Is Your Interpretation of the Tax Rules the Same as the CRA?
You are probably well aware that tax in Canada is a matter of interpretation. It all begins with a very complex set of laws called the Canada Tax Act. As you can imagine this is set of rulings that are all written in legal jargon. Probably the only ones that truly understand them 100% are the ones who literally wrote them. So for the rest of us we have to try to get into the heads of these writers and decipher what they really mean.
This is what the CRA does. They take these very complex laws then rewrite them so they are more understandable for them and you the tax payer. This interpretation is put in written form for you by way of what used to be called guides and bulletins, and is now folios.
Now the next step is your professional accountant takes these interpretations and handles your tax matters based on them. They are highly trained in ensuring that the calculations are correct and you are abiding by these tax interpretations so your return is compliant. Finally it comes down to you, if you aren’t using an accountant. You need to rely on these interpretations. Rather than try to prove their accuracy, in most cases you will just assume they are correct and this is really what the tax laws means.
It is not always that cut and dry though. That is why we have complex tax cases before the courts now, because some tax payers have challenged these interpretations. Unfortunately unless it relates to a huge amount of money in question the average tax payer is not going to be able to afford to challenge their tax situation. So you as the everyday tax payer whether you agree with the interpretations are just going to have to grin and bear it.
While in many ways we have a great tax system it is just so muddled that the average tax payer figures there is just no point in trying to figure it all out. If you were to sit down and look at each section of the tax return and try to determine how you can use it legally to your best advantage, it would mean having to sort through all of the information pertaining to just that one section which is not likely going to be easy. There are always “if, and’s or but’s”. However, you do have the option to do this, or you can move up the ladder of tax expertise and use a good quality tax accountant.
Now has the tax accountant throughout his training gone through this exercise of deciphering what each section of the income tax means? The answer is yes, in fact he has. His education may not have included intense studying of the Income Tax Act, but it did include studying of the CRA rules and regulations. This allows this expert to know how their rulings apply to your tax situation. They are much more advanced in their knowledge than the average tax payer and are a resource that can make a difference when it comes to your tax dollars.