# Being audited by CRA HELP!!!



## sm1new (Oct 6, 2015)

Ok, i personally file my own taxes. I claim my mother as an eligible dependent on me due to her financial situation and her health complication. My dad does not work at but collect pension, which is like $40 a month, however due to his age now he is able to claim spouse supplement income so it bump up.

Every year I claimed my mother as an eligible dependent but CRA never have to pay me so they never audit me but this time CRA have to pay me so they are auditing me. They want me to send them Schedule 5. When I went to this CRA website. I went through 3 questions, last question was like this

*Question 3
Questions and answers
Did any of the following situations apply?*


The dependant's net income (line 236 of his or her return, or the amount it would be if he or she filed a return) is $11,474 or more. However, if you claimed the family caregiver amount for the same dependant, the dependant's net income is $13,595 or more.
You or someone else is claiming a spouse or common-law partner amount on line 303 for this dependant.
Someone else is claiming an amount on line 305 for this dependent. If you and another person can both claim this amount for the same dependant (such as shared custody of a child) but cannot agree who will claim the amount, neither of you can make the claim.
The person for whom you want to claim this amount is your common-law partner.
Someone else in your household is making this claim. Each household is allowed only one claim for this amount, even if there is more than one dependant in the household.
You were separated from your spouse or common-law partner for all of 2016 because of a breakdown in your relationship and you were required to make support payments for this child for 2016.

So, obviously my dad is claiming my mother as a dependant, however I can have him sign a letter saying that due to financial reason he is not supporting her. What else can I do to convince CRA that I am the one supporting her. Guys, help me out here plz. Thank you


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## OnlyMyOpinion (Sep 1, 2013)

Do your parents both live with you?


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## sm1new (Oct 6, 2015)

OnlyMyOpinion said:


> Do your parents both live with you?


Yes they both live with me. However, my father pay me rent of $3600 to help me with finance, which I show that in my tax return.


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## Just a Guy (Mar 27, 2012)

Just because CRA is auditing you doesn’t mean they’ll deny your deductions. Every businessman I know has been audited by CRA, including myself. Most of the time they don’t find any major problems, they just want to ensure you can prove your claims. 

If you’re doing nothing wrong, they’ll find your doing nothing wrong. 

P.S. don’t worry about panicking, everyone does the first time they get audited.


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## ian (Jun 18, 2016)

Absolutely NO reason to panic.

First off,,,is this a desk audit, ie they send you a letter asking for reciepts? This is fairly standard. It could be the result of a project or it could be system generated based on your return.

My advice. ONLY give them exactly what they ask for. Answer the questions, but DO NOT provide any extra information that does not pertain directly to their inquiry.

Audits are simply the price we pay for the convenience of self reporting. I have had three of them. No problem whatsoever. Just sent in the required back up information, got it all back a few months later.


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## AltaRed (Jun 8, 2009)

I may not be reading what the OP wrote very well, but it seems both of them are claiming the same person as a dependent???


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## gardner (Feb 13, 2014)

Just a Guy said:


> If you’re doing nothing wrong, they’ll find your doing nothing wrong.


That is by no means guarantied with the CRA. They have been known to go on very invasive fishing expeditions on the basis of what seems like a simple issue. I would first google around and read the blogs of some of the tax lawyers who handle CRA audits. You should at least do a free consultation with a specialist.


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## gardner (Feb 13, 2014)

AltaRed said:


> I may not be reading what the OP wrote very well, but it seems both of them are claiming the same person as a dependent???


I read that too. With the Father/Husband's income being so low, it likely makes no sense for him to claim the Mother/Wife. I would put it down to one of the unfortunate defaults in the tax prep software -- the second you tick the "married" box, it automatically claims your spouse as a dependent if there is no income entered for him/her.

If the subject of the proposed audit is this specific issue, then I would write to them and possibly just re-file the Father's return and see if that makes the audit go away. I would reiterate that an audit is a bad thing that you want to avoid and if you can't, you want to handle it with a high level of preparedness and professional advice.


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## sm1new (Oct 6, 2015)

Yes CRA sent letter asking to resend Schedule 5 and some receipts. Mostly wheelchair receipts etc because my mom is disable. 

