Tax: Methods of Taxation/Law

[BC_chick]

So, only smart people like you get to decide stuff - for the rest of us.

I put forth a coherent argument why it's a bad idea to wait until year end to collect taxes. I made the distinction between asset/insurance-backed loans with penalties and interest vs giving anyone earning an income a line of credit in the 10's of thousands. I continued with the fact that no other establishment in the habit of collecting revenue would do such a thing.

What kind of fourth-grade response back is this? That I think I'm smarter than you so I get to decide?

[BC_chick]

I didn't "backtrack" anything, considering that's what I was talking about all along. They are not "very different". It's a distinction many employers like to make, but it still very applies to people who work exclusively for one employer, who submit timesheet or punch a clock, and who receive a paycheque without any reductions.

From the very start I made the distinction (in several posts) about payroll deductions vs. business tax instalments. You said you know many employers who don't take tax upon your request. That implied payroll tax, of course, because small-business DON"T deduct tax off contractors.

Many businesses literally never make any deductions for ***any employees**. I've had a few such jobs. The onus to keep track was entirely on me.

You back tracked that you're talking about contractors.

There is no grey area here, you conflated and lost. The two are indeed, very different.

Edited April 8, 2016 by BC_chick

[Bryan]

You said you know many employers who don't take tax upon your request.

And I do.

You back tracked that you're talking about contractors.

I did not, that was always what i was referring to.

The two are indeed, very different.

They CAN be very different, but in the instances I'm talking about, the only tangible difference is that they have to take care of their own taxes.

[BC_chick]

I did not, that was always what i was referring to.

Oh wow, really, you want me to quote you AGAIN where you said employees even though I just did in my last post? Ok here:

Many businesses literally never make any deductions for any employees. I've had a few such jobs. The onus to keep track was entirely on me.

Do you see the word 'employees' at the end of sentence one? If you were 'always talking about contractors' why didn't you say so?

[Bryan]

Oh wow, really, you want me to quote you AGAIN where you said employees even though I just did in my last post? Ok here:

Do you see the word 'employees' at the end of sentence one? If you were 'always talking about contractors' why didn't you say so?

So? You're the one who said it was impossible (if not illegal). I only claimed I knew for a fact that it's routinely done, not that I know which line of the tax code or what technical jargon covered it.

[BC_chick]

As I said on page one, business owners who run a profitable business (considered as a net tax owing of $3K/year) have to pay instalments.

It's CRA's way of making sure they are subjected to the same process as payroll employees.

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/pymnts/nstlmnts/menu-eng.html

"The Income Tax Act requires corporations to make instalment payments so that they are treated the same as taxpayers who have tax deducted from their income at source."

If you did not pay instalments, it means you run a business that is not profitable enough to garner $3K in taxes per year. It doesn't mean you're off the hook.

[BC_chick]

So? You're the one who said it was impossible (if not illegal). I only claimed I knew for a fact that it's routinely done, not that I know which line of the tax code or what technical jargon covered it.

I was talking about payroll. Once again, different obligations which we can rehash in pages 2-3.

For businesses, refer to my previous post. You are still legally obligated to pay and subject to interest. Maybe the day will come where you break the $3K threshold and see that I was right.

[Bryan]

I was talking about payroll. Once again, different obligations which we can rehash in pages 2-3.

For businesses, refer to my previous post. You are still legally obligated to pay and subject to interest. Maybe the day will come where you break the $3K threshold and see that I was right.

All of us were well over $3k. Neither CRA nor our accountants cared because were were not actually operating independent businesses.

[BC_chick]

All of us were well over $3k. Neither CRA nor our accountants cared because were were not actually operating independent businesses.

That's $3 in net taxes, not $3k revenue.

And if you weren't independent operators it bring us back to the nature of your employment being employees but your employer paying you as casual in which case as I said before, your employer is behaving in very risky ways as s/he would be on the line for your remittances and their portion, plus interest, penalties,

and even jail.

You continue conflating employee and contractor and you don't seem to have a good grasp of the distinction or the obligations in each scenario.

Msj was spot on - quit while you're behind.

Edited April 8, 2016 by BC_chick

[msj]

Just in case someone comes across this thread and gets the wrong idea about Canadian requirements for instalments or payroll deductions thanks to the misrepresentation in previous pages I suggest these links:

Instalments: http://www.cra-arc.gc.ca/instalments/

Payroll deductions: http://www.cra-arc.gc.ca/E/pub/tg/t4001/t4001-e.html

As is usual in Canada, ignorance of the law is no excuse and will not protect you against interest nor penalties.

