Deck 2: Procedures and Administration

Question 1

In some situations, an employee may request an increase in the amounts that are withheld for future income taxes. What circumstances might lead an employee to make such a request?

Answer 1

While there are other possibilities, the ones that are mentioned in the text are:
• Normal withholding is based on rates in a low tax rate province, but the individual resides in a high tax rate province (e.g., the individual works in Alberta, but lives in Saskatchewan).
• An individual receives large amounts of taxable spousal support payments that are not subject to withholding.

Question 2

If quarterly instalments must be paid by an individual, they can be calculated as one-quarter of the net tax owing for the preceding year.

Answer 2

True

Question 3

If a corporation that is a small CCPC is required to make quarterly instalment payments on their income taxes, how are the required amounts determined?

Answer 3

A corporation that is a small CCPC can choose from three different methods in determining their instalment payments.
Method 1 - The instalments can be based on one -fourth of the estimated taxes payable for the current taxation year.
Method 2 - The instalments can be based on one -fourth of the taxes payable for the previous taxation year.
Method 3 - The first instalment can be based on one -fourth of the taxes payable for the second previous year. The remaining three instalments will then be based on the taxes payable for the previous taxation year reduced by the amount paid in the first instalment, with this amount divided by three.

Question 4

Under what circumstances must an individual make income tax instalment payments during the current year?

Question 5

Because the taxation year of an individual must be based on the calendar year, all individuals will have the same filing due date.

Question 6

Cases can be heard by the Tax Court of Canada using either the general or the informal procedures. How do these two procedures differ?

Question 7

On April 30 of the current year, her filing due date, Nicole Houde finds that she has a significant net tax owing. She will not be able to pay this until the beginning of July. She doesn't want to file her return until she has the funds available to pay the balance. What advice would you give Ms. Houde in this regard?

Question 8

If a corporation that is not a small CCPC is required to make instalment payments on their income taxes, how are the required amounts determined?

Question 9

If an individual dies after October in a particular taxation year, his legal representatives must file his tax return by the later of his normal filing due date and six months after the date of his death.

Question 10

By making all instalments on the basis of the CRA's instalment reminder, the taxpayer is assured that no interest will be assessed for deficient instalments. However, this may not be the best alternative for making instalment payments. Explain why this is true.

Question 11

An individual can request that an employer reduce the amounts withheld for income taxes. What conditions must be met for this request to be granted? Provide an example of a situation where this request would be granted.

Question 12

A corporation's balance due date is not the same as its return due date. Explain how these dates differ.

Question 13

The normal reassessment period is 3 years for individuals and CCPCs and 4 years for other corporations. Indicate two situations where a reassessment can occur outside the normal reassessment period.

Question 14

Briefly describe the difference between tax evasion and tax avoidance.

Question 15

Under what circumstances must a corporation make income tax instalment payments during its current taxation year?

Question 16

One of your clients has received his instalment notice and has asked your advice as to whether he should make the payments. Provide the requested advice.

Question 17

If an individual believes that the amount of income taxes withheld by his employer is greater than the amount that he will have to pay in a particular year, he can make a request to the CRA to have his source deductions reduced.

Question 18

How is interest on late instalments calculated?

Question 19

If an individual is required to make quarterly instalment payments on their income taxes, how is the required amount of the instalments determined?

Question 20

If an individual is required to make income tax instalment payments, one acceptable pattern of payments is to base each payment on one-quarter of the estimated Tax Payable for the current taxation year.

Question 21

Ms. Deveco's 2020 income tax return is due on April 30, 2021. While she is too busy to file her tax return on that date, she remits a cheque to the government for $10,000, her estimated amount of net tax owing on that date. She has never filed a late return before. She prepares and files her tax return on May 31, 2021. At this time, the return shows that her actual net tax owing was $9,800. Assuming that the interest rate applicable to late payment of taxes is one-half percent per month without daily compounding, how much will she owe in penalties and interest on the late filing?

A)$ 49.
B)$490.
C)$588.
D)$637.
E)Nil.