Yes, AltaRed, you are correct, my dad also claim my mother as dependant and I did as well. I did call CRA regarding this letter, they said I can not claim as my mother as dependant because my dad and my mother are under same roof. I can have my dad sign a letter saying he does not want her to claim a dependent or something.


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## ian (Jun 18, 2016)

Our experiences with CRA have always been very fair and we have found the staff to be reasonable. We had three desk audits, queries on a tax shelter, and re-filing both of our returns for a five year period including getting tacit permission to refile further back than the regulations permitted.

Simply provide the data. If a re-assessment, up or down, is required, then it will happen. You cannot change the facts or the regulations.


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## OhGreatGuru (May 24, 2009)

_You or someone else is claiming a spouse or common-law partner amount on line 303 for this dependant.
- Someone else in your household is making this claim. Each household is allowed only one claim for this amount, even if there is more than one dependant in the household._

What part of these 2 conditions did you not understand? Both you and your father cannot both claim her as a dependent (or the spousal amount in the case of your father). It's not clear to me if you would have the option of claiming her instead of your father - you would have to discuss this with CRA. I agree the instructions under Line 303 are open to interpretation.


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## ian (Jun 18, 2016)

There is a world of difference between 'being audited' by CRA and CRA asking for documentation/clarification for a certain line item (s) on your tax return. The latter is fairly easy and straightforward. Either you claim is verifiable or allowable or it is not.

For an an audit, the first stop is to gain access to all bank records. It can be voluntary, with your signature, or involutary without. They simply add up all the deposits, eliminate the non income deposits such as transfers,etc, to come up with an income amount. They do the same with expenses. An easy check for those who tithe for their church is to check this amount against income declared. This is a common and an effective method in parts of Alberta I am told.


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## AltaRed (Jun 8, 2009)

+1 It seems to me this is just CRA asking for detail, i.e. Schedule 5, to clarify the deduction(s). Seems the OP's headline is off the Richter scale. Clearly though, it seems the OP and his father have not been coordinating to avoid potential double dipping?


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## OnlyMyOpinion (Sep 1, 2013)

Not necesarily related to CRA's interest, but it seems odd that father is paying rent of $3600/mo (high) which OP is declaring as rental income, esp. when father has pension of only $40/mo (and other income?).


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## AltaRed (Jun 8, 2009)

I assume papa is loaded with investment income.


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## RussT (Jul 11, 2016)

I assumed the rent was an annual amount, not monthly. Makes more sense in the context I think.


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## Nerd Investor (Nov 3, 2015)

RussT said:


> I assumed the rent was an annual amount, not monthly. Makes more sense in the context I think.


This was my assumption as well.


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## OnlyMyOpinion (Sep 1, 2013)

Good point. Makes a lot more sense.


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## gardner (Feb 13, 2014)

AltaRed said:


> I assume papa is loaded with investment income.


My guess was savings rather than income.


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## AltaRed (Jun 8, 2009)

Interesting how lack of clarity can result in so many varying assumptions. Not that those data points mean very much with respect to the issue/question.


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## sm1new (Oct 6, 2015)

Sorry everyone for confusion, Yes my dad is paying $3600/year. He does have some saving but since he can not support my mother (his wife). I just support her financially. My mother is also approve on Form T2201 Disability Tax Credit Certificate and I am the who claims it because Doctor wrote down on Form that I will be claiming. 
I think CRA does not believe that she is infirm/disable even though I have provided with Form T2201 Disability Tax Credit Certificate, which has been approved by CRA.
Now, I think i am stuck at who can claim my mother, because according to my interpretation CRA meant any one in house hold can claim it, whether it could be spouse (my father) and someone who is looking after her financially. Now, my father did claim spousal amount, not because he wanted but software claim automatically and send it off to CRA.

I agree with *OhGreatGuru*

You or someone else is claiming a spouse or common-law partner amount on line 303 for this dependant.
- Someone else in your household is making this claim. Each household is allowed only one claim for this amount, even if there is more than one dependant in the household.