[msj]

Except if a PM decides to spend trillions for his friends, to help people...

These are serious questions though: how do you deal with the transition from our current system to your system?

Do you run deficits of $300+billion per year until the next election?

Do you expect people to pre-pay 4 years worth of income taxes without them knowing their incomes yet?

Do you have elections more often than every 4 years?

[Bryan]

That's $3 in net taxes, not $3k revenue.

Of course.

And if you weren't independent operators it bring us back to the nature of your employment being employees but your employer paying you as casual in which case as I said before, your employer is behaving in very risky ways as s/he would be on the line for your remittances and their portion, plus interest, penalties,

and even jail.

No. It's standard procedure. Very big companies with in house legal teams do it all the time, and have been for decades. It's never an issue.

You continue conflating employee and contractor and you don't seem to have a good grasp of the distinction or the obligations in each scenario.

It's a distinction without a difference when it comes to the job. Same offices, same desks, same work put in, same base pay. Obviously the obligations are different, that's what I've been telling you since the beginning.

[BC_chick]

If they are working on site using the employer's resources as you say, that in itself is one of the criteria for employment, not contractor. Just because a company breaks the law and does not get penalized, it doesn't make it legal. It just makes them lucky for the time being.

[msj]

No. It's standard procedure. Very big companies with in house legal teams do it all the time, and have been for decades. It's never an issue.

Do you have an independent source for this claim?

BCchick and I have both pointed to CRA documents that specifically talk to the issues of payroll deductions and installments for contractors/corporations.

If you expect anyone to believe you then show your work.

[BC_chick]

Agreed. Or name the company if you think their conduct is perfectly legal.

Edited April 8, 2016 by BC_chick

[Bryan]

Do you have an independent source for this claim?

BCchick and I have both pointed to CRA documents that specifically talk to the issues of payroll deductions and installments for contractors/corporations.

If you expect anyone to believe you then show your work.

No you didn't. You pointed to one document that did not apply, and another that might apply. They one that might apply is the one I agree with, and have made no quarrel with. You keep trying to claim that you've pointed out that something I've said is not true, or that I'm contesting the use of the term contractor. That is not the case. You're looking for an argument where none exists.

[msj]

You have made the claim that contractors can get away without paying instalment interest by gaming the instalment system.

Yes, to some extent it can be gamed.

But if you are required to pay quarterly payments or monthly payments the daily interest rate will apply to those payment dates.

Yes, if the interest rate does not change during the year (which it generally hasn't) you can pay your March 15th instalment on, say, April 14th and then pay your June 15th instalment early, say May15th and the daily interest charges will wash.

But that's not an advantage. It's just slightly different timing and no big deal.

In the end, the contractor or corporation pays instalments or pays the interest on not making the instalments at the appropriate times.

In my experience, most contractors and corporations do not pay the full instalments and pay at least some interest due to cash flow and/or stubbornness when it comes to pre-paying the current years taxes (which I define as stupidity).

But what would I know. I only do personal, trust, and corporate taxes for a living.

Edited April 9, 2016 by msj

[Bryan]

You have made the claim that contractors can get away without paying instalment interest by gaming the instalment system.

I'm not making a claim about what someone else can "get away with". I'm saying I never made any instalments nor did I ever pay any interest. I have no idea what line of the tax code covers that. Neither CRA nor my accountant had any issue with it. What they knew that you do not I can not tell you.

But what would I know. I only do personal, trust, and corporate taxes for a living.

According to the standards of evidence that you've established in this thread, I should expect you to prove that by providing me copies of those clients' tax returns if you expect me to believe that they really exist. /s

[msj]

I'm saying I never made any instalments nor did I ever pay any interest. I have no idea what line of the tax code covers that. Neither CRA nor my accountant had any issue with it. What they knew that you do not I can not tell you.

According to the standards of evidence that you've established in this thread, I should expect you to prove that by providing me copies of those clients' tax returns if you expect me to believe that they really exist. /s

Sure you can claim that all you and I can claim to be the greatest tax lawyer on the planet (but I'm not, I'm just an ordinary tax accountant).

But I have backed up my claims regarding instalments with links already provided.

The only reason you haven't paid instalment interest is for one of the following reasons:

1) you don't earn enough money and therefore don't pay enough tax to be forced to pay instalments or

2) related to #1, your income is low enpugh that you get the working income tax benefit which is a great program that helps out the working poor or

3)you have a combination of income with withholding tax that keeps your tax owing below the $3,000 threshold or

4) your income fluctuates so much from year to year, but is mostly on the low side, that you haven't had two years out of three of > $3,000 income tax owing or

5) a combination of #3 and #4.

