The Canada Revenue Agency (CRA) said today that it will continue its practice of not processing tax returns that claim credits under gifting tax shelters until it first audits the shelter.
The CRA announced that it is continuing its procedure for dealing with gifting tax shelter schemes. For the 2013 tax year, it will not assess taxes owed, or provide a refund, to taxpayers who claim a tax credit under a gifting shelter until the tax shelter has been audited. This is the same procedure that the CRA followed in the 2012 tax year.
Taxpayers can have their return assessed before the tax shelter has been audited if they agree to remove the claim from their return, it adds.
The CRA reports that it has denied more than $5.9 billion in donation claims, and reassessed over 182,000 taxpayers, who participated in these gifting tax shelters. It has also revoked the charitable status of 47 organizations that participated in these schemes, and it has assessed $137 million in penalties against the promoters and tax preparers involved.
So far, the CRA, which is auditing all of these gifting tax shelter schemes, hasn’t been found one that complies with Canadian tax law. And, it warns taxpayers that if they receive a charitable donation receipt for an amount higher than the value of property donated, the receipt is not valid and can’t be used to claim a tax credit.
Also, under new legislation that was introduced in last year’s federal budget, in cases where taxpayers are appealing a decision to deny a credit, the CRA can collect 50% of the amount in dispute, or withhold 50% of the refund, when these amounts are related to a gifting tax shelter, it notes.
“The CRA strongly encourages taxpayers to get advice from an independent tax professional before engaging in a tax shelter,” it says, stressing that, “To make sure the advice is independent, a tax professional should not be linked in any way to the tax shelter or the promoter of the tax shelter.”