Remind your clients that if they receive a charitable donation receipt for an amount higher than the value of property donated, the receipt is not valid and can’t be used to claim a tax credit. The CRA is auditing all such gifting tax shelter schemes, and to date, none has been found to comply with Canadian tax law.
For the 2013 tax year, CRA will not assess taxes owed or provide a refund to taxpayers who claim a tax credit under a gifting tax shelter scheme until it has been audited.
Read: Protect clients from gifting tax shelter schemes
But if a taxpayer makes a claim under a gifting tax shelter scheme, she can have her tax return assessed before the related tax shelter has been audited if she agrees to remove the claim from her return. This procedure was also available in the 2012 tax year.
New laws introduced in the 2013 budget affect taxpayers who have been denied a tax credit for donations made under a gifting tax shelter and who have objected to the CRA or appealed it to the Tax Court of Canada. The legislation allows the CRA to collect 50% of the amount in dispute or to withhold 50% of the refund when these amounts are related to a gifting tax shelter.
Read: Budget boosts charitable tax credits, LSVCCs phase out
The CRA strongly encourages taxpayers to get advice from an independent tax professional before engaging in a tax shelter.
Facts on gifting tax shelters:
- The CRA has denied more than $5.9 billion in donation claims and reassessed over 182,000 taxpayers who participated in these gifting tax shelters.
- The CRA has revoked the charitable status of 47 charitable organizations that participated in gifting tax shelters.
- The CRA has assessed $137 million in third-party penalties against the promoters and tax preparers involved.
- The CRA will also be administering new legislation for the 2013 tax year, which affects taxes in dispute related to gifting tax shelters.