What part of these 2 conditions did you not understand? Both you and your father cannot both claim her as a dependent (or the spousal amount in the case of your father). *It's not clear to me if you would have the option of claiming her instead of your father - you would have to discuss this with CRA. I agree the instructions under Line 303 are open to interpretation.*

There is no clear answer if I have the option to claim my mother instead of my father. I believe if they both live apart then YES i can claim her but if they live together under same roof, then NO i can not, even though I am the one looking after my mother. DAMN CRA/ canadian Government, they would give out our hard earned tax dollar to terrorist, OMAR KHADR ETC or Syrian but there is no financial support for people who actually work in this country.

Now as I am going through CRA letter, there is a line saying

*
- the name, address, and if available, a SIN of any other person claiming or entitled to claim the same dependent;
- only one person is able to claim this amount for the same dependant. If both of you and another person claim or are eligible to claim the amount for the same dependant, you will need to provide a written statement signed by both you and the other person indicating who will make this claim; *

so, I have no choice but to tell them about my father and If I do tell them that will screw me up for sure. In which case, I am thinking of having my father saying that he made a mistake and does not wish to claim his wife/my mother as dependent on him (something along that line).

What should I do guys?


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## gardner (Feb 13, 2014)

Before you were talking about a normal dependent tax credit. https://www.canada.ca/en/revenue-ag...dant/you-claim-amount-eligible-dependant.html
Now you are ALSO talking about disability tax credit. https://www.canada.ca/en/revenue-ag...s-disabilities/disability-tax-credit.html#clm



sm1new said:


> What should I do guys?


Get professional advice.


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## sm1new (Oct 6, 2015)

gardner said:


> Before you were talking about a normal dependent tax credit. https://www.canada.ca/en/revenue-ag...dant/you-claim-amount-eligible-dependant.html
> Now you are ALSO talking about disability tax credit. https://www.canada.ca/en/revenue-ag...s-disabilities/disability-tax-credit.html#clm


I do not have any problem with disability Tax Credit as CRA is not asking for that. I just put that there for information for readers.


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## AltaRed (Jun 8, 2009)

sm1new said:


> so, I have no choice but to tell them about my father and If I do tell them that will screw me up for sure. In which case, I am thinking of having my father saying that he made a mistake and does not wish to claim his wife/my mother as dependent on him (something along that line).
> 
> What should I do guys?


You come clean with CRA and say you did not know your father claimed spousal amount for your mother. But before you do that, you had better agree with your father what his response will be when CRA contacts him. Bottom line, one of you will be re-assessed and there will be taxes owing along with interest, and possibly penalties...though the latter (penalties) may not happen. All you, or your father needs to do ahead of time, is to acknowledge which of you claims mother as dependent. I am guessing it would be best (or might only be possible) that whoever is claiming the disability tax credit may have to also claim the spousal credit.... but that is beyond my pay grade.

You may wish to talk to a tax accountant first to see the approach they suggest. Some professioal advice is good as already suggested.


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## TomB16 (Jun 8, 2014)

ian said:


> My advice. ONLY give them exactly what they ask for. Answer the questions, but DO NOT provide any extra information that does not pertain directly to their inquiry.


Golden words.


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## ian (Jun 18, 2016)

There is no question that you have fallen afoul of the rules. So make it right. It really is not that difficult. And it is not at all uncommon to fall afoul of some of these rules. No doubt the desk auditors who handle these realize this. I very much doubt that you are looking at three years in jail with perhaps time out for good behaviour! Seriously, stop dithering, get this behind you and move on. The longer this drags on the more it will weigh on your.

Determine who will have the least impact from a tax liability perspective. The one the benefits the most claims the deduction, the other gets his/her tax return re-assessed. This is very straight forward as I understand the facts. And do it for just one year. They may or may not go back to prior years. Depends on the desk auditor and the amount of taxes to be recovered.

If you think that you are in bad shape, you are not. Just look at those poor folks who went into those COIP charitable donation scams. Many have repay thousands of dollars of tax refunds that they previously rec'd as a result of inflated and unsubstantiated charitable donation claims. You small challenge is a doddle compared to that.


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