Question 22

The penalty for an individual making insufficient instalment payments is 5 percent of the total unpaid tax at the filing date, plus 1 percent per month.

Question 23

The interest rate applicable on refunds to individuals is 4 percentage points less than the interest rate applicable on amounts owing to the CRA.

Question 24

Which of the following statements is NOT correct?

A)If an individual has business income during the year, the due date for their income tax return is June 15 of the following year.
B)An income tax return may be required of an individual, without regard to their age.
C)If an individual has no Taxable Income for the year, they do not have to file an income tax return.
D)If an individual sells a capital property during the year, they are required to file an income tax return, even if there is no gain or loss on the transaction.

Question 25

The notice of objection for a corporation must be filed within 90 days from the date of mailing of the notice of assessment.

Question 26

Ms. Loren dies on February 1, 2021. All of her income is from employment activities and she does not have a spouse or common-law partner. What is the latest date for filing her 2020 income tax return?

A)April 30, 2021.
B)June 15, 2021.
C)August 1, 2021.
D)June 30, 2021.

Question 27

Without regard to whether an individual's filing due date is April 30 or June 15, any balance of tax owing must be paid by April 30.

Question 28

Which of the following statements is correct?

A)When an individual dies in a year, an income tax return must be filed for that year within 6 months of the date of death.
B)Only residents of Canada are required to file Canadian income tax returns.
C)An individual with business income during the year must pay any balance owing by June 15 of the following year.
D)A self employed individual with a net business loss for the year does not have to file an income tax return for the year.

Question 29

Interest and penalties may be waived or reduced in extraordinary circumstances, such as those involving natural disasters or serious illness.

Question 30

John Barron is self-employed and plans to file his 2020 tax return on June 15, 2021. His balance-due day is:

A)April 30, 2020.
B)April 30, 2021.
C)June 15, 2021.
D)June 15, 2020.

Question 31

Ms. Ali, a self-employed music teacher with business income, dies on November 15, 2020. What is the latest filing date for her 2020 income tax return?

A)April 30, 2021.
B)May 15, 2021.
C)May 30, 2021.
D)June 15, 2021.

Question 32

The GAAR provisions are not applicable to gifts to adult children.

Question 33

With respect to the filing of an individual income tax return, which of the following statements is correct?

A)An individual is required to file an income tax return if their only source of income is business income, even if no tax is payable.
B)An individual is required to file an income tax return if they have reached the age of 18 by the end of the year.
C)If an individual has disposed of a capital property during the year, they are required to file an income tax return, even if no tax is payable.
D)An individual is not required to file an income tax return if no tax is payable for the year.

Question 34

Greta died on September 10, 2020. She has never reported any business income. By what date must her final tax return be filed?

A)April 30, 2021.
B)April 30, 2022.
C)March 10, 2021.
D)June 15, 2021.

Question 35

Mr. Khan, a self-employed construction contractor, dies on April 1, 2020. What is the latest filing date for his final tax return?

A)April 30, 2021.
B)June 15, 2021.
C)October 1, 2021.
D)December 31, 2021.

Question 36

All corporations must file their tax returns no later than six months after the end of their fiscal year, and pay any balance of tax owing no later than three months after the end of their fiscal year.

Question 37

Bunly Im is a self-employed hairdresser. Which of the following dates are correct for the date by which his tax return for a year must be filed (1st item)and his payment due date (2nd item)?

A)April 30, April 30.
B)June 15, April 30.
C)April 30, June 15.
D)June 15, June 15.

Question 38

For the 2020 taxation year, John Bookman had a taxable capital gain of $45,000 and a net business loss of $45,000, resulting in a Taxable Income of nil. Which of the following statements is correct?

A)John is not required to file a tax return for 2020.
B)John must file a tax return on or before June 15, 2021.
C)John must file a tax return on or before December 31, 2021.
D)John must file a tax return on or before April 30, 2021.

Question 39

Tax avoidance involves deliberately ignoring a specific provision in the Income Tax Act.

