Tip of the week

November 2019

Records of Employment - Fines

November 12/19

An employer is required to file a record of employment form (ROE) when they have employees who have a break in employment. The most common case is when an employee is laid off or quits. The rule is generally that you have 5 days to file the form. If the form is not filed on time, it is possible that the employer will be fined. The usual fine is $2,000, but in one case in Ontario the court felt that the delay in getting the ROE caused significant hardship to the employee and the fine was $50,000. 

You also should be careful to fill in the reason for the ROE being issued. Services Canada investigates this on occasion, and you don’t want to have said that the ROE was issued for shortage of work if the actual reason was dismissal. When you are filling out the ROE, remember that it is a legal document, and should be filled out carefully and filed on time.

Recent Case on Proper Books and Records

November 5/19

Proper books and records is a phrase that we hear a lot. The Income Tax Act requires that every taxpayer, whether they are an individual, a corporation or a charity, keep records that prove that the receipts agree with the numbers that have been used to file tax returns.

A recent court case (2019 TCC 145) highlighted this problem. In this court case the charity could not provide documentation for money spent overseas. The result was that the charity has lost its ability to issue a donation receipt for a year. For most organizations the easiest way to fix this documentation problem is to stop paying cash for expenses. Use a debit or credit card, a cheque or an online transfer. It is important to be able to prove that you are the one who spent the money. 

For a taxable entity the failure to keep proper books and records will lead to paying more income tax. This is because you will not be able to get a deduction for expenses when you cannot provide a receipt. This should be avoided because we all pay enough taxes.