Frequently Asked Questions (FAQs) About Tax Law (Planning & Litigation)
What are common tax deductions for individuals in Canada?
Many common expenses can be deducted from your income in Canada, reducing your taxable income. These include:
- Employment expenses: Certain work-related costs like union dues or uniforms.
- Medical expenses: Prescriptions, medical treatments not covered by insurance, and disability-related expenses.
- Charitable donations: Gifts to registered charities.
- Interest paid on mortgages for principal residences.
What is tax planning, and why is it important?
Tax planning involves understanding the tax code and using legal strategies to minimize your tax liability. This can involve maximizing deductions, claiming credits, and structuring your finances to benefit from tax-advantaged accounts like Registered Retirement Savings Plans (RRSPs). Effective tax planning helps you keep more of your hard-earned income.
When should I consider hiring a tax lawyer?
A tax lawyer can be invaluable in complex situations. Consider seeking legal advice if you:
- Own a business with significant tax implications.
- Are facing an audit from the Canada Revenue Agency (CRA).
- Have a tax dispute with the CRA.
- Need help navigating tax implications of inheritance or other legal matters.
What are common tax credits available in Canada?
Tax credits directly reduce the amount of tax you owe. Common credits include:
- The Basic Personal Amount (BPA): A non-refundable credit that reduces your tax burden.
- The GST/HST Credit: Provides financial assistance to low- and modest-income individuals and families.
- Education and tuition credits: Offset the cost of post-secondary education.
What happens if I receive a notice of reassessment from the Canada Revenue Agency (CRA)?
A notice of reassessment means the CRA has adjusted your tax return. It’s important to review the notice carefully. If you disagree with the assessment, you can file a Notice of Objection within 90 days. Consider consulting a tax lawyer for guidance in navigating this process.
What are the penalties for filing late or inaccurate tax returns in Canada?
Filing late or inaccurately can result in penalties and interest charges. The severity depends on the circumstances. Filing late typically incurs a penalty of 5% per month, to a maximum of 12 months, plus interest on any outstanding taxes.
How long should I keep tax records in Canada?
The CRA generally recommends keeping tax records for six years after the year the return was due. This includes receipts, invoices, and other documents supporting your income and deductions.
What is the difference between tax avoidance and tax evasion?
Tax avoidance uses legal strategies to minimize your tax liability. Tax evasion, however, involves illegal activities like underreporting income or falsifying documents to avoid paying taxes altogether. Tax evasion is a serious offense with significant penalties.
What are my rights during a Canada Revenue Agency (CRA) audit?
You have the right to be represented by a tax lawyer or accountant during a CRA audit. You also have the right to request additional information from the CRA and to provide explanations for any discrepancies they may find.
Where can I find more information about Canadian tax law?
The Canada Revenue Agency website (https://www.canada.ca/en/revenue-agency.html) offers a wealth of information on tax laws, deductions, credits, and filing procedures. Additionally, professional associations like the Canadian Bar Association (https://www.cba.org/Home) can provide resources to help you find a qualified tax lawyer.
These articles are for general informational purposes only and are not legal advice. Contact us today to discuss your specific situation.