Question 40

Mr. Finlay, a retired individual whose only source of income was pension receipts, dies on August 15, 2020. By what date must Mr. Finlay's final tax return be filed?

A)April 30, 2021.
B)February 28, 2021.
C)February 15, 2021.
D)December 31, 2020.
E)None of the above.

Question 41

Which of the following statements with respect to corporations is NOT correct?

A)Corporate income tax returns must be filed within 6 months of the end of the taxation year.
B)All corporations must file their income tax returns electronically.
C)If the corporation is a CCPC, the due date for any balance owing is three months after the end of the taxation year.
D)If a corporation has foreign operations, it can determine its Canadian tax liabilities on the basis of financial statements prepared in the corporation's functional currency.

Question 42

Jason Marks has to pay his tax by instalments as a result of his significant investment income. His net tax owing in 2018 was $13,600. In 2019, it was $15,000. His estimate for 2020 is $17,000. If he decides to pay his 2020 tax instalments according to the prior year option, how much should he pay on September 15, 2020?

A)$3,400.
B)$3,750.
C)$4,250.
D)$6,500.

Question 43

For its 2020 taxation year, its first year of operation, PS Swim Inc. filed its return three months late. The unpaid tax at the due date for the return was $2,500. This amount was not paid until the return was filed. What would its penalty be?

A)Nil.
B)$75.
C)$125.
D)$200.
E)$500.

Question 44

PP Ltd., a client of your firm, has a November 30 year end and has requested you to advise them on what its monthly instalments for the 2020 tax year will be. Its taxes payable for its November 30, 2018 and November 30, 2019 years were $13,800 and $13,200, respectively. Its estimated taxes payable for the November 30, 2020 year are $14,400. PP Ltd. wants to pay the lowest amount possible, without incurring interest penalties. What would its instalments be?

A)Twelve payments at $1,200 per month.
B)Twelve payments at $1,100 per month.
C)Twelve payments at $1,150 per month.
D)Two monthly payments at $1,200 each, followed by ten monthly payments at $1,140 each.
E)None of the above.

Question 45

A Canadian public company has Tax Payable of $62,000 in 2018, $95,000 in 2019, and $75,000 in 2020. The company would like to minimize its 2020 instalments. What would its instalments be?

A)One monthly payment of $5,167 per month, followed by eleven monthly payments of $8,167 per month.
B)Twelve payments of $5,167 per month.
C)Twelve payments of $6,250 per month.
D)Two monthly payments of $5,167 per month, followed by ten monthly payments of $8,467 per month.

Question 46

For corporations, the filing deadline for tax returns is:

A)April 30.
B)the fiscal year end.
C)three months after the fiscal year end.
D)three months after the fiscal year end if the small business deduction is claimed, otherwise two months after the fiscal year end.
E)six months after the fiscal year end.

Question 47

Ms. Marston has net tax owing for 2018 of $4,500, net tax owing for 2019 of $8,000, and estimated net tax owing for 2020 of $7,500. If she wishes to pay the minimum total amount of instalments for the 2020 taxation year, her first payment on March 15 will be for what amount?

A)Nil.
B)$1,125.
C)$1,875.
D)$2,000.

Question 48

Which of the following individuals did NOT have to pay instalments in 2020?

A)Jane Austen, who had business income of $50,000 in both 2018 and 2020 and a $1,000 business loss in 2019.
B)Charlotte Bronte, who realized capital gains of $3,500 in 2019 and $4,000 in 2020. Her only other income during the years 2018 through 2020 was $5,000 in employment income.
C)George Eliot, who had rental income of $50,000 in the years 2018 through 2020 and a net allowable capital loss of $50,000 in 2019.
D)Emily Bronte, who received spousal support payments of $20,000 per year in each of the years 2018 through 2020.

Question 49

Which of the following is NOT one of the criteria for a CCPC to be considered a small CCPC eligible to pay instalments on a quarterly basis?

