So you've looked back and found an error on a previous year's tax return? Well, don't just sigh and throw the return back in a filing cabinet. Asking Ottawa to correct it may result in significant tax savings.
And the process has never been easier, tax pros say.
Although the Canada Customs and Revenue Agency generally offers a three-year reassessment period, the agency's fairness package allows many adjustments to be filed as far back as the 1985 taxation year, says Dawn McGeachy, a certified general accountant in Almonte, Ont. "Even if the receipt is fairly old, it is definitely worth talking to your practitioner about making the claim."
The most common tax-filing errors -- which include forgetting to file an RRSP or charitable donation receipt or medical expense, failing to claim the equivalent-to-spouse tax credit or neglecting to apply for GST and provincial tax credits -- are the simplest to correct.
All the taxpayer need do is provide CCRA with the information slip, along with a letter or a T1ADJ (adjustment) form, asking it to take the new information into account.
Another common trigger for prior-year corrections are capital gains and losses, when taxpayers suddenly remember they had gains to apply losses to. When re-questing a loss carryback, taxpayers must fill out and submit a T1A form to the CCRA.
But, cautions Dennis Tew, vice-president and controller of Franklin Templeton Investment Corp. in Toronto, the CCRA's provisions allowing taxpayers to make prior year corrections do not constitute a license for them to suddenly change course on tax-planning initiatives they may have second thoughts about.
"They would challenge you if you've already claimed something and then tried to go back and revise numbers in your favour," he says.
If, for instance, an individual chooses to claim less than their maximum capital cost allowance in one year, leaving room to claim some of that amount in future years, he or she can't suddenly decide to go back and change that allocation. The same holds true for RRSPs.
CCRA would not allow taxpayers to amend their previous tax return if they decided to reallocate how much was deducted for a particular year, says CCRA spokesperson Sam Papadopoulos.
There are also several grey areas where the agency may use discretion in determing whether to rule in favour of the taxpayer.
Take, for example, cases where investors suddenly discover they have allowable business investment losses applicable to a previous year. Applying half of those losses against all other income could prove a lucrative credit.
© The Globe and Mail
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