CRA warns about WITB tax scheme

Canada Revenue Agency (CRA) is warning Canadians about a scheme to get a tax refund from the working income tax benefit (WITB) even if a person has no employment income.

The WITB is a refundable tax credit to give tax relief to low-income workers, says CRA in its warning. Income must be earned from working in Canada.

CRA says the scheme works in the following way:

• a promoter, usually a tax preparer or a tax professional, says they can increase one’s tax refund;
• the promoter will say they will prepare a T4 in the person’s name and list an income amount in box 14 to maximize the tax refund; and
• the promoter will tell the person to repay the deductions noted on the T4 and to pay a fee for completing the tax return.

Read: Things we learned from CRA at STEP Canada

A legitimate tax preparer will never ask someone to pay back deductions and will not prepare a T4 if the person didn’t earn an income in Canada, says CRA.

It adds that anyone promoting and participating in this scheme could face penalties, court fines and jail time.

Read the warning here.

Also read:

CRA makes one change to Q3 interest rates

Tax penalties tied to real estate increasing in Ontario, B.C.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.