Kelowna's real estate investors, listen up! Tax season is upon us, and with the April 30th filing deadline looming, there's a new wrinkle to consider. The feds recently proposed expanding the Canada Revenue Agency's (CRA) audit powers, and let's just say, they're getting serious about cracking down on tax cheats.
This follows a 2018 report highlighting how some taxpayers conveniently ignore CRA requests for information. The new measures could mean more reviews and audits, and real estate transactions might be under particular scrutiny.
Review vs. Audit
The CRA might choose your return for a review. This basically means they want backup for specific deductions, income amounts, or claims you made. Respond within 30 days, even if it's just for an extension. Ignoring a review can lead to disallowed deductions – not ideal.
An audit is a deeper dive. The CRA gets out the magnifying glass and takes a long hard look at your books and records. Audits are usually triggered by a "risk assessment," which can involve digging into your past tax filings.
Red Flags for Real Estate Investors
The CRA is taking a closer look at homeowners claiming the principal residence exemption, that sweet perk that eliminates capital gains tax on your primary home sale. New rules target "flippers" who buy and sell properties frequently.
Landlords, beware! If you're claiming rental income but showing losses on your properties, that could trigger a review or audit. And forget living large while reporting a shoestring income – the CRA frowns on major lifestyle inconsistencies.
Chill Out, But Get Ready
Don't panic if you're selected for a review or audit. If you've been honest on your tax filings, cooperating with the CRA shouldn't be a problem. Gather your paperwork – receipts, contracts, the whole shebang.
For complex situations, bring in the pros. A qualified financial advisor or tax specialist can guide you through the process and might even find tax savings in past returns – a nice bonus! While their help might cost a bit, it's peanuts compared to the penalties and stress of ignoring the CRA.
Your Real Estate Ally
We understand the tax implications for real estate investors. We recommend consulting with a qualified tax professional to ensure you're filing accurately and minimizing your tax burden. With the right team behind you, tax season can be a breeze, not a blizzard.
