Your client wants to give to charity. But before he makes a donation, warn him about gifting tax shelter schemes.
If it seems too good to be true, it probably is, says the Canada Revenue Agency (CRA). For example, if a tax shelter promoter offers a tax receipt for a larger amount than the donation or payment, it’s unlikely to be valid.
Read: Give more for less
The CRA urges Canadians considering entering into a tax shelter arrangement to obtain independent, professional tax advice before signing any documents.
Starting this year, the CRA will hold the assessment of returns for taxpayers claiming a credit for a gifting tax shelter scheme. This will prevent invalid refunds and discourage participation in these abusive schemes, says the CRA.
Assessments and refunds will not proceed until the audit has been completed, which may take up to two years. All gifting tax shelter schemes are audited and the CRA has not found any that comply with Canadian tax laws.
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A taxpayer whose return is on hold can have their return assessed if they remove the claim for the gifting tax shelter receipt in question.