It’s your tax return, so doesn’t it make sense to check it’s accuracy?
If you are like many business owners, you might directly sign your return and send it to the CRA without even reviewing. But as courts have implied, it’s your responsibility to ensure your return is accurate. Otherwise, you may attract huge penalties and even face legal hassles.
In this post, we will tell you why it’s necessary to review your tax return before signing it!
Avoid being Willfully Blind
Does the name “Fiscal Arbitrators” ring a bell?
A few years back, Fiscal Arbitrators was a tax preparation firm operated by Larry Watts. The court found the firm guilty of fraud in 2016 and ordered a penalty of $150,000. Watts was also sentenced to 6 years in prison. But what did he do to invite the wrath of the court?
Fiscal Arbitrators was responsible for filing fraudulent returns on behalf of its clients. The firm reported business losses from non-existent businesses for some 1,800 taxpayers in 2009.
One of the taxpayers out of 1,800 signed the return without even checking it. As a result, the return went to the CRA with fraudulent transactions and claimed inappropriate refunds.
The court ruled that any taxpayer can be charged with deliberate ignorance when he is “willfully” blind. Or in other words, if a taxpayer is aware of the need or reviewing his return doesn’t do so, he can be accused of gross negligence. And that can attract a gross negligence penalty, up to 50% of the tax that the taxpayer sought to avoid.
The court also overruled the argument that the taxpayer placed his trust on Fiscal Arbitrators, and he didn’t know much about tax rules or regulations.
So it’s imperative that you scrutinize your return to ensure it is accurate and error-free.
Don’t fall for tax professionals advertising Guaranteed Refunds
One of the main reasons to read your tax return before signing it is to make sure there are no inaccurate filing of refunds. The above Fiscal Arbitrator case goes a long way to prove why you should be wary of guaranteed refunds that many tax firms promise. Yes, this is an unfortunate realty that lot of independent tax accountants providing seasonal tax services in Canada try to claim deductions and credits for the clients which they are not entitled to; just to make the client happy.
During tax season, you will find many firms advertising guaranteed returns to earn a few quick bucks. You should always be careful when choosing your tax services provider in Canada and make all efforts to stay away from fraudulent ones.
Everybody looks for tax refunds but trying to game the CRA is not at all a good idea. So review your tax return thoroughly before you sign it!
Get Overall Financial Picture of Your Business from your tax return
Your tax return is one of the best tools to get an overall picture of your financial condition. You can easily form an understanding of your income and expenses by looking at the return and supporting documents. You can find out about your loans, debts and other nuances that affect your revenue or expenses.
Your tax return is a critical source of financial information that can help you make informed business decisions. So always read first, and then sign your tax return no matter which firm or CPA prepares it.
As a result of any reassessment you need to pay back that refund. Its always better to ask questions to your tax preparer; a good tax preparer in Canada will always explain your tax return to you.
Ask for Credentials of your tax preparer
There is no such requirement to have credentials such as CPA or CA, or any other similar professional designations to be a tax preparer in Canada. Having credentials mean that the person preparing your tax return has a strong knowledge about the tax preparation in Canada and is also subject to rules of the regulatory professional body he is member of. This does not mean that a tax preparer not having credentials is not competent one, a lot of time years of experience contribute to a higher skill set.
Acknowledge the CRA’s Capabilities
This is important to remember that Canada Revenue Agency has many resources and tools available to flag the returns having errors. When you file the return, you get the refund within few days. Systems run sweep usually in the later months and returns are reviewed.