My annual tax season rant..

[kato]

It's that time of year again, back at the accountants for my seasonal job sorting through piles of papers and turning them into tax returns.

Some hints that just may save everyone some money..

- if you've gone to all the work of entering your information into Agexpert, go the extra half mile, and map the lines to the agstability form. You will be hailed as a hero when you go back to pick up your return. And you will save money.

- If you've gone to all the work of entering fifteen pages of entries in columns in an account book, go the extra mile and total them up. You will save money. Balance them and you will also be hailed as a hero.

- If you've got Quickbooks, throw it out. That's my personal opinion, not necessarily that of my employers. I have yet to see someone set that thing up properly, and it doesn't have the checks and balances that keep your information correct. Double entry is the way to go, IMHO.

- And if you haven't gone to any effort at all, at least take the papers from the envelopes. You will save a lot of money, and make the life of some poor tax preparer much easier. This time of year, the last thing anyone wants to see is a shopping bag full of envelopes sitting on the shelf when they walk into the office in the morning.

Like the one I saw this morning........ arghhh......

[ALLFARMER]

I don't mean to be critical Kato but if you charge
by the hour why would the unorganized people
bother you?

I think your just much more kind hearted than I
am. I have little sympathy for people who can't get
there shit together.

My taxes were done and returned months ago. I
do Agriinvest but no longer do Agristability. With
the Agristability fees, recent reduced payouts,
hassle of dealing with those people and the paper
work involved, and the fact I don't just hand out
person business information for the hell of it I
dropped em.

[grassfarmer]

Just curious what envelopes they don't open kato? are
you talking from CRA or just regular farm bills,lol

[kato]

They open the phone bill, pay it, then stuff it back in the envelope. I don't know why, but maybe they think it won't get lost that way? Or maybe the tax department wants to see the envelope in case of an audit?

Who knows....... all I know is that it really slows things down, just when there are deadlines coming up.

I suspect the people on Agri-ville, being computer literate, are more advanced with their financial records than a lot of people though.

[grassfarmer]

So is it normal in this country to submit the actual
bills/income receipts? Does that make you more or
less likely to get audited? I just send in an account
book with all the entries totalled and the accountant
never sees the actual paperwork. In Scotland we had
to submit both the filled in account book and the
actual bills/income receipts etc.

[Happytrails]

Good post Kato. And hats off to those of you that can do income tax. I have to defend quickbooks tho. I've used it since July '98 when my accountant set it up. Since then I've entered every bank statement and its never been a penny out. Used to take floppy's to the accountant but now do it on a stick. I've got 15 years of financial records available at the click of a mouse which wouldn't have happened otherwise. You are right that there is no way to verify the info except that it matches a bank statement. Anyway it works for me. HT

[grassfarmer]

Same kind of question to you HT - why do you need
to show or balance bank statements? does the
accountant need or want to see that info? The ones
I've used are happy enough to see an account book
with a list of income and expenses and they file a
tax return on that basis. Just trying to understand
your system here better.

[kato]

I guess the thing is that if you balance everything to your bank statements, and reconcile them, then there is no doubt about whether anything got missed. In the eyes of the CRA, that means unreported income more than anything else. Not reporting income is a much bigger issue than trying to claim something that may be "in a grey area". Those claims are just disallowed at worst. Unreported income is treated much more seriously. Penalties and interest can get pretty high on that.

As for the receipts, if the CRA audits someone, they don't just want to see the books. They want the receipts to back up what's entered in the books. And if you don't have receipts, they've been known to check safety deposit boxes, walk around the yard and see if you have stated enough income to actually own the stuff you do, and generally make life pretty miserable.

An auditor who comes across someone with balanced books, and good records treats them much much more favourably than someone who keeps no records, and can't back up their claims.

We got audited once a few years ago for some government program which escapes me right now. Anyway, the guy came to the house, saw the records, asked me to pull out four or five invoices, then packed up and left. Quick and painless. If I'd brought out a big cardboard box and some looseleaf papers, he'd have been there for days. LOL

[grassfarmer]

I've got the paper invoices etc filed monthly going
back 12 years so locating an invoice for a tax
inspector would not be a problem. Just wondered if
there is a benefit to letting the accountant see that
system?

Only got audited once in the old country and it was
quite an experience. The investigators were paid on a
bounty system at the time and were able to
investigate things without any reasonable grounds for
suspicion. I remember them digging through my
personal bank accounts and thinking they hit the
jackpot when they found a cash payment of $500 or
so with no supporting documentation (this was a
personal account not the farm one). It was a payment
a friend gave me as we went on holiday together and I
had paid for our flights because he didn't have a
credit card. They eventually accepted dated holiday
photos as proof of this. Just ridiculous - cost us many
hours of our time, our accountants time and at the
end of the day they walked away with nothing and
never offered either a thank-you or an apology. The
investigator got fired later for overstepping his
boundaries with other taxpayers. It's made me
nervous of tax inspectors ever since.

[grassfarmer]

Quickbooks and AgExpert have their goods and bads.

Its all about who's entering and if they have any knowledge and interest in what they are doing.

No program is worth it if you are not going to balance to the farm bank account and input financing credit lines.

This is the number one reason why many are against farm programs and their results - IMO