How to avoid misrepresentations that will cost you money -- or ruin your credit rating
A client came into my office last season with an e-mail message from the Canada Revenue Agency (CRA). It claimed that she had missed deductions on her tax return, and that by clicking a link, she could claim the adjusted amount. She was suspicious, and rightly so. Fortunately, she came to me first.
Had she clicked on the link, a CRA lookalike web site would have asked her to verify her identity by entering banking and personal information. Once that was supplied, she wouldn't have seen a deposit for an adjustment; she'd have seen a scam artist empty her account or wreak havoc on her credit rating.
A variation on the scam is a threatening phone call claiming to be from the CRA, demanding prepayment on a non-existent debt by supplying a credit card number.
These misrepresentations can appear to be official, right down to the logo and formatting. They are not. The CRA will never contact you via e-mail over an adjustment or an amount owing. Starting this year, you can choose to have your notices of assessment posted to My Account rather than sent via mail. You can opt-in to this program by providing your email address to the CRA. The CRA will then send you an email to let you know the document is available at My Account.
The CRA will never ask for a credit card number, passport number, driver's license number or health card number. If it isn't information you normally provide with a tax return, the CRA won't ask you for it -- much less, as one scam goes, ask you to leave the information on an answering machine.
That personal and banking information is enough for phishing artists, as they're called, to apply for a loan, credit card or even a mortgage in your name, and it can take years to clear up the damage. You should report any such communication to the RCMP for investigation -- keep track of phone numbers and e-mail addresses.
KEEP TRACK OF YOUR T4s
Identity thieves thrive on personal information, and an accomplished one can drum up enough information from your Facebook account, obituaries in the newspaper, and "dumpster diving"--yep, it's just what it sounds like -- to go to work. But if there's one gift-wrapped source of identity information for identity thieves, it's a T4 slip.
Picture an apartment building. People move on, people move in. Mail for previous residents tends to be left out for retrieval by the local postal carrier, usually in the lobby. In February, some of that mail will be errant T4s, with names, social insurance numbers, income and employment information -- a goldmine for scam artists. If you change jobs during the year, make sure all of your employers for that year have your updated mailing information so your T4s don't go astray. It will also save you a ton of stress in April, when you're trying to pull together your tax return.
CAN'T CLAIM THIS
Frequently, people are misled about the tax benefits of particular donations or expenses -- and often by people who don't realize they are giving out inaccurate information.
Not-for-profit organizations are not necessarily charities, for example. For an organization to qualify for charitable status, it must be resident in Canada and have a purpose that falls under one of four missions: the relief of poverty, the advancement of education, the advancement of religion, or "certain other purposes that benefit the community in a way the courts have said is charitable," according to the CRA. The last category is based on common-law precedents; the CRA will only consider purposes that have already been approved by the courts. These conditions must be met in order for an organization to receive a charitable donation number. Donations to a not-for-profit organization that has no charitable donation number cannot be claimed on your tax return. The CRA offers an online tool to identify if an organization has charitable status. The short version is: if there's no charitable donation number on the receipt, it's not deductible.
There's also some confusion about what qualifies as a medical expense, and some practitioners might misrepresent the tax status of a procedure. Procedures that are purely for cosmetic purposes -- liposuction, hair replacement, Botox injections and teeth-whitening, for example -- aren't eligible deductions unless they are reconstructive or will correct a congenital deformity. The CRA lists non-eligible expenses on its web site, but a rule of thumb is a procedure must be declared medically necessary by a physician, usually by way of a prescription, to be eligible. Thus, driveway improvements that are necessary for mobility purposes may qualify, but plastic surgery probably doesn't.
Some misleading practices simply become a tax-time annoyance; others can have long-term financial impact. Be on the lookout for scams of all types to keep your personal financial information safe.
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