Bare Trust reporting...suspended due to lack of interest (?) and confusion (!)

[DoubleF]

Originally Posted by DownInFlames

Do we need to set up a sub forum for accountants?

Deep down inside, we are all accountants. You just don't live in the stacks of paper smelling of printer toner making clicking noises on adding machines like some of us do.

Originally Posted by Monahammer

I have no earthly idea what a bare trust is and even after looking it up am somewhat confused.

And the failure to file penalty of this information return was basically $2500 or 5% highest FMV of the assets for the year, whichever is greater. A house worth $500K @ 5% (co-signing a mortgage for your kids requires filing a bare trust return) is $25K in penalties, $800K @ 5% is $40K.

An accountant typically would never know if you co-signed a mortgage or added a name on land titles or certain assets for probate purposes. It is documentation that typically never shows up for tax purposes.

Oh, and here's the kicker. There is no definition of what a bare trust is in the income tax act, AND it was very obvious that CRA was going to just sit on their ass and do nothing, then evaluate asset dispositions and say, "Oh, I think there should have been bare trust filing requirements on these... 5% FMV of asset times years the requirement was missed please. 3 years down the road, 15%, 10 years, 50%. Raw FMV of the assets, not the gain, not net proceeds on disposition, raw FMV of assets. Completely idiotic rule.

I'm a taxpayer too and I had to check for any filing requirements for myself. Many clients were angry at me that I was "scaring them" by telling them the potential penalties on some common scenarios was in the tens of thousands of dollars, which it was. I told them I was telling them this so that they could protect themselves because IMO the government did not deserve a single penny for this type of bull#### technicality. I need to analyze how the CRA gets the taxpayer angry at us for bringing these rules to the taxpayer's attention. Vs not really upset at all at the CRA and Department of finance who are the ones who enforce and write these rules.

Originally Posted by taxbuster

Just a comment on that: we work HARD and read tons of legal crap to keep YOUR money in YOUR pockets. Apparently not many actually appreciate that.

If you want to ban anyone, start with banning stupid posters in the Main Forums. I'll start making the list....

A client saw my ITA once and asked what it was.

"Tax made easy." was my response.
"God damn. My son is a lawyer and I've never seen him reference a book that thick."

[Locke]

Originally Posted by DoubleF

"Tax made easy." was my response.
"God damn. My son is a lawyer and I've never seen him reference a book that thick."

I once bludgeoned a mugger with my copy of the Income Tax Act. Such a might Tome makes a formidable weapon.

Although it turns out that the mugger was actually just a beggar. I like to think I gave him an education via osmosis.

Not like Taxes were his biggest problem to begin with, but hey, beggars can't be choosers!

[kipperiggy]

My firm alone had apparently submitted over 800 questions to CRA on this so I can't imagine how they ever thought this deadline was feasible.

[taxbuster]

#FireFreeland should be trending on Twitter at the very least.

What a complete FusterCluck, waste of time and energy, not just for us but tens of thousands or more people, and then the Laughing Libs (TM) pulling it at what is almost the last possible moment....well happy freaking Easter Weekend.

[GGG]

Pulling it was still the correct decision rather than drive thousands into non compliance.

[Locke]

Originally Posted by GGG

Pulling it was still the correct decision rather than drive thousands into non compliance.

You're not really getting it though. This was obvious, they waited until the last possible second despite all evidence pointing to the impossibility of the task.

So...they were either incompetent or malicious, either way, heads should roll.

Because I guarantee there was an enormous amount of stress placed on holders and filers.

If you don't have a reasonable plan...dont set hard deadlines. Its just another incident where our Federal Tax Agency glaringly highlights that they have no idea what they're doing.

[DoubleF]

Originally Posted by GGG

Pulling it was still the correct decision rather than drive thousands into non compliance.

Not necessarily. The goal of the bare trust filing had to do with a global attempt at addressing money and asset laundering. This bare trust stuff is going to come back. I'd put money that there will be filing requirements for 2024 after their "discussions" and the CRA will try to play off as being a gracious entity for giving all taxpayers an extra year to understand and catch up with the bare trust filing rules.

I get what the CRA is trying to do and fundamentally I have no issues with it. But my biggest issue was how they rolled it out and how little time there was to understand who was affected, especially since there is no definition of a bare trust in the ITA. The CRA was doing very little to educate taxpayers of this new rule and unlike UHT, there were even less tools to try and understand the rules/determine if you had a filing requirement. The CPA body and whatever the legal body equivalent approached the CRA, asked for more guidance and extensions to the deadline to understand the situation further and CRA said #### you, no leniency... only to cancel it 2 days before the intended deadline and many had already filed. Guess what, is CRA going to throw away that information just because they "exempted" all those people? #### no. They're definitely going to use that info. IMO that's kinda nefarious.

