Frequently Asked Questions

 
 

INCORPORATION SERVICE

 

ABIL CLAIMS

Are you working for CRA or for me?  

The Canadian tax system is self-assessing. TaxWatch is absolutely only working for you. However, part of the advantage of TaxWatch is that it is familiar with how CRA often views your situation; it is an important insight to have. All tax professionals are very careful to ensure the accuracy and support for the income and deductions included on your tax return. CRA can assess 3rd party penalties to tax preparers for lack of diligence or gross misconduct. Expect questions and requests for documents from your tax preparer. They are only trying to prepare for CRA scrutiny.    

I haven't filed in a long time, how far back do I need to file?

The answer will depend on whether or not you have received a Request or Requirement to File from CRA as well as your personal tax situation which can be best determined by speaking with a tax professional specializing in late tax filing such as TaxWatch Canada. In our experience, the best approach is to draft returns for each year (typically no more than 8-10 years back) which facilitates the decision regarding what years will need to actually be filed. CRA can always ask for older returns if needed, however, in our experience, this has not been a common situation.

What if I cannot afford to pay all that past tax liability?  

There are collection protocols within CRA that will extend payment terms based on your financial situation. CRA may request details of your financial situation in order to evaluate how much you should reasonably afford to be able to pay. Each situation is unique. Payment commitments should never be more than what you really believe you can afford and will pay. CRA wants you to keep your current tax filings and liability up to date as well. One thing you should never do is make commitments that you already know you cannot keep.    

How affordable are your fees?  

Our professional fees are certainly not high end and are reasonable because we only do what we both agree is worthwhile. Fees are based on a step-by-step process of service that allows you to manage the service arrangements and fee costs and know the exact fee for each accomplished step. The first step is to determine your tax liability and perhaps engage legal representation. That may involve bookkeeping, GST implications, a review of your financial history and discussions with legal counsel. That is one fixed fee, payable in advance. Proceeding to file returns and to deal with particularly involved situations or complex problems would be a separate fee. Filing of notices of objection or answering CRA questionnaires is a separate fee. Tax payment negotiations may involve another separate fee. In all instances, the fees are fixed unless additional information comes to light that we were not advised of. Payment terms for fees can be arranged. For those who are corporations or are self-employed, the fees are tax-deductible. Fees for preparation and completion of notices of objection and tax court appeals are also tax deductible. 

 

What is a Corporation?

A Corporation is a legal entity, often referred to as a ‘limited company’ or ‘company’, with an independent legal existence from its owner(s). A Corporation has the same powers as a natural person; a Corporation can enter into contracts (in the name of the Corporation), carry on business, buy and sell property, etc. Corporations are governed by the applicable federal or provincial legislation (Companies Act). 

Why Can’t I Just Incorporate my Own Business?

You can. There are tax compliance risks if asset (such as existing capital assets and contracts which have value) transfers create capital gains personally. Documentation for transfers of assets must be complete (a simple process), and many other subtleties exist (such as the need for a complete minute book). 

Why should I Choose TaxWatch Canada's Incorporation Service?

While many businesses offering incorporation services pride themselves on offering a quick & easy solution, TaxWatch Canada LLP’s service, albeit an extended process, is comprehensive and provides exceptional value to your bottom line. Our tax perspective provides maximum tax savings to increase wealth and take advantage of the many benefits of incorporation.

What is the Cost for the Turn Key Incorporation Service?

Your complimentary initial review will include an immediate quote only after we ensure we can help you and a new Corporation is going to produce substantial positive outcomes.  Historically, upfront fees (which include out of pocket payments to institutions of around $600 or more) are from $1,800.00 for a new business and increase as the complexity of transferring existing business assets gets more involved. But that is where the benefits really shine. Many times other professionals - your choice who to use - are engaged to prepare agreements, provide 2nd opinions or valuations. 

 

Why can’t I simply ask my own accountant to file for my ABIL loss claims?

You should consider asking your accountant to do this, but it has been our experience that the probability of a successful outcome increases when a specialized service is recognized as being required. TaxWatch works well with many other accountants and legal reps because they are sometimes engaged in providing the information needed and are insightful and helpful. There is also the timing and comparable cost factor to be considered.

As a result of successfully filing a loss claim in a particular year, will CRA attempt to review other parts of my tax return for that year?

