Monday, March 9, 2009
Some days you feel like a rolling stone - I can't get no satisfaction. If you decide to spend your career dealing with the Canada Revenue Agency (CRA), it may be more like most days.
Satisfaction or not, at least we now have clarity. I am talking about the Northern resident travel deduction.
Northerners who have lived in the NWT or Nunavut for at least six months qualify for a travel deduction if they receive a Box 32 travel benefit from their employer reported on their T4 slip.
For this deduction, you claim the lower of three amounts: the Box 32 benefit, trip expenses and a controversial amount described in the Income Tax Act as the "lowest return airfare ordinarily available, at the time the trip was made." If your travel benefit was $1,500 and you spent $1,600 on a trip, you want to know what that "lowest return airfare" is, wouldn't you?
The CRA states - which we agree - the "lowest return airfare" is the lowest regular fare available at the time of your trip to the nearest city, i.e., Edmonton, Winnipeg, Montreal or Ottawa (depending on where you live). In English, the "lowest return airfare" is the last-minute airfare you would have paid at the counter at the time you started your trip, regardless if you flew, drove, paddled, cycled or boated.
For Yellowknife taxpayers, the CRA said the "lowest return airfares" were $1,209 for 2006 and $756 for 2007.
You are already thinking there must be a typo. It's improbable that an average last-minute counter fare for a 2007 Yk-Edmonton return ticket could have been purchased for only $756, considering the numerous busy travel periods. It's even more improbable for a last-minute fare to have fallen from 2006 to 2007.
Furthermore, those "lowest return airfares" were never provided by the CRA at the start of the tax season.
Actually, they were never provided at all. You found out what CRA's "lowest return airfare" was after you were reassessed because you used a higher "lowest return airfare."
I wrote the CRA in Winnipeg in September 2008 and asked, "Look, what is your 2008 lowest return airfare? We need some clarity." As expected, their logical response was, "2008 isn't over yet." That was a good start because the query forced this controversial issue onto their agenda.
Over the past two months, after lengthy phone discussions, the CRA has informally agreed to use the following amounts as the "lowest return airfares" for 2008.
Fort Smith's fare is an anomaly because $1,188.60 is the only available fare. For the rest of the communities listed above, the listed fares are the lowest economy fares generally available throughout the year.
The CRA will not publish this information. Does this seem odd to you? Perhaps, but the 2006 and 2007 "lowest return airfare" were never published either. These 2008 amounts were wrought out of a CRA officer, and I was assured Northerners using these 2008 "lowest return airfare" will not have their 2008 travel claims reassessed.
Next week: My thoughts on CRA's 2008 "lowest return airfare" and a few more things.
Andy Wong, CGA, CFP, is a tax consultant at MacKay LLP, Chartered Accountants, in Yellowknife. He can be reached at: firstname.lastname@example.org.