In 2020, my client’s selfemployment was filed to show a net loss, based on actual income and expenses. I cannot find anywhere that the tax laws say that all expenses MUST be claimed. I would like to reduce expenses to increase income to $5,000. Any advice will be considered. Oh, and I did google to see what i could find on this topic. Everyone is just interested in telling us what may and may not be claimed.
I see this as an easy one.
Section 9 of the Income Tax Act reads as follows:
”9 (1) Subject to this Part, a taxpayer’s income for a taxation year from a business or property is the taxpayer’s profit from that business or property for the year”
What is required by section 9 its the reporting, as income, of the taxpayer’s “profit from that business or property for the year.”
Therefore, any artificial manipulation of that “profit” amounts to a misstatement or fraudulent reporting of that “profit” and thus income.
I would apply usual standards in its determination.
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I can’t remember the specifics BUT I seem to recall a thread ?or Video Tax News ?or something somewhere?
that CRA was NOT allowing people to change their tax returns for the purpose of benefiting from another program.
I am certain some of our more detail oriented persons in this group will have that handy.
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That makes sense - I was just grasping at straws. It didn’t seem like a good idea. Thanks @abechew309 and @rachelavryl
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If net income is falsified for the purpose of receiving a benefit e.g. bank loan I believe that could be an attempt to defraud. Not something you’d want to be any part of.
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There are various deductions that are discretionary, such as CCA (i.e. you don’t have to claim the maximum). But, if you have already filed the tax return, CRA does not have to let you CHANGE it - a T1 ADJ is a REQUEST to CRA, not a legal demand that they have to change anything.
The SE taxpayer must declare their income but can choose to claim what expenses including CCA they will claim. A key aspect is that the taxpayer agreed to the information filed, claiming expense amounts, these are not necessarily errors or omissions, so the CRA is under no obligation to adjust the return, especially to improve a benefit claim, this was also stated earlier.
I find the CRA rather enthusiastic to challenge lose claims, business or rental, and that is supported by individuals fudging their numbers or misunderstanding what can be claimed or having nothing to substantiate their claims. The CRA shakes the tree and money falls.
If your client has a non-capital loss he can carry it forward or back. I know some may be enthusiastic to aid clients but jigging returns post file that were accurately prepared by you is a waste of your time. If the client or another erred in the initial filing then get paid first, then review it.
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