Step 3: legally minimize your taxes
In week three of the Kustom Design Level 1 Financial boot camp we covered the CRA, taxes, and tax reduction strategies.
Below are my notes from the class.
The Authority Hierarchy
- The Supreme Court of Canada
- Tax Court of Canada
- Canada Revenue Agency (formerly ‘Revenue Canada’, formerly Canada Customs and Revenue Agency (CCRA))
The CRA is a corporation, and their main line of business is collections or as they call it “to administer tax”. They are effectively a collection agency. In Alberta, they only adminster personal income tax not corporate.
The Tax Court of Canada
The tax court of Canada is a specialized court of law whose jusisdiction extends to several Acts of parliament, and most notable the Income Tax Act, the Excise Tax Act, and several provisions of the Employment Insurance Act.
This is a superior court to which individuals and companies may appeal to settle disagreements with the Canada Revenue Agency on matters of income tax, GST and employment insurance.
The Supreme Court of Canada
The Supreme Court of Canada is Canada’s final court of appeal, the last judicial resort for all litigants, whether individuals or governements.
The Canada Revenue Agency
- CRA loses many cases that are appealed to the Supreme Court of Canada.
- The Supreme Court of Canada over the years have repeatedly said to the CRA:
Taxpayers have the right to structure their affairs in a way that minimizes taxes.
Never ever give the CRA originals of anything! They have a history of accidentally losing documents.
Dealing with the CRA
- Don’t ever take what an agent says on the phone as fact, get it in writing.
- Go to the rulings department to get it in writing.
- object if you don’t agree. (appeal)
- make applications to the fairness and Tax Ombudsman.
- you have 90 days to object to an assessment (the blue paper in your taxes)
- stay in honour with them.
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Understanding Tax Brackets
- 15% on the first $40,970.00 of taxable income.
- 22% on the next $40,971.00 of taxable income. ($40,970.00 to $81,941.00)
- 26% on the next $45,080.00 of taxable income. ($81,941.00 to $127,021.00)
- 29% of taxable income over $127,021.00.
Provincial tax rate for Alberta is a flat 10% on taxable income.