2 kids born 2013 and 2017 - allowable childcare expenses $5,000 + $8,000 = $13,000.
Childcare expenses paid in 2020 approx $15,000 for the younger child. Client cannot obtain receipt for the older child’s care and won’t claim it.
Problem: TaxCycle is allowing the entire $13,000 to be claimed rather than the $8,000. Should the amount be overridden?
No.
Program is functioning as it should.
“TaxCycle is allowing the entire $13,000 to be claimed rather than the $8,000”
You may wish to review ITA S63(1)(e)(ii) [and S63(3)].
If you don’t have receipts, you can’t claim it. If you can’t claim it, don’t enter the amount. No need to overwrite it. You only enter the amount for the younger child.
1 Like
If this were my client, I would suggest that if they wished to claim the full amount, that they should do so. I would advise them that there is certainly a possibility that CRA will ask to see the receipts - although this is unlikely, and that an explanation will be required at that time. Yes, a reassessment would follow.
My feeling here is that your clients are not violating the spirit of the law, and shouldn’t be denied the deduction simply because someone else refuses to provide a receipt. If they were claiming Child Care expenses in a situation where one of them was not employed or running a business, that would be quite different. CRA would likely - rightly - flag that situation for review.
I hope this helps.
Stephen
@swelbourn You are actually advising a client to break the law, based on the unlikely event that CRA will ask for receipts?
You need to read up on third party negligence penalties (and hope nobody reports you for advising illegal filings)
The reason receipts are required is to attempt to stop the underground economy - the reason they can’t get receipts (which they are required by law to provide) is that the child care provider is not reporting their income! So in effect, the law abiding citizens that file correctly are now supporting both the non-reporting provider AND your over deducting client! How is that fair?
2 Likes
As a tax preparer and as a taxpayer I get very perturbed when the “pay me cash and no tax charge” topic comes up. Like many folks I too don’t enjoy paying taxes, however I do realize that my paying into the tax system provides, roads, bridges, security, healthcare education, even financial assistance programs (like CERB, CEBA).
The folks that intentionally operate in the “cash-only” business method do so with the mindset that “they pay too much in tax and this is a way to re-coup what they believe is theirs”. However when the cash economy opportunities dried up when the pandemic hit, these same folks were one the first in line looking to apply for any and all government assistance programs. Also, had anyone of them fallen ill from Covid or any other ailment that required medical care, they are the first to arrive at the door step of emergency department, expecting gold star service in health care, meanwhile they HAVE NEVER contributed their share into the system.
My late father (an accountant also) used to always say, " if you are not happy with how your taxes are being managed, don’t take it out on the teacher, police officer, nurse or doctor, buy not paying your share of tax. Instead use your democratic right to vote and remove the party that you believe is not fiscally responsible and vote in the party that will."
Its off topic of child care expenses, sorry.
2 Likes
One of my clients paid for child care at full price to a private caregiver. She was promised receipts at the year end. When she was not issued a receipt because the caregiver was not claiming the income, we filed the amount anyway and gave her full name and address of the caregiver. I know this is snitching but everyone is obligated to report income earned and my client was entitled to claim the credit on her taxes. Paying someone almost 10% of your income is no small amount.
1 Like
Tammy, I don’t think that’s “snitching”, such a negative word. You and your client did the right thing.
That’s not"snitcing"
That was your ethical REQUIRED duty of care to your client.
You would have been in breach of professional ethics had you not done so.
Perhaps better practice of your client is to obtain the SIN of a proposed private caregiver before handing over the kids for the first time into their care…