Power of Attorney Compensation Help
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Thread: Power of Attorney Compensation Help

  1. #1
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    Power of Attorney Compensation Help

    Hi, I read online that compensation for a power of attorney needs to be reported as employment income. First, is that the case, and secondly, how does one clear this up if you collected for a couple of years but not claimed yet. Is there a way to minimize any penalties if there are any?

    thx,


  2. #2
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    Yes ... http://personalawgroup.com/power-of-...-yours-to-cra/

    Another link notes:
    Notably, a Power of Attorney who is paid is held to a higher standard of care than a Power of Attorney acting without compensation. The unpaid attorney is required to “exercise the degree of care, diligence and skill that a person of ordinary prudence would exercise in the conduct of his or her own affairs” while the paid attorney is required to “exercise the degree of care, diligence and skill that a person in the business of managing the property of others is required to exercise.”
    http://www.allanlaw.ca/wills-and-est...y-compensation

    It seems clear it has to be reported.


    With just about anything that is wrong on previous tax returns, fixing it with CRA before they find it usually means the interest/penalties are waived. Having CRA re-assess usually means both are applied ... which can inflate the numbers dramatically.


    I noticed that the mention of previous years compensation needing to be reported so likely the previous tax returns will need to be updated.
    http://www.cra-arc.gc.ca/changereturn/
    http://www.taxtips.ca/filing/changereturn.htm


    Cheers

  3. #3
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    Yes, this definitely has to be reported. Note there may be two parts to your compensation. There is the fee you charged for acting as POA( this is primarily for your time and expertise) and then there is reimbursement for reasonable expenses you incurred. This would include things like mileage incurred for looking after banking, reporting to the donee etc, postage etc, and any other expenses out of pocket. Reimbursement of expenses is not reportable.
    A 10 km trip each week for 50 weeks * 2 years =1000 km at 50 cents per, is 500.00. Not sure if 50 cents is the accepted mileage allowance by CRA but it is close.

    If you only charged a fee, you could calculate your expenses and deduct them before reporting. Make sure you keep track.

    I have seen CRA accept all the expenses being reported in the final year. I would only do this if fees are modest and don't affect your tax bracket. Otherwise just file an amendment for 2015 and 2014 if applicable.

    CRA is usually pretty reasonable if you are upfront.

    Cheers
    J

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  5. #4
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    Quote Originally Posted by twa2w View Post
    ... Reimbursement of expenses is not reportable...
    Thanks, I was hoping someone would mention this.
    I recall in setting up our own PofA's, the question of paying the attorney a fee plus out-of-pocket expenses - or just reimbursing them for out-of-pocket expenses was raised.

  6. #5
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    Thanks everyone for your help and advice; very helpful. Did a bit more research and given that I have to report it there seems to be some form of penalty if you have made the same mistake twice in a 4 year span. Looks like 10% of missed income both provincially and federally for 20% total for repeat missing.

    http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html

    I did see that you can apply under the "Voluntary Disclosure Program" for relief from penalties.

    http://www.cra-arc.gc.ca/voluntarydisclosures/

    One question that I hope someone can help with on the disclosure section:

    It states "You are not eligible for relief of penalties for anything related to:

    ... income tax returns with no taxes owing or with refunds expected..."

    There are 2 consecutive years where I had very little to no income and thus no taxes were owed or refunds expected. Does that mean that penalties will apply on those years?

    thanks,


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