, Amended
Or Revoked
Elections
 ITA 73
 13 Others

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Fairness Package
 Cancellation Or Waiver
Of Interest Or
Penalties
 Disasters
 Illness Or Accident
 Emotional Or Mental
Distress
 Department Errors

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Fairness Package
 Refunds Beyond 3
Year Period
 Beyond Normal 3
Year Period
 No Permissive
Deductions (CCA)

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Fairness Package

 Auditor General’s
Report ($185 Million In
2001)
 No Detailed Records
Providing Basis For
Waiver
 No Systematic Review Of
The Decisions

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