A)Taxable income cannot exceed $500,000 for the corporation and its associated corporations for the current taxation year and the two previous years.
B)The corporation has claimed the small business deduction in the current or previous year.
C)The corporation has a perfect compliance record during the last 12 months.
D)The corporation and its associated corporations do not have Taxable Capital Employed in Canada that exceeds $10 million for the current or previous year.

Question 50

Which of the following scenarios will result in a penalty being charged by the CRA?

A)A taxpayer pays less than the required amount of instalments.
B)A taxpayer who is owed a refund files their tax return late.
C)A taxpayer who has a balance owing files their tax return late, with the payment enclosed.
D)A taxpayer who has a balance owing files their tax return on time, but does not include a payment.

Question 51

Larry Short has self-employment income of $62,000 in 2020. Prior to this year, he was employed full-time and his employer's withholdings more than covered his tax liability for the year. Larry estimates that, based on his self-employment income, his net tax owing for 2020 will be $8,000. Which of the following statements is true?

A)Larry must file his return for 2020 by April 30, 2021.
B)Larry should pay instalments in 2020.
C)Larry must pay his income tax for 2020 by June 15, 2021.
D)If Larry has as much income in 2021 as he had in 2020, he will have to pay instalments during 2021.

Question 52

Dora Burch files her 2020 income tax return on March 2, 2021. She receives a nil assessment on June 3, 2021. However, on December 28, 2021, she receives a reassessment indicating that she owes a substantial amount of additional tax. She would like to object to this reassessment. What is the latest date for her to file a notice of objection? (Ignore the effect of leap year if applicable.)

A)March 2, 2022.
B)April 30, 2022.
C)March 28, 2022.
D)December 28, 2022.

Question 53

The balance due date for a corporation is:

A)April 30 of the following year.
B)the same as the filing deadline.
C)three months after the end of the fiscal year, or two months after the end of the fiscal year if the corporation is a small CCPC.
D)two months after the end of the fiscal year, or three months after the end of the fiscal year if the corporation is a small CCPC.

Question 54

Lang Lang Ltd., a CCPC eligible for the small business deduction, has a March 31 year end. Due to the death of the owner/manager, the tax return for the year ended March 31, 2019 was not filed until May 12, 2021. The unpaid tax on March 31, 2019 was $15,500. Lang Lang Ltd. has never filed a return late before. What is the total late file penalty that the corporation is required to pay? (Do not include any interest payable.)

A)$775.
B)$2,635.
C)$1,860.
D)$3,720.

Question 55

A Canadian public corporation had federal taxes payable in 2018 and 2019 exceeding $3,000. One correct option it has with respect to its 2020 instalments is to pay:

A)equal instalments, on a quarterly basis, based on its 2019 federal taxes payable.
B)on a monthly basis, instalments equal to 1/12th of its estimated 2020 federal taxes payable.
C)one lump-sum payment, within three months of its 2020 year end.
D)on a monthly basis, instalments equal to 1/12th of its 2018 federal taxes payable.

Question 56

One way to ensure that no interest will be assessed for late instalments is:

A)to pay the amounts provided by the CRA in their instalment reminder on or before the required dates.
B)to pay the lowest amount calculated using the three alternative calculations on or before the required dates.
C)to pay the estimated tax owing for the current year on the first instalment due date.
D)to pay the average of the three amounts calculated using the three alternative calculations on or before the required dates.

Question 57

Individuals are required to pay instalments:

A)when net tax owing is over $3,000 for any one of the past two years.
B)when net tax owing is over $3,000 for the current year and both of the two prior years.
C)when net tax owing is over $3,000 for the current year and one of the two prior years.
D)when net tax owing is over $3,000 for the current year only.

Question 58

PS Swim Inc. has a year end of November 30. It is a small CCPC. For its 2020 taxation year, its income tax return is due on:

A)January 31, 2021.
B)February 28, 2021.
C)April 30, 2021.
D)May 31, 2021.
E)None of the above.

