Everyone Cheats on Their Taxes. Don’t They?

My husband got his T4 the other day and I stared at it in amazement. His “earned income” was way higher than I would have thought. That’s because we have to budget and live off of his “real income.” You know, the miniscule amount that comes home after taxes, EI, CPP, health savings account, charity, life insurance, social club fees, savings plan, disability insurance and all the other deductions are paid. We won’t be getting much if any of those taxes back, either, because we don’t cheat.

How stupid honest are we? We actually report the 38 cents of interest we earn on our chequable savings account.

Like most Canadians, however, tax breaks, deductions, scams and cheating fascinate me. While I would never dare to try some of the stunts I’ve read about, I do find them entertaining.

Why Do People Expect Others to Condone Their Tax Cheating?

I’m also astonished at how many people seek validation for their misdemeanors publicly.

Here are some recent examples on RedFlagDeals.

One couple wants to delay admitting they’ve been living common law for years because (a) it might decrease the grant portion of student loans one of the couple could receive and (b) presumably it has resulted in them getting a HST refund that they are not eligible for if their income is combined. This led into a convoluted attempt at justification by asking whether the CRA would penalize two same-sex room-mates who accidentally had sex one time only in a drunken stupor by making them file a common law tax return. It’s fascinating, if a little frightening, to see how some people think.

Another person wants to know if it’s worth hiring an accountant who routinely mis-reports investment expenses and asks for a split from the customer for the resulting tax refund. Yikes!

Does anyone else wonder if the CRA cruises through forums like this looking for ideas for audits?

I caught a few minutes of a recent W5 episode about people who fell for a tax refund scam and then were denied their claims plus fined 50% of the tax they had dodged dubiously as a penalty. The one person I saw was crying on camera. She said her fine and back taxes owed were in the thousands of dollars and she didn’t have the money to pay and she hadn’t known she was doing anything wrong.

Really? You think there are deductions out there that will save you THOUSANDS on your tax bill legally? I wish! There are almost NO legal tax deductions in Canada for the average wage-slave.

Speaking of non-average-wage-slaves, Mr. C. Black is also apparently on the hook for a large tax penalty.  I doubt we will ever fully understand tax evasion at those levels, though, as it involves batteries of tax lawyers and tax accountants. In a strange way it would be nice to have to worry about it, though!

Don’t Let a Tax Mistake Lead to You Paying Tax Fraud Penalties

Occasionally, people aren’t trying to evade taxes, they just make a mistake. The Blunt Bean Counter explained what you should do before you get caught in “The CRA’s Matching Program – Mismatch and you May be Assessed a 20% Penalty.”  A typical cause of this is you don’t notice that you need to download and print a T-slip for a small amount of interest or capital gains income from a non-registered investment account or a work-related savings plan. As e-receipts become more common, I expect this type of error will also increase. Unfortunately, the CRA doesn’t care: it will penalize you anyway.

Please Help Others Meet Their Tax Obligations by Revising the CPP Death Benefit

While it has nothing to do with tax fraud, I would also like to remind readers that it would be great to lobby the government to implement a withholding tax on the CPP Death Benefit. Every year, people who took on the responsibility of paying the last costs of a friend or relative who died penniless discover that although they have already spend the CPP Death Benefit on funeral costs, they now must pay tax on the benefit, out of their own pocket. The only simple way I can see to reduce this injustice is to withhold some of the Death Benefit at the time it is issued so there is no tax owed. Please read my post about this topic and if you agree, send a letter or email to Ottawa.

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Have you heard any “tax tips” that made you cringe as you thought of the fines and penalties awaiting anyone silly enough to try them? Please share your views with a comment.

For Love or Money

Krystal Yee recently wrote “When do you have the ‘Money Talk’ In a Relationship.” It made me shudder, frankly. I can’t imagine the horrors of having to date again much less having to sound out new partners on everything from STDs to HELOCs. It was another (unneeded) reminder of how incredibly wonderful it is to be married, in love, and working &*%*$ hard to stay that way.

She’s right, though, that money can break many relationships and add a lot of tension to others. One older married couple I’m related to have had to invest patience and empathy in solving their basic difference in money outlooks: one is always afraid of being destitute, the other is always sure things will work out. Fortunately since they were both professionals earning a good income their disputes were never enough to drive them apart. For a family with a much more modest income those same differences could well have ended in divorce.

The High Cost of Divorce

Divorce itself is a huge reason for poverty. In NewsWeekly from Australia, Augusto Zimmermann lists various studies that have shown a decline in living standards of up to 30% in the US in families who divorce.

I’m sure you know people who have divorced; you may even be someone who has divorced. If you run through the list of those you know who are divorced, I’d be very surprised if each of those families are financially as well-off post divorce as pre. (Obviously, though, there are reasons why divorces are necessary even if they may be financially devastating.)

Marriage and Money

Perhaps ironically, the marriage ceremony itself can cause financial hardship.
When a couple of my older relatives married, they had a church service for friends and family followed by a reception in the church hall with sandwiches, squares and cookies, and a slice of the wedding cake. Half of the family couldn’t attend because they didn’t own cars and taking the train from one province to another was unthinkably expensive.

Fast forward to today when it’s not unusual for middle-class couples to have a “destination” wedding where everyone flies to another country and stays in a hotel for several days. Every single thing, from the officiate to the food and drinks must be paid for at retail rates.

If you wander through the internet with a search term like “I can’t afford to go to your destination wedding” you’ll score dozens, if not hundreds, of articles. Salon has covered it. Ask Ellie has too.

Melissa Leong at the Financial Post wrote about this new trend in weddings in “No, I don’t want to go to your expensive wedding.” She describes people paying $500- 1000 just to attend a stag or stagette. What has made this “normal”?!

MamaMia wrote about the significant changes in the costs of being a bridesmaid, too, in “Actually no, I don’t want to be your bridesmaid. I can’t afford it.”

All of the articles speak to the same problem. In North America, at least, people find it tremendously difficult to tell a friend or relative that something costs too much. The embarrassment seems to rank right up there with public speaking or asking them about their sexual preferences.

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So how are people supposed to cope with the demands of love and the role of money in their lives? I don’t know. If you do, please share your advice with a comment.

In the meantime I’d better start saving some more money. I’d hate to have to miss my children’s weddings because I can’t afford to attend!