Phoenix T4 Slip Error

I just noticed this error on a government T4 slip. This is for T4 slips for employees posted overseas. The primary worker who may be affected are members of the Diplomatic Corp. Individuals working in private industry such as the Oil Sector may also be affected.

Background

The definition for province codes for T4 slips may be found by checking this following web page. If you check the instructions for Box 10 – Province of Employment, the government has standardized all the codes.

These codes reflect the same two character provincial abbreviations used by Canada. The only two exceptions are:

  • US – for employment in the US, and
  • ZZ – for other, meaning that the employee worked in a country other than Canada or the United States, or if the employee worked in Canada beyond the limits of a province or territory (for example, on an offshore oil rig).

Problem

Phoenix has used the code EX instead of the authorized codes.

All government workers who work outside of Canada (principally the diplomatic corp,) will probably have their T4 slips registered at the Canada Revenue Agency with this wrong code in box 10. As a result, any person who downloads these tax slips will likely have a problem with importing the tax slip into their tax return, if you use tax software.

Apologies for the delayed responses

This past week has been rough with the loss of both my father and my oldest dog. As a result, I have not been able to focus as closely on my client’s affairs as I would prefer.

I will be back working again in the next few days, but I am providing a link to my father’s obituary at the remembering.ca website.

My father has an insatiable need to discover information and was always going through several books at once. He would not pay too much attention to increasing his collection though, managing to pick up several copies of the same book. Not at the same time thankfully.

Equally, he was known as the white haired guy who snowboarded on the local ski patrol, to the shock of the cool kids playing in the snowboard park. He hated to wear a hat when snowboarding, but when the patrol arranged for helmets for the patrollers, he would don the thing as an example to his grandchildren. And, like me at aged four or five, he helped each grandchild navigate the slopes, on skis or snowboard. Though Emily was probably the youngest – At aged two, she was placed in a set of skis so she could try “walking”. She walked to the big lift and wasn’t going to be deterred, with Grandpa in tow.

Past Estate Planning now creating issues

A previous common practice of putting children on family properties is now causing conflicts with current laws.

Situation

What has happened in the past is that children would be put on the title for the family properties for the purpose of moving the properties to the children seamlessly for estate purposes. The thought was that the children then could take over the family property, generally a family cottage, with little hassle when the parents are no longer able to manage the property.

Conflict with tax law

Doing so creates issues with tax law. This maneuver is an attempt to circumvent the deemed disposition of the property on death. While the parents can “gift” the property to the children, the property is deemed to have been sold at fair market value at the time this occurred. If this did not happen (and the tax department actually keeps these details on file,) then the capital gains can be significant.

Another problem is if the property is sold after the addition of the child, but before the child receives the full ownership of the property. For example, if the child was put on the title when they became of legal age, then the property is sold decades later, the child isn’t aware that they have to declare that sale on their tax return. This has been required in Canada for the past few years and there are several people who have discovered that they didn’t declare the sale when they should have. Or the child wasn’t called into the meeting to handle the sale of the property to the new owners, rending the actual sale at risk!

Property ownership issues

It is equally possible that the parents may have financial difficulties while the child has been put on to the property title. As a result, the municipality and/or mortgage company may seek redress from the child for outstanding debts that the parents were unable to pay. This is a concern that all individuals who are on title should be aware of as it does impact their personal credit risk. Lenders are increasingly wary when people have their name on multiple titles.

Conflict with estate law

Another issue that has come up is the conflict with estate law, specifically probate. While this isn’t an issue in some jurisdictions, others have indicated that they consider the placement of children on title for the purpose of transferring the property outside of probate is possible fraud. I am not presently aware of any court cases which have settled this situation, but it is another risk that people should be aware of.

This article touches on some legal matters which is better addressed with your legal adviser to provide specific and personal advice for your personal situation. It is only an introduction to the matter and is not intended to replace legal advice from a lawyer or other member of the legal profession.

Why you should not email documents…

I have had several people prefer to use email to send me documents. This has created issues for most of them. Here are some issues for you to be aware of:

  • Everything that you send by email can be read by everyone in its path. And email does not travel in a straight line – People are surprised to realize that most emails being sent from Ottawa, ON to Ottawa, ON usually travel either through Michigan or New York State.
  • Email may be mis-directed or mis-typed. I had one people call wondering where their tax return was at. Turns out that they emailed their papers to someone in South Africa.
  • Replying to a previous email can route the reply through a filtering system which strips out attachments. Your documents are not received.
  • Replying to a previous email, then adding additional versions of my email address results in both emails being identified as spam and the email by-passes my in-box.
  • Replying to a previous email can result in the email being identified as non-urgent or from a conversation which has now expired. The email by-passes my in-box.
  • Sending emails about taxes may result in the email being identified as spam and by-passing my in-box.
  • Emails can expire. This means that your email isn’t seen.
  • I am a bulk receiver for emails. This means, no matter what I do, it is entirely possible that your email will not be on my screen by the time I look at the emails.

I have tools which ensure that your documents are received and logged as received. All clients can use them. Those tools prevent all of the above problems.