Question 59

Dora Chen has determined that her minimum tax instalments for 2020 are $8,000 per quarter. She also owes $30,000 on her credit card, which carries an interest rate of 20%. She has destroyed her credit card, so no more can be put on it. Dora is unable to pay both the entire instalment amounts and her credit card balance, but she does have $8,000 in cash each quarter for her debts. Which of the following would be the best choice for Dora from a financial planning perspective?

A)Dora should pay off her credit card balance before making instalment payments.
B)Dora must make all her instalment payments, even if it means she cannot pay anything off on her credit card this year.
C)Dora should split her payments equally between the credit card balance and the instalment liability, in order to show the CRA that she is trying her best to meet her obligations to them.
D)Dora should pay her first two instalments and then make payments on her credit card balance.

Question 60

All of the following people will have to pay tax by instalments this year, except:

A)Jane White, who received a one-time bonus of $60,000 last year and, because her employer had not deducted enough tax, found herself with net tax owing of $8,200.
B)Karen Phillips, who has started to earn investment income, which resulted in net tax owing of $3,100 last year. Her investment income is expected to be even greater this year.
C)Blake Fortin, who established a sole proprietorship two years ago. Blake had a very successful first year and, as result, he had net tax owing that year of $85,000. Business dropped in his second year, resulting in net tax owing of only $1,500. This year, business has picked up again and he expects to have net tax owing of $53,000.
D)Terri Jones, who has had net taxable capital gains on real estate in excess of $40,000 in each of the last two years, and who expects to have similar gains this year.

Question 61

Marc Mayer filed his 2020 personal tax return on March 1, 2021. Neither he nor his spouse has business income in any year. The CRA mailed a Notice of Assessment to Marc dated May 5, 2021 and Marc received it on May 14, 2021. If Marc disagrees with the Notice of Assessment, he has until which one of the following dates to file a Notice of Objection?

A)August 3, 2021.
B)August 12, 2021.
C)March 1, 2022.
D)April 30, 2022.

Question 62

Minnie Belanger is retired. She filed her 2020 tax return on March 5, 2021. She received a portion of the tax refund claimed and an assessment notice, dated April 19, 2021, which set out the difference between the amount claimed and the amount of the refund. As Minnie disagrees with the notice of assessment, she wishes to file a notice of objection. What is the latest date she has to file a notice of objection?

A)March 5, 2022.
B)April 19, 2022.
C)April 30, 2022.
D)July 18, 2021.
E)June 15, 2022.

Question 63

Tom Arnold filed his 2020 tax return on March 1, 2021. The CRA mailed a notice of assessment to Tom dated May 15, 2021, and Tom received it on May 30, 2021. If Tom disagrees with the notice of assessment, what is the latest date he has to file a notice of objection?

A)90 days from March 1, 2021.
B)90 days from April 30, 2021.
C)90 days from May 15, 2021.
D)90 days from May 30, 2021.
E)None of the above.

Question 64

The taxation year end for Grange Inc. is March 31, 2020. It is a Canadian controlled private corporation that claims the small business deduction and had Taxable Income for the year ending March 31, 2019 of $165,000. Indicate the date on which the corporate tax return for the year ending March 31, 2020 must be filed, as well as the date on which any final payment of taxes is due.

Question 65

Lemar Ltd. has a December 31 year end. It is not a small CCPC. For 2018, its taxes payable were $71,500, while for 2019, the amount was $93,600. For 2020, its estimated taxes payable are $114,700. What would be the minimum instalment payments for the 2020 taxation year and when would they be due? How would your answer differ if Lemar Ltd. qualified as a small CCPC?

Question 66

As his Taxable Income in 2019 was nil, Mark Felton did not make any instalment payments during 2020. In completing his return for 2020, he finds that he has tax payable of $22,500. While his normal filing date would be April 30, 2021, he does not file his return or pay the balance owing until September 12, 2021. What penalties and interest will be assessed for the 2020 taxation year?

Question 67

George Klause dies on March 1, 2021. All of his income during 2020 was earned through his unincorporated accounting practice. By what date must his representatives file his 2020 income tax return? Explain your answer.

Question 68

Mark Brown's 2020 Net Income includes business income. When is his 2020 tax return due? By what date must his 2020 tax liability be paid in order to avoid the assessment of interest on amounts due?

