Taxes can be so taxing: Part 1

by Edo van Belkom

There was another letter from the government. This one, like the one before, was from the Canada Revenue Agency. He put it aside atop the pile of junk mail he’d just cleaned out of his post office box.

He kept the PO Box so he’d have a place where information he couldn’t get over the phone could be sent, and so he could receive the mail he couldn’t get via e-mail. The government might have offered an e-mail option, but he’d have to open the letter to find out.

The tax people had been sending him letters for a while now. He’d put the first couple in the round file without opening them, and then he might have misplaced a few others along the way. To be honest, there had been so many of them he’d lost track of where they’d all went.

As far as Mark was concerned, he paid his taxes on time, filed his GST claims regularly, and for those reasons, the government had no reason to bother him. And that’s how he looked at this letter, as a bother. It all stemmed from a bad experience he’d had with Revenue Canada years ago after an accident when he’d been unable to drive and had been receiving disability cheques from an insurer. Almost a year had passed before he was informed that income tax wasn’t being taken off any of the cheques and it was up to him to send the money to Ottawa.

Once he filed his taxes the government sent him a bill for over $5,000, which took him months to pay. During that time he was constantly short money to live on because every spare dollar he had was going to the government.

By the time he’d paid off his bill, he was late on his taxes for the next year, so not filing a return was the easiest thing to do because by the time he did file, he’d be fined $1,000 or more in interest on top of the taxes he owed. Thankfully he’d never gotten sick during that time because if he’d been out of work even for a few weeks, the money crunch due to back taxes would have been even more severe.  

It’s no wonder that he’d come to equate letters from the government to bad news to his bottom line and found them easy to ignore. If he didn’t open it, he wouldn’t get any bad news, simple as that. But that way of thinking eventually began to change.

In time, Mark realized he had to start operating his owner/operator business like a professional and that meant buying a new truck. The only trouble was that when he went to his bank for a loan, they wanted to see tax statements for the last few years to verify his income and make sure he’d be able to pay back a loan and the interest payment that went with it.

And so, reluctantly, he had to file several returns and the cycle started all over again.

He managed to break the cycle by working for a broker.

A broker made life easier for him in regards to record keeping and tax filing because everything he needed to keep himself up-to-date was taken care of by the broker. In a few years he was back on track with the government and was ready to buy a new truck and make the transition to full-time owner/operator.  

Still, he didn’t trust himself to take care of his finances on his own. He’d heard plenty of stories about drivers who, when money got tight, decided to do their own taxes and then do nothing for a few years only to find themselves in the same jam Mark had been in.

Mark vowed not to head down that road again and took on the services of an accountant who made sure his GST payments were right and on time and who taught him about a lot of expenses he was eligible to claim, but just wasn’t taking the time to keep track of his expenses or that he simply didn’t know about.

For example, Mark never knew that he could claim all of the banking fees on his personal bank account. It wasn’t much, but a few dollars every month could add up to a hundred or more dollars that he didn’t have to pay taxes on by the end of the year. And then there was his personal car. Mark didn’t own a car anymore but when he did, he’d never claimed any mileage on it for things related to his business, like a drive into the office to collect a paycheque or file some papers, or even a weekly trip to the bank to manage his fortune.

And then there was his GST refund.

The government wanted Mark and drivers like him to file his GST claims quarterly. Mark had enough trouble filing a tax return once a year, never mind four times, so an accountant was a sound business investment. Especially so when a monthly GST refund on a truck payment of $2,000 equaled nearly a $1,000 each quarter.

What small business could operate fluidly without an injection of that much cash every few months?

Mark’s accountant also kept him from making bogus claims on his tax returns, the kind which, over time, might catch the attention of an adjuster in Ottawa. In the past Mark had claimed haircuts and sunglasses as business expenses, reasoning that his hair grew and the sun shone while he was driving.

The trouble was that his hair grew and the sun shone all the time, not just while he was driving. The accountant also discouraged him from claiming a hot tub (it helped him relax after a long haul) and a dog (a security system) as business expenses. Apparently, hot tubs are luxury item and lap dogs are not car alarms. Who knew?

Now, Mark was much more aware of what were legitimate business expenses and considered the cost of an accountant and diligent tracking of expenses to be as important to the successful operation of his business as fuel-efficient driving and proper truck maintenance. Sure the services of an accountant or bookkeeper might cost him a bit of money, but it was a small price to pay compared to the money he could receive as a result of expenses or tax benefits he wasn’t even aware of.

And to top it all off, his accountant’s fees were a genuine business expense and there would be someone in his corner if there was ever a problem with the government. Like now.

There had to be a problem with so many letters being sent.

Reluctantly, Mark opened the letter.

Dear Mr. Dalton…the letter began.

Mark could feel the blood drain from his face. Apparently, the Canada Revenue Agency had been trying to contact him for some time and when there was no response from him they went ahead and did an audit on his tax returns for the last five years. Without Mark’s input, they disallowed a number of his expense claims and as a result he owed in excess of $20,000 on the new assessment. Thoughtfully, the government had provided a number for him to call to arrange a payment schedule he was comfortable with.

Mark couldn’t see his face, but knew it was white. His knees were weak and he had to put a hand against the wall to keep himself from falling over.

“You okay, sir?” an old lady said as she closed up her own post office box with a snap.

“I’ve just been robbed,” he said.

She looked around with wide eyes. “How? By who?”

“By a sneak-thief the government employs called the Tax Man.”

“Hmm,” she said, shooting him a look of disgust and shaking her head. “Tell me something I don’t know.”

– Mark Dalton returns next month in Part 2 of Taxes can be so taxing.

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