I know when I first started I gamed my payroll deductions and used a combination of dividends one year and wages and wages payable in other years to briefly not have to deal with corporate instalments and personal instalments.

Then I realized what I pain in the ass that was and just put myself on a monthly budget, throw money into savings first, taxes second, and travel/food/entertainment third and don't look back to those times I thought I was beating the system when I wasn't.

Once again, for those who come across this thread here is a credible source on the instalment requirements:

http://www.cra-arc.gc.ca/instalments/

Don't take advice from anonymous users on forums.

Even those of us who claim to be CPA's and even though we support what we say with credible links.

Pay attention to the details of those links and ignore the opinions.

Especially the opinions of the guy claiming he games the system without being able to explain how he does it.

[Bryan]

You're still wrong. I paid a lot more than $3K in taxes, and my income was dead static. I didn't "game" anything. I paid what was required.. It's not my problem that another accountant knew what to do and you don't. I'm just glad I didn't come to you.

You're right about not taking my tax advice though. They shouldn't take yours either. Go see a competent accountant.

You're also right that it was a PITA. There's a reason why I don't do that anymore -- regular deductions are definitely easier to plan for.

[BC_chick]

According to the standards of evidence that you've established in this thread, I should expect you to prove that by providing me copies of those clients' tax returns if you expect me to believe that they really exist. /s

That was me, not msj. I would not normally ask such a thing if it seemed like you're talking about a small business, but according to you these are "very big companies with in-house legal teams" so I assumed you're talking about a big corporation like Telus.

If the company is as big as you say and their practices are as kosher as you say, I don't see the problem in providing an example. After all, it's not like they're breaking any laws, right?

[BC_chick]

You're still wrong. I paid a lot more than $3K in taxes, and my income was dead static. I didn't "game" anything. I paid what was required.. It's not my problem that another accountant knew what to do and you don't. I'm just glad I didn't come to you.

You're right about not taking my tax advice though. They shouldn't take yours either. Go see a competent accountant.

You're also right that it was a PITA. There's a reason why I don't do that anymore -- regular deductions are definitely easier to plan for.

You have yet to clarify the nature of this pay, and that is the KEY point within the discussion because everything thereafter relies on that piece of information. Did you work sporadically for the company or for long term?

Either give up some information or bow out gracefully but if you want to have an honest debate you have to back up your claims.

Edited April 9, 2016 by BC_chick

[msj]

You're still wrong. I paid a lot more than $3K in taxes, and my income was dead static. I didn't "game" anything. I paid what was required.. It's not my problem that another accountant knew what to do and you don't. I'm just glad I didn't come to you.

You're right about not taking my tax advice though. They shouldn't take yours either. Go see a competent accountant.

You're also right that it was a PITA. There's a reason why I don't do that anymore -- regular deductions are definitely easier to plan for.

Just so I have this right, you claim:

1) that another accountant knew how to avoid tax instalments, and

2) that any competent accountant would know how to do this, and yet

3) it's too much of a PITA and, therefore

4) you don't do it anymore because

5) regular payments are easier.

Oh, and you have no way of proving how this is done or how it was done.

Um, ok, that's just odd, inconsistent, demonstrates cognitive dissonance, and lacks credibility.

Again, as BCchick has asked: put up or shut up.

Edited April 9, 2016 by msj

[BC_chick]

1) you don't earn enough money and therefore don't pay enough tax to be forced to pay instalments or

2) related to #1, your income is low enpugh that you get the working income tax benefit which is a great program that helps out the working poor or

3)you have a combination of income with withholding tax that keeps your tax owing below the $3,000 threshold or

4) your income fluctuates so much from year to year, but is mostly on the low side, that you haven't had two years out of three of > $3,000 income tax owing or

5) a combination of #3 and #4.

Bingo.

He can say he has a good accountant as much as he likes but this is not about the accountant, it's about CRA. If he continuously paid more than $3K in taxes year after year and he did not have any other type of income throughout the year on which he already paid taxes, it wouldn't matter who did his taxes, he would get that letter.

I know it's difficult to speculate with Mr. Super Big Secret, but my guess is he worked sporadically for a company alongside other means of employment on which he did contribute throughout the year, and he paid the difference after filing his taxes. He now thinks that because company B did not deduct taxes and he was not required to pay instalments, it means he has a 'good' accountant.

[Bryan]

You have yet to clarify the nature of this pay, and that is the KEY point within the discussion because everything thereafter relies on that piece of information. Did you work sporadically for the company or for long term?

It was my exclusive full time job for about a year and a half. I was paid an hourly rate, by cheque, bi-weekly.