Question 69

Which of the following statements is NOT correct?

A)When the person filing the return has made any misrepresentation due to neglect, carelessness or wilful default, the normal reassessment period can be extended beyond 3 years.
B)A taxpayer can choose to file a waiver to extend the 3 year time limit.
C)When a return has been reassessed once, no further reassessments are permitted.
D)Reassessment can occur outside the normal reassessment period when reassessment within the normal period affects a balance outside of the normal period.

Question 70

Dustin Inc. has a September 30 year end and is not a small CCPC. For its taxation year ending September 30, 2018, its tax payable was $33,500. The corresponding figure for the year ending September 30, 2019 was $93,400. It is estimated that, for the year ending September 30, 2020, its tax payable will be $56,200. What would be the minimum instalment payments for the taxation year that ends on September 30, 2020, and when would they be due? How would your answer differ if Dustin Inc. qualified as a small CCPC?

Question 71

The taxation year end for Lawnco Inc. is January 31, 2020. Lawnco Inc. is a Canadian public company and does not qualify for the small business deduction. Indicate the date on which the corporate tax return must be filed, as well as the date on which any final payment of taxes is due.

Question 72

Chemco Inc. has a December 31 year end and is not a small CCPC. For 2018, its taxes payable were $146,300, while for 2019, the amount was $94,650. For 2020, its estimated taxes payable are $52,300. What would be the minimum instalment payments for the 2020 taxation year and when would they be due? How would your answer differ if Chemco Inc. qualified as a small CCPC?

Question 73

At the beginning of 2020, the following information relates to Jerry Farrow: Is Mr. Farrow required to make instalment payments during 2020? If he is required to make instalment payments, indicate the amounts that would be required under each of the three alternative methods of calculating instalments. Indicate which alternative would be preferable.

Question 74

Ms. Jeanine Farrel has 2020 Net Income which includes business income. When is her 2020 tax return due? In addition, indicate when any remaining tax liability must be paid in order to avoid having interest assessed on the amount due.

Question 75

At the beginning of 2020, the following information relates to Sarah Elmsley: Indicate whether Ms. Elmsley is required to make instalment payments during 2020. Explain your conclusion and, if your answer is positive, indicate the minimum instalments that will be required and when they are due.

Question 76

For a public corporation, which of the following statements is correct with respect to filing a notice of objection?

A)It must be filed no later than 180 days from the date on the notice of assessment.
B)It must be filed the later of 90 days after the date on the notice of assessment and one year from the filing date for the return under assessment.
C)It must be filed the later of 180 days after the date on the notice of assessment and one year from the filing date for the return under assessment.
D)It must be filed no later than 90 days after the date on the notice of assessment.

Question 77

Despite the fact that her net tax owing has been between $7,000 and $8,000 in the two previous years, and is expected to be a similar amount during 2020, Marsha Fields has made no instalment payments for 2020. While her normal filing date would be April 30, 2021, she does not file her 2020 return or pay the balance owing until August 24, 2021. Marsha has filed her return on time in all previous years. What penalties and interest will be assessed for the 2020 taxation year?

Question 78

Which of the following is NOT one of the criteria that must be met before an adjustment to a previous year tax return is permitted?

A)The CRA must be satisfied that the previous assessment was incorrect.
B)The change is based on a successful appeal to the courts by another taxpayer.
C)The taxpayer's return was filed within 3 years of the end of the year to which it relates.
D)The reassessment must be made within the normal assessment period, or under certain permitted extensions to this period.

Question 79

Gloria Klump dies on December 1, 2020. Much of her 2020 income resulted from an unincorporated business which she operated. By what date must her representatives file her 2020 income tax return? Explain your answer.

Question 80

Horace Greesom filed his 2019 return on time. At the beginning of 2020, the following information relates to Mr. Greesom: What amounts will be shown on the Instalment Reminder notices for 2020 and when will the amounts be due? Should he pay those amounts? Explain your conclusion.