I was saying that the CRA should have started with registries and insurance companies to figure out how far these arrangements might extend and then start having those companies sending notices to the taxpayers/legal owners and say that the scenario was flagged as a potential bare trust filing requirement and to file a return or go to a tax preparer to further understand the situation. Something like that. I think CRA should have extended the deadline on this vs exempted the requirement. It's bull#### they'd pseudo cancel it, when most tax preppers know they'll still implement it later after addressing a few "unintended issues".

The Canadian tax system has become brutally overly complicated. I have no doubt in my mind tax reform is coming and taxpayers will rapidly start to realize the value/difference between a tax preparer ($20-40 a return/H&R block who won't do anything for you if they screw up) vs a competent tax preparer (stands by their work) and a tax expert.

I have looked at a Czech tax returns in the actual Czech language and other than the translation of the words to ensure I have the correct understanding, the logic of how those returns work are very easy to understand. We're talking a 2-3 ish page straight forward return for individuals that basically have the equivalent of a few tax slips here, a 6-8 ish page return for those that are self employed.

IMO CRA auto filed returns are coming down the pipeline. Similar to the auto filing platforms that other countries have, I think this will be the future of Canadian tax system sometime in the near future. CRA will "autofill" a return and give you a timeframe to review. However, this autofill will potentially be disadvantageous to you where none of your deductions are factored in yet. So those that are lazy will pay less tax, those that are diligent can reduce their taxes. IMO that's fair. Also, simple returns will not have to go to an accountant or those low quality tax preparers.

However, this requires significant tightening up of rules for filing slips to the CRA on time. It's fricken 2024 and there's still major errors on slips or missing slips.

[Locke]

Originally Posted by DoubleF

However, this requires significant tightening up of rules for filing slips to the CRA on time. It's fricken 2024 and there's still major errors on slips or missing slips.

Its late and every time I close my eyes I see tax returns in my mind, so I wont address your entire post but this is one element I wanted to focus on.

2 Years ago CRA decided that they wanted Taxpayers to be more dependent on their database of online slips.

So, in their infinite wisdom, they decided to focus on the slips they control. ie. T4APs and T4AOAS.

Despite the fact that the demographic of individuals in this country who collect and claim these things are the least likely to have or understand access to their online accounts.

We're talking Seniors.

Did no one at the table of these discussions raise their hand to discuss the obvious problem here?

And dont for a moment think they havent tried again and again.

I had a 78 year old widow show up at my office yesterday for her appointment and she apologized because she didnt have her T4AP or T4AOAS.

I tell her, 'thats because they want you to get them digitally.'

No problem, I log in to grab them aaaaaand.....they ain't there. She has been collecting these for over a decade. They never mailed them to her and they're not posted online.

Its F###ing MARCH 28th!!

If I dont post my slips for clients by the end of February I'd be drawn and quartered in the Town Square. How on Earth could they not post or offer a CPP or OAS slip in nearly 3 months?

You know what its going to be. There is no reason.

[Manhattanboy]

Tax lawyers and accountants have it easy. They only need to know one damn Act. Meh you can get through it in a weekend.

[Slava]

Let’s just have one giant consumption tax and do away with income taxes entirely.

[GGG]

Originally Posted by Locke

You're not really getting it though. This was obvious, they waited until the last possible second despite all evidence pointing to the impossibility of the task.

So...they were either incompetent or malicious, either way, heads should roll.

Because I guarantee there was an enormous amount of stress placed on holders and filers.

If you don't have a reasonable plan...dont set hard deadlines. Its just another incident where our Federal Tax Agency glaringly highlights that they have no idea what they're doing.

I agree with you. But you can suck for a long period of time and then eventually do the right thing. You should be criticized for the sucking part not for eventually doing the right thing.

If the government changing its mind only ever has negative consequences we end up worse off.

[taxbuster]

For any accountant or lawyer interested in doing so, Joseph Devaney (of Video Tax News) and a long-standing commenter on tax has started an initiative to attempt to quantify the costs of this debacle:

https://www.linkedin.com/posts/josep...member_desktop

[White Out 403]

I asked GPT to explain it to me like I'm a kid and I'm still confused.

Imagine if you gave your friend some money to buy a video game, but the rule is that they have to buy the game you want and then give it to you. In the world of Canadian tax law, this is a bit like what's called a "bare trust." It means someone (the trustee) holds something, like money or property, for someone else (the beneficiary), but they can't make any decisions about it. They just have to do what the person who gave it to them wants. This is used in taxes because the person who actually owns the thing (like you owning the game) is the one who has to pay any taxes on it, not the friend who bought it for you.

