Newsgroups: can.general
Path: utzoo!lsuc!dave
From: dave@lsuc.uucp (David Sherman)
Subject: income tax tips #18: "But they let me claim it last year!"
Date: Wed, 11-Jan-89 09:53:18 EST
Message-ID: <1989Jan11.095319.12575@lsuc.uucp>
Distribution: can
Organization: Law Society of Upper Canada, Toronto

Taxpayers are sometimes confused when they are advised not
to claim a particular deduction or credit, where their lawyer
or accountant is sure they do not qualify for it.  "But I've
been claiming that for years, and they've always allowed it!",
they say.

It is important to understand what has and has not happened when
you file your return and receive an assessment.  Your return *has*
been looked at; the arithmetic has been checked; the deductions
and credits for which you are required to file receipts have been
checked against those receipts.

But your return has not been audited.  The eight weeks or so
between filing the return and when you receive your assessment
(and refund, if there is one) don't allow time for millions of
taxpayers' returns to be audited.  Only a small percentage of
returns are selected for audit, usually some months after
the original assessment.

So if you claim, say, the disability credit, and your claim is
allowed, and you never hear from Revenue Canada again in respect of
that year, that doesn't mean they are "letting you" claim it.
It just happens that your file hasn't been reviewed or audited --
you lucked out.  You certainly aren't setting any kind of precedent
for saying that the claim should always be allowed.

(On the other hand, if you are audited, have a full discussion
with the auditor about your situation and do not receive a
reassessment, you can fairly safely assume that Revenue genuinely
agrees with your claim.)

The above should not be taken to suggest that you should make
all kinds of frivolous claims in the hope that you won't be
caught.  First of all, if you are eventually reassessed (within
the three-year period), you will be required to repay the
amount of tax owing, plus interest compounded daily at an
interest rate which is approximately equal to the banks' prime
rate.  Second, if your claim was fraudulent or completely
unsupported by the facts, you may be subject to serious penalties
-- up to double the tax which you were trying to avoid paying.
(This is in addition to the tax and interest.)  So you should
only make claims which are justifiable.

David Sherman
Tax Lawyer
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