Wednesday, September 15, 2010

Tax Day

Good laws should be fair, understandable, and enforceable.  Whenever I have to pay income taxes, I reflect on this.

Today is another income tax instalment due date.  If net taxes owing at the end of the year (not previously deducted at source) exceed $3,000, I have to make quarterly instalments.  If net taxes owing will be less than $3,000, I can disregard the friendly reminder.

Last spring, owing to low interest rates and generally poor economic prospects  (double-dip recession on the horizon),  I disregarded the reminder.

Now I realize that my income will be a little higher than I thought, and maybe I need to pay instalments.

My Options:  (1) pay one-quarter of net taxes owing from 2008 in March and June; pay one-half of balance equaling net taxes owing from 2009 in Sept and Dec; (2) pay one-quarter of net taxes owing from 2009 each quarter; (3) pay one-quarter of net taxes owing for 2010 each quarter; (4) reduce income by loss-selling and make sure net taxes owing are less than $3,000 to avoid penalties. 

I opt for (2), making the payments I previously omitted, still leaving the door open for (4).

The Canadian income tax system is an honour system.  If they owe taxes, Canadians are expected to file returns annually, report all taxable income, and pay amounts owing.  How well does this work?  Those entitled to a refund or other benefits will probably file a return.  If they fail to file or misrepresent their income,  is the law enforced?

Are the tax laws understandable?  Or just too complex?

Are they fair?  I guess that might depend on whether you get a refund.

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