[White Out 403]

And now, haiku

Trust holds, not owns, clear,
Benefit flows to named heir,
Silent, taxes steer.

[taxbuster]

Taxing and spending
CRA watches closely
Government trusts us

(or not!)

[Manhattanboy]

Here’s a simple way of thinking about it. Suppose 3 friends want to by a condo together and rent it out for the income. Rather than all 3 being registered on title as owners, they incorporate a company to hold title to the property. There are some advantages to doing this. The 3 friends will own the shares of the company, which is often referred to as the nominee or bare trustee given that the 3 friends are the true, or beneficial owners. In the past they would each report a third of the income and expenses of the property on their personal tax returns and the nominee corporation didn’t have to file its own return. Now CRA is requiring that the nominee file a tax return as well to disclose the trust relationship.

[DoubleF]

Originally Posted by Manhattanboy

Here’s a simple way of thinking about it. Suppose 3 friends want to by a condo together and rent it out for the income. Rather than all 3 being registered on title as owners, they incorporate a company to hold title to the property. There are some advantages to doing this. The 3 friends will own the shares of the company, which is often referred to as the nominee or bare trustee given that the 3 friends are the true, or beneficial owners. In the past they would each report a third of the income and expenses of the property on their personal tax returns and the nominee corporation didn’t have to file its own return. Now CRA is requiring that the nominee file a tax return as well to disclose the trust relationship.

LOL, that's not simple at all. I'm not sure there's a simple way to explain it or think of it. Higher level, it's a lot easier to understand, but lower level, it's hard. Like trying to explain what someone's chess piece does to someone who doesn't understand chess and you do must so without them ever understanding the rules of chess or the chess board where the chess piece goes. Most attempts to make bare trusts easier to understand seem to make it more confusing.

IMO, the definition of a bare trust is an arrangement without a formal trust arrangement AND has a bare trustee.

A bare trustee basically means someone/entity who legally owns an asset on paper, but is not the person/entity who actually has discretion or authority of that asset.

It's a little like the Emperor's new clothes story. The CRA is demanding people who aren't wearing clothes to declare their situation. CRA is taking money from the Emperors wearing no clothes, but are also the swindlers who made the "clothes" in the first place.

[CliffFletcher]

Originally Posted by DoubleF

IMO CRA auto filed returns are coming down the pipeline. Similar to the auto filing platforms that other countries have, I think this will be the future of Canadian tax system sometime in the near future. CRA will "autofill" a return and give you a timeframe to review. However, this autofill will potentially be disadvantageous to you where none of your deductions are factored in yet. So those that are lazy will pay less tax, those that are diligent can reduce their taxes. IMO that's fair. Also, simple returns will not have to go to an accountant or those low quality tax preparers.

We’re already most of the way there. With my CRA and TurboxTax accounts linked, almost all of my fields are automatically populated as I prepare my return. T4s, RRSP contributions, etc. For simple returns, it’s quite convenient. But when my returns get more complicated as I start drawing a pension, declaring investment income, etc., I’ll likely have a professional do them.

[Shazam]

Originally Posted by GGG

I agree with you. But you can suck for a long period of time and then eventually do the right thing. You should be criticized for the sucking part not for eventually doing the right thing.

If the government changing its mind only ever has negative consequences we end up worse off.

Canada is literally decades behind on bare trust reporting.

Also CRA has been warning for years that this was happening. So it's basically your fault for being an idiot about it.

[cSpooge]

Originally Posted by Locke

Its late and every time I close my eyes I see tax returns in my mind, so I wont address your entire post but this is one element I wanted to focus on.

2 Years ago CRA decided that they wanted Taxpayers to be more dependent on their database of online slips.

So, in their infinite wisdom, they decided to focus on the slips they control. ie. T4APs and T4AOAS.

Despite the fact that the demographic of individuals in this country who collect and claim these things are the least likely to have or understand access to their online accounts.

We're talking Seniors.

Did no one at the table of these discussions raise their hand to discuss the obvious problem here?

And dont for a moment think they havent tried again and again.

I had a 78 year old widow show up at my office yesterday for her appointment and she apologized because she didnt have her T4AP or T4AOAS.

I tell her, 'thats because they want you to get them digitally.'

No problem, I log in to grab them aaaaaand.....they ain't there. She has been collecting these for over a decade. They never mailed them to her and they're not posted online.

Its F###ing MARCH 28th!!

If I dont post my slips for clients by the end of February I'd be drawn and quartered in the Town Square. How on Earth could they not post or offer a CPP or OAS slip in nearly 3 months?

You know what its going to be. There is no reason.

To be fair to CRA they don't actually do anything with those slips. They are completed by ESDC/Service Canada/Whatever freakng name they're going by now.