No. CRA generally restricts adjustments of prior tax years to a separate group within CRA - not an audit group. If you have a notice of objection outstanding for the year of a loss claim, you may not receive the tax reduction related to your loss claim until your objection is resolved.

What if I have previously claimed a capital gains deduction? Will my claim be allowed?

It depends. These deductions canceled over ten years ago but, if claimed, still affect ABILS. Generally, the amount of the loss that can be deducted will be restricted by the capital gains deduction previously reported. The loss will be reduced by the amount of the previous capital gains deductions and only the amount in excess of the previous deduction, if available, will be eligible for an ABIL deduction. Other restrictions, if applicable to your situation, may reduce or restrict your claim.

What if my claim for losses is denied by CRA?

If we disagree with CRA’s determination, or the facts CRA relied upon to deny your request, we will appeal the decision on your behalf.

If my investment turned out to have been a scam, is it easier to make a claim for my loss?

Unfortunately, no. The claim will be processed just like any other claim and would be subject to scrutiny and due process by CRA. In many cases a capital loss will be allowed even if the ABIL claim is denied.

Do I need to file my past tax returns?

By law, you are only required to file a return if you have taxable income and/or you receive a Request or Requirement to File from CRA. However, even if you do not have taxable income, you may want to file in order to receive certain credits you may be entitled to. Each tax year should be considered on its own merits. Keep in mind that CRA does not know your personal tax status and therefore, unless you file, you can still receive inquiries from CRA, particularly if you have a spouse or common-law partner who files. There are also other potential consequences of not filing discussed in our blog post here.

What if I'm missing old tax slips and/or information?

As part of our service, we will assist you to determine what is required and how to best obtain the information. Read more on this topic in our blog post here.

What is the most important step to take when deciding what to do about late tax returns or claiming unreported income? 

The first and most important step is to determine your estimated tax liability and discuss possible penalties and interest that may be applied as well. You can still adopt filing positions to reduce your tax liability and remain compliant with the tax law, subject to having to defend your filing position. There are many factors to consider that affect your tax position. Some examples are: the determination of intention to earn income; treatment of expenditures and the timing and nature of funds received; allocations to different business partners or spouses; the correct treatment of funds paid by a corporation to its shareholders; matching expenditures to income; choice of year ends; timing of capital cost allowance (depreciation); and the timing of the claiming of losses to name just a few. Many factors contribute to legitimate tax minimization, which you are allowed to do.    

 
 

Who is a Corporation most useful for?

Any business not already incorporated (operating as a proprietorship, partnership), with a net annual income of $50,000**, including:

  • Established businesses or start-ups

  • Small businesses (any type of business activity)

  • Professionals with a practice (Physicians, Dentists, Lawyers, Accountants, Engineers, Real Estate Agents, Architects, etc.) whose licensing bodies allow Corporate ownership. 

  • Those who work part time for multiple clients on a contract basis.

Note-mortgage, banking, insurance, loan, trust companies, other financial institutions, cooperatives, and not-for-profit corporations are incorporated under different statutes.

**approx. /general amount only – other determining factors exist.

Why a minimum of $50,000 annual income?

From a tax perspective, in our experience, this is the approximate threshold where the tax saving of a Corporation become most interesting. 

 
 

How much will all this cost me?

After completion of our free evaluation (which includes an estimate of your refund, if any) you will be provided with your options which include our fee. Fees are based on complexities of the claim. The fees of TaxWatch Canada are always fixed unless special circumstances arise.

How can I find out whether or not any capital gains deductions were reported on any of my previous income tax returns?

You can call CRA for this information and request a print-out (RC143) of your previous filing history. Alternatively, we can do this for you once we have your signed consent (which is filed with CRA) to discuss your income tax matters with CRA.

How long will I have to wait before I receive my refund?

You can expect to wait for about 16 weeks and perhaps longer if the expected refund is substantial. CRA will send questionnaires if the claim is over a certain threshold. TaxWatch will respond to any CRA request.

Can I deduct interest expenses I incurred to finance the investment which is now non recoverable or lost and the subject of my loss claim?

Deductibility of interest paid will mostly depend on the particular facts of your situation.

I have incomplete documentation regarding my investment loss. What should I do?

So long as you can provide the right critical documentation and supporting evidence, you may still claim your loss. A missing document or two will not necessarily result in CRA denying an otherwise legitimate loss claim. In most cases, we are able to determine if what you have is likely to be acceptable.