[afransen]

He has 2 kids, and his wife was staying at home last year taking care of baby #2. I dunno if that has anything to do with it. He claims gas, depreciation on his car, I give him my restaurant receipts for him to claim eating out, clothing, etc...you name it, he claims it.

Ask around, this is common practice. Another friend is a self-employed graphic designer who paid $8k in taxes last year. He took in $90k. I'm not kidding, my Aunt did his taxes.

I dunno how he gets away with it. I've witnessed it for 3 years running. He paid a measly $2-$3k the first year. Can you believe it? It's not like he's self employed, he's simply under contract. In other words, an employment agency subs him out.

The second year he paid around $5k, and this year he paid about $6k.

It's improper to claim the full cost of a car if it is also used for personal use. I wouldn't want to have submitted that return... Yes you can lie, but lying doesn't solve every problem.

Nonetheless, I do agree that there is plenty of evasion, and room for it to be curbed.

 

[AKS]

He has 2 kids, and his wife was staying at home last year taking care of baby #2. I dunno if that has anything to do with it. He claims gas, depreciation on his car, I give him my restaurant receipts for him to claim eating out, clothing, etc...you name it, he claims it.

Ask around, this is common practice. Another friend is a self-employed graphic designer who paid $8k in taxes last year. He took in $90k. I'm not kidding, my Aunt did his taxes.

I dunno how he gets away with it. I've witnessed it for 3 years running. He paid a measly $2-$3k the first year. Can you believe it? It's not like he's self employed, he's simply under contract. In other words, an employment agency subs him out.

The second year he paid around $5k, and this year he paid about $6k.

wow, I should have gotten your aunt to do my taxes for me. I would save a few thousand. As it is, I only claim a small portion.

 

[afransen]

wow, I should have gotten your aunt to do my taxes for me. I would save a few thousand. As it is, I only claim a small portion.

His aunt isn't magic. You could claim whatever you want to, like all your household related expenses, but it's not legit as you will discover if/when you are audited.

 

[Hank]

The CRA also doesn't necessarily have to 'prove' that you made a certain amount before they can tax you on it. They can do a net worth audit and determine how much in taxes you should be paying by basically looking at how rich you are. If you want to make any deductions you'll have to prove them (and just showing receipts won't be enough to prove that the money was a business expense).

Also, they can go back at least three years (and more if you've lied on your tax returns) to reassess previous years, so don't think that your friend is out of the woods because the CRA has accepted his return for the last three years. He could be hit with a monstrous tax bill (plus penalties) in a year or two. If they decide that he's been evading taxes, he could also go to jail.

 

[Automation Gallery]

The CRA also doesn't necessarily have to 'prove' that you made a certain amount before they can tax you on it. They can do a net worth audit and determine how much in taxes you should be paying by basically looking at how rich you are. If you want to make any deductions you'll have to prove them (and just showing receipts won't be enough to prove that the money was a business expense).

Also, they can go back at least three years (and more if you've lied on your tax returns) to reassess previous years, so don't think that your friend is out of the woods because the CRA has accepted his return for the last three years. He could be hit with a monstrous tax bill (plus penalties) in a year or two. If they decide that he's been evading taxes, he could also go to jail.

In other words “You can't beat the Taxmanâ€

 

[Eug]

Yeah, I've known people who have gotten some pretty enormous tax bills because of audits years down the line. And often times, it's not even "illegal" type claims. It's just claims that are in a grey area, and CRA disagreed with those people's accountants.

That friend with the "creative" expense write-offs is prime for an audit.

 

[nfitz]

You'd think that'd be the case, but as Hank says, that's not how it works. For some idiotic reason, a house costing $600000 requires payment of 100% of the tax on all $600000, whereas there is no (net) tax at all on homes below $400000.

Yeah ... that does seem odd. But is Hank correct? Why would they only rebate 6% rather than 8%? I'm not sure all of Hank's facts are correct.

 

[nfitz]

He has 2 kids, and his wife was staying at home last year taking care of baby #2. I dunno if that has anything to do with it. He claims gas, depreciation on his car, I give him my restaurant receipts for him to claim eating out, clothing, etc...you name it, he claims it.

It's called fraud - and it's a criminal act. They should put him in jail - and you to as you're conspiring with him.

An uncle of mine used to go on about all the great tax advise he used to get from his father-in-law, and how he was saving all this money. Then they caught his father-in-law for tax fraud ... he lost his job, money ... and I haven't heard my uncle boast about the subject in over a decade now.

Hey, you want to save some real money on sales tax? Shoplift ... no taxes.

 

[afransen]

Yeah ... that does seem odd. But is Hank correct? Why would they only rebate 6% rather than 8%? I'm not sure all of Hank's facts are correct.

I think it's 2% because that is the effective rate of taxation built in through PST on materials.

 

[Hank]

I think it's 2% because that is the effective rate of taxation built in through PST on materials.

Exactly. As I mentioned, there's 2% of PST already built in to the cost of new homes and because builders can't claim input credits on PST, they simply add the 2% to the cost of the house. When the PST becomes HST, builders will be able to claim input credits (ie basically get a rebate) for that 2% which would let them lower prices on new homes by 2%. Combine that with a 6% Ontario rebate and you have a total credit that theoretically covers the 8% tax increase (but only on homes under $400,000; the credit will be gradually phased out on homes costing between $400,000 and $500,000).

A few seconds of Googling found these summaries of the new plans: http://www.stikeman.com/cps/rde/xchg/se-en/hs.xsl/12433.htm, http://www.osler.com/resources.aspx?id=17186

 

[Automation Gallery]

Housing market stabilizing, but Ontario's new HST a concern

This could force builders to skew construction toward either extremely low- or high-priced homes, leaving middle-class buyers with even fewer options.

http://www.financialpost.com/news-sectors/story.html?id=1566293

 

[afransen]

Okay. VAT on new home construction isn't a novelty in this world. Is there any evidence that it has had a distortionary effect in other jurisdictions?

 

[BobBob]

Of course it's distortionary if it's based around the magic number of 400 or 500 thousand: it clearly punishes redevelopment of central urban areas where property values are higher, and rewards fringe development, for one.

 

[afransen]

I've agreed that the proposed implementation is distortionary for homes over $400,000. My question is whether VATs are distortionary. The home industry to claiming that the sky will fall if they are taxed in this way, and I find it rather uncompelling.

 

[Therion]

I've agreed that the proposed implementation is distortionary for homes over $400,000. My question is whether VATs are distortionary. The home industry to claiming that the sky will fall if they are taxed in this way, and I find it rather uncompelling.

It's distortionary in that you get less house for your money. Since people generally have a set amount in their heads when they buy a house, I think developers are afraid that they 8% increase will come out of their pockets as people will buy cheaper houses. I'd like to see what % of houses sold in Ontario cost over $400,000. I personally have no idea, but that number could make a pretty huge difference.