Tax avoidance schemes are most definitely a case of buyer beware.

 

The Canada Revenue Agency (CRA) recently posted this warning on their website:

 

“Warning: Canada Revenue Agency has denied over $2.5 billion in tax shelter gifting arrangement donations.”

 

Despite this and other related warnings from CRA, I’m sure many Canadians will still claim tax credits from gifting arrangements on their 2008 income tax filing. Everyone should note that tax shelter numbers are assigned for identification purposes. Even though a gifting arrangement may have a tax shelter number, it does not guarantee that you are actually entitled to any proposed tax benefit or credit. I recently read that the CRA is reviewing 65,000 tax returns where the filer participated in some sort of gifting arrangement. While not every one of these 65,000 cases will necessarily result in punitive action, I’m sure there will be a lot of negative outcomes from a taxpayer perspective.

 

If you participated in any of these types of tax shelters, you may be able to avoid penalties and prosecution if you contact CRA before they undertake your audit.   

 

As a rule of thumb, whenever you are presented with any type of tax avoidance arrangement, I would consult with a tax expert who is not associated with the proposed arrangement about its eligibility.