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Tuesday's Tax Tidbits- Latest Income Tax Info - Aug 26, 2014

Canadian Taxation of Contract Cancellation Payments

A termination fee received for cancellation of a contract will be considered to have been received as a payment on account of capital (capital gain) or as ordinary income for Canadian income tax purposes depending on the details of the contract termination. If the termination payment relates to the loss of an income-producing asset, it will be considered a capital receipt, only one half of which is taxable. Conversely, if it is compensation for the loss of normal business income, then it will be taxed as business income for the year. Proper drafting of the termination agreement by our experienced Canadian tax lawyers may help the Canadian Tax department find that it is a capital gain.  

Voluntary Disclosure:

Are you considering a voluntary disclosure (VDP or tax amnesty application) to the Canadian tax department for unflled Canadian income tax returns or undeclared income, but are feeling confused due to all of the conflicting information on the internet?

Are you afraid of a sinister "tax man" or "tax police" in dark glasses waiting to pounce on you and throw you in jail for tax evasion or not filing tax returns?

Nothing could be further from the truth. You CAN sleep at night, despite the fear mongering that you may have seen to the contrary.

The Canadian income taxation system is based on self-assessment. Taxpayers sometimes fail to report all income that they should, either through inadvertence or due to the extreme complexities of the Canadian tax system.

The purpose of the Canada tax amnesty program is to encourage Canadian taxpayers to voluntarily comply with their income tax obligations. Prosecution would be contrary to the goals of the VD program and contrary to the published guidelines (binding on CRA) that make it clear there will be no prosecution.

Benefits of Filing A Voluntary Disclosure Application

REDUCE YOUR TAXES.

Find useful tax tips on Canadian Income Taxation suggested by experienced Canadian Tax Lawyers. Proper Tax Planning can reduce your Canadian income taxes owing.