Have you heard or read the phrase “no tax receipts, no problem”? It sounds too good to be true, right? Unfortunately, that’s because it is.
Many people fail to file their personal taxes on time because they don’t have all of their tax receipts. Often, they assume that they can’t be assessed until they file. This is far from true. When it comes to notional assessments and determination of income by expenses, if you owe, you owe — period. So, what can you do? It’s time for a plan, especially with the self-employed tax deadline approaching on June 15, 2018.
The government conducts notional assessments (where they estimate and assess your income) in a number of ways:
- Based on the prior year’s earnings.
- Based on T4s or T4As that have been filed by people who paid you.
- Invoices you issued to customers who have been audited. This would uncover that you had income in a particular tax year and have not filed.
- Through an estimate of your living expenses. For example, if you spend X amount monthly, you must earn it.
When notionally assessed, the government will estimate your income, assess penalties and interest retroactively, and proceed to collect on the debt.
This is not to mention that if you are self-employed and HST is involved, after four years you lose the ability to claim input tax credits.
If you have been notionally assessed, the first step is to refile your tax return to be re-assessed to reflect accurate information.
If you have not been assessed, burying your head in the sand and not filing is NOT the answer. Not only will penalties and interest begin to accumulate, but you will also lose access to benefits that expire after an amount of time. These could include:
- Filing a notice of objection.
- Claiming input tax credits.
One reason you may be procrastinating filing is that you know you are going to owe money and are concerned about how you are going to pay it. This is inevitably the biggest issue for most people, but you can be prepared.
Step one: if you know you are going to be facing a financial problem, consult the right type of financial professional. The only type of financial professional aside from a judge who can stop CRA collection action is a Licensed Insolvency Trustee (LIT).
Consulting a LIT doesn’t mean going bankrupt, either. Through initial consultation, they can connect you with the appropriate accounting resources that are equipped and experienced at working with people who have tax issues, such as not having tax receipts or records.
Step two: Once it is determined what you will owe, the LIT can explain your financial options if you can’t afford to pay the debt.
Step three: Make a plan for the future. Create a filing system for your tax receipts and hold yourself accountable to staying organized. A little bit of preparation will save a lot of pain in the long run.
Fuller Landau’s qualified debt consultants can help you deal with notional assessments, a lack of tax receipts, and more. Contact us today for a free consultation. Call (416) 927-7200 or visit www.fullerdebt.com.