Tax Professionals Beware of Big Penalties

The tax professional is becoming a central focal point for information-gathering on behalf of the Government, and in the process can be at significant financial risk. Fees charged to clients may have to reflect this new reality as CRA continues to unveil new and more detailed forms – with big penalties for missing information.

New filing requirements for the revised T1135–Foreign Income Verification Reporting and the proposed Registered Tax Preparer Program (RTPP) have recently been discussed. The SR&D Tax Credit has a similar bent.

The new Form T661 is required to be filed for SR&D claims for SR&D applications effective January 1, 2014. It places more emphasis on the accuracy of form completion by the tax preparer.

Of note is the new Part 9 of the form. Preparers are now required to answer the question, “Was a claim preparer engaged in any aspect of the preparation of the SR&D claim?”

If the answer is “yes” the following information must be completed and submitted with the claim:

• Name of claim preparer (company or individual)
• Their Business Number
• The Billing Arrangement
  • Contingency, hourly, daily, flat fee or any other type of arrangement
  • The billing rate, as applicable (percentage, hourly/daily rate/flat fee)

Tax preparers will be subject to a new penalty of $1,000 for failure to complete and submit information requested in the T661 information or in any case where information is missing, incomplete or inaccurate. 

Contingency payments may also indicate a hallmark for the Reportable Transactions Form RC312.

All of this indicates that client interview techniques and documentation must feature much more precision.

Join us at the Audit Defence Bootcamp in May as we examine the increasing compliance and regulation burden and what tax and financial professionals can do to protect and position themselves for a new future in the tax and financial services.

Report filed by Alan Rowell, MFA, DFA-Tax Services Specialist.