You have quite likely heard of the thousands of reassessments and audits that have been conducted on Canadians across the country who foolishly put money into those tax savings/donation schemes that seem to be everywhere. The CRA clearly declared that many of these are not eligible and many are now in the very awkward position of trying to find tens of thousands of dollars in taxes, penalties and interest.
If you have Mis-claimed
Step one: Analyze your past tax filings. Review them to ensure that any of your shorter-term deals (there is no stated time, by the way, it is all to do with your intention) have been properly declared on your tax filings. If you suspect not, ask your accountant about it and get a very clear written answer to: "What is my risk in this?" Discuss whether it is worth refiling or not.
Step two: Make sure you are not mixing short-term quicker-turn properties in the same company (or personal name) with long-term buy and holds. If they are mixed, capital gains even on the longer term properties may be denied or reduced.
Step three: During the slower summer season for your accountant, have a clear heart-to-heart discussion with them about how you wish to deal with this matter moving forward. Listen to their advice, measure your risks versus rewards and set a clear mandate for clarity and full-disclosure moving forward. Make sure you are satisfied with the answers; remember, it is you who takes the ultimate risk if you file incorrectly.
Step four: Finally, in all cases, make sure you are getting professional advice from accountants and lawyers who have real estate investment experience. The rules and rulings in the real estate area of tax law are continually being updated. Make sure your accountant is a real estate investment specialist and even better is if they are real estate investors themselves.
Let me be perfectly clear, I am not an accountant. However, it is my advice that you do whatever you can to remain far away from the grey areas that seem so tempting but in reality just add an enormous amount of unnecessary risk as you build your portfolio to your ultimate freedom.
You have quite likely heard of the thousands of reassessments and audits that have been conducted on Canadians across the country who foolishly put money into those tax savings/donation schemes that seem to be everywhere. The CRA clearly declared that many of these are not eligible and many are now in the very awkward position of trying to find tens of thousands of dollars in taxes, penalties and interest.
As that is winding up, next on the radar seems to be the review and reassessment of short-term property transactions (including contract assignments) as income and not the capital gains they were declared as.
Oh No, I Think I Have Misclaimed: Now What?
Step one: This week, analyze your past tax filings. Review them to ensure that any of your shorter-term deals (there is no stated time, by the way, it is all to do with your intention) have been properly declared on your tax filings. If you suspect not, ask your accountant about it and get a very clear written answer to: "What is my risk in this?" Discuss whether it is worth refiling or not.
Step two: Make sure you are not mixing short-term quicker-turn properties in the same company (or personal name) with long-term buy and holds. If they are mixed, capital gains even on the longer term properties may be denied or reduced.
Step three: During the slower summer season for your accountant, have a clear heart-to-heart discussion with them about how you wish to deal with this matter moving forward. Listen to their advice, measure your risks versus rewards and set a clear mandate for clarity and full-disclosure moving forward. Make sure you are satisfied with the answers; remember, it is you who takes the ultimate risk if you file incorrectly.
Step four: Finally, in all cases, make sure you are getting professional advice from accountants and lawyers who have real estate investment experience. The rules and rulings in the real estate area of tax law are continually being updated. Make sure your accountant is a real estate investment specialist and even better is if they are real estate investors themselves.
Let me be perfectly clear, I am not an accountant and nor is this article to be construed as professional accounting advice. However, it is my advice that you do whatever you can to remain far away from the grey areas that seem so tempting but in reality just add an enormous amount of unnecessary risk as you build your portfolio to your ultimate freedom.
- See more at: http://www.rew.ca/news/property-flipping-tax-issues-2-misfiling-a-tax-claim-1.2003359#sthash.eL0tN5hc.dpuf
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