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Be Mindful of Moving Expenses to Avoid CRA Audits As Canadians enter peak moving season, those relocating for work or education should carefully track their expenses for tax season while ensuring compliance with Canada Revenue Agency (CRA) regulations. Moving expenses are frequently audited, as the amounts claimed can often reach five figures. The rise of interprovincial relocations and remote work has also contributed to heightened CRA scrutiny in recent years. A common issue involves paying movers in cash to avoid the harmonized sales tax (HST). Although this might seem like a cost-saving measure, cash payments invalidate the receipt for tax purposes, as the moving company must have proof of tax payment. Without valid documentation, taxpayers are more likely to be audited and held responsible for the unpaid taxes. When audited, individuals may face unexpected expenses if they cannot obtain valid receipts from movers. In many cases, people prefer to settle the CRA’s demand rather than spend time and effort fighting the audit process. Relocating for Remote Work: Know the Rules Issues can also arise when individuals move to another province for lower housing costs but continue working remotely for the same employer. The CRA requires that a new home be at least 40 kilometers closer to the taxpayer's new employer, business, or post-secondary institution to qualify for a moving expense deduction. Moving for personal reasons does not typically meet the criteria for a deductible relocation, and there generally needs to be a clear employment purpose for the move. Employers must show that there is a specific reason for the employee to be based in the new location. Beware of Double Dipping on Expenses Taxpayers should avoid the mistake of "double-dipping," where both an employer and an employee claim the same moving expenses. The CRA may request supporting documents to verify claims, as these expenses can only be deducted once. Students can also encounter difficulties if they claim moving expenses that exceed their income from scholarships and bursaries. However, unused claims may be carried forward to future years when the student’s income qualifies. Eligible vs. Ineligible Moving Expenses Taxpayers must understand the difference between eligible and ineligible moving expenses. Deductible expenses include transportation, moving insurance, storage, travel, and lease cancellation costs. On the other hand, trying to claim ineligible expenses—such as home renovations before a sale or trips to find a new home—can trigger audits. If individuals qualify for moving expense deductions but forget to claim them, they can adjust their returns for up to 10 years. It’s essential to retain receipts, as the CRA may ask for proof to support the claim. To check if you qualify for these deductions, visit https://gytd.cpa. By staying informed and organized, taxpayers can avoid common mistakes and ensure a smoother experience during tax season.

CRA's 2024 Budget Expands Audit Powers: Oaths, Non-Compliance Penalties, and Legal Risks for Taxpayers These new proposals build on legislative changes introduced in 2022, further expanding the Canada Revenue Agency’s (CRA) audit powers. The 2024 federal budget outlines amendments to the Income Tax Act, giving CRA auditors the authority to demand information or answers under oath, affirmation, or through sworn affidavits. This shift introduces a heightened level of legal formality, akin to courtroom proceedings, sparking concerns among experts about fairness and escalating compliance costs. Legal advisors warn that these measures may coerce taxpayers into sharing information beyond their obligations and could increase the need for legal representation to navigate potential pitfalls during audits The budget also proposes new enforcement mechanisms, such as the introduction of a "Notice of Non-Compliance." If issued, this notice will incur a penalty of $50 per day, capping at $25,000, for failure to comply. Additionally, the CRA will have the ability to "stop the clock" on the three-year reassessment period during legal disputes or when such notices are in effect, giving the agency more time to reassess taxpayers beyond usual deadlines. These developments signal a shift toward more stringent enforcement and harsher penalties for non-compliance. While the government justifies the measures as necessary for improving audit efficiency, experts caution that they may create legal uncertainty and place a heavier burden on taxpayers, particularly those unprepared for more invasive audits. Engaging legal and tax advisors early in the audit process is becoming increasingly important to manage these expanded requirements and avoid unintended consequences.

CRA's 2024 Budget Expands Audit Powers: Oaths, Non-Compliance Penalties, and Legal Risks for Taxpayers These new proposals build on legislative changes introduced in 2022, further expanding the Canada Revenue Agency’s (CRA) audit powers. The 2024 federal budget outlines amendments to the Income Tax Act, giving CRA auditors the authority to demand information or answers under oath, affirmation, or through sworn affidavits. This shift introduces a heightened level of legal formality, akin to courtroom proceedings, sparking concerns among experts about fairness and escalating compliance costs. Legal advisors warn that these measures may coerce taxpayers into sharing information beyond their obligations and could increase the need for legal representation to navigate potential pitfalls during audits The budget also proposes new enforcement mechanisms, such as the introduction of a "Notice of Non-Compliance." If issued, this notice will incur a penalty of $50 per day, capping at $25,000, for failure to comply. Additionally, the CRA will have the ability to "stop the clock" on the three-year reassessment period during legal disputes or when such notices are in effect, giving the agency more time to reassess taxpayers beyond usual deadlines. These developments signal a shift toward more stringent enforcement and harsher penalties for non-compliance. While the government justifies the measures as necessary for improving audit efficiency, experts caution that they may create legal uncertainty and place a heavier burden on taxpayers, particularly those unprepared for more invasive audits. Engaging legal and tax advisors early in the audit process is becoming increasingly important to manage these expanded requirements and avoid unintended consequences.

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