PLAYING THE INSTALLMENT GAME   

How much and when? These questions haunt us as we try to figure out CRA's cut of our income.  Despite the complexities of interest calculations, there are a few simple rules of thumb to follow:

1.  Pay the required amount on the due date. Third quarter personal tax installments are due September 15, 2011.  The next payment due date is December 15, 2011.  Any balance owing (above the installment requirement) is due April 30, 2012.

2.  Pay the minimum required. The annual installments are usually based on either 2010 or estimated 2011 taxes - whichever is lower.  If you cannot estimate 2011 taxes, call us. In some cases installments are based partly on 2009 tax.

3.  CRA installment requests are only reminders - they do not have the force of law.  CRA cannot force you to make an installment if you choose not to.  The downside of not making an installment is CRA charges interest (at fairly high rates).  The bright side is the interest is not assessed until CRA knows the tax for both years.  This is usually after filing your 2011 return.

4.  Prepay a future installment if the year-to-date installments are deficient.  If you find your 2011 estimate is wrong, and you underpaid earlier in the year, pay the deficiency as soon as possible.  Your intentional overpayment gets interest credit up to the amount of interest previously charged.

If you need help, or clarification of any of these points please contact our office.   

 FOUR TIMELY TAX TIPS

1.  If you deduct employment expenses (either as an employee or commissioned employee) get a Form T2200 - Declaration of  Conditions of Employment signed by your employer.  There is no deduction without this Form.

2.  Form TL11A  (Tuition, Education, and Textbook Amounts Certificate - University Outside Canada) is needed for tuition credits for students at foreign universities.   Start now to get this Form.

3.   Review your medical expenses.   Consider accelerating expenditures to maximize the medical expense credit.

4.   For the employees deducting expenses, or for self-employed individuals,  get all your receipts in order for the first three quarters of the year.  Tax time will be less troubling by doing work in advance.  

                                                       RECORD KEEPING  

Taxpayers are responsible for keeping, maintaining, retaining and safeguarding their records.

Canada Revenue Agency ("CRA") allows original source documents and records to be maintained in an electronic format.

The CRA uses the criteria set out by the Canadian General Standards Board to establish an acceptable document imaging program.  The publication, Microfilm and Electronic Images as Documentary Evidence, is available for purchase from the Canadian General Standards Board.

The Standards Board recommends the following procedures be in place:

• The records must be in a readable format;
• The document must be retrievable upon request;
• Written confirmation by a person of authority that electronic record management and storage will be part of the usual and ordinary activity;
• Documented systems and procedures;
• A logbook that provides date of imaging,  signatures of persons involved,  description of records imaged and date that original source documents were destroyed or disposed;
• Index maintained by the imaging software;
• Images can be produced on screen or on paper in legible and readable commercial quality;
• Availability of equipment in good working order to view or reproduce a hard copy of the image.

A taxpayer who relies on a third party to do the electronic document storage is responsible to ensure that the third party does so in a manner acceptable to CRA.   

Paper source documents that have been electronically stored in accordance with the national standard can be disposed of and their images kept as a permanent record. The retention of the electronic image is subject to the same standard as paper source documents.

The CRA can impose significant penalties on taxpayers who do not maintain adequate books and records or cannot provide information or documents upon request.  On summary conviction,  a taxpayer is liable for penalties otherwise payable plus fines of not less than $1,000 or both the fine and imprisonment if it is determined that a person was involved in tax evasion.  

Third quarter personal tax  

   installments due                       September 15, 2011