As we gather our receipts and get ready to prepare our taxes, many of us start to feel a ‘cash crunch’ and are looking for bigger deductions to lessen our tax burden. Considering that many hospital workers such as nurses are in the 40 per cent tax bracket, they are understandably exploring deductions which would make their salaries go a little further. Look out: tax fraud promoters and tax preparers are on the hunt too and while you’re looking for deductions, they may be looking to entice you.
Every tax filing season, we essentially see the same tax scams used over and over. One of the most popular one works by preying on your sense of moral obligation: tax fraud promoters, posing as financial advisors or expert tax preparers, recommend investing in new and interesting medical research, promising matching investment funds, tax credits and most importantly huge tax refunds.
Over time the research ‘investments’ prove to be false and victims are left to pay steep penalties and repayments to the CRA as well as legal fees to protect their good names.
It’s an awful trick, really, people’s life savings get taken from right under their noses, and some even lose their homes.
How do you avoid falling victim to one of these tax fraud schemes? As a hospital worker, ask yourself if you could fall into one of these groups:
- Unionized environments and technical individuals
Overwhelmingly, hospital workers are skilled in their field of practice (medicine, trades, administrative professionals) but aren’t tax-savvy. Worse, word can spread throughout unions, attracting several victims at once.
- Hospital workers earning $50,000+ per year
Most hospital workers pay tax all throughout the year, from every paycheck. Self-employed individuals do not typically pay tax until April 30. At the end of the year, hospital workers have already paid their fair share of taxes – a fact not lost on the tax fraud promoters. Promoters try to extract as much of the paid taxes from the CRA as possible, typically charging a handsome fee to do so.
- Individuals at the same job or hospital for 10, 20 or more years
Hospital workers who consider their jobs to be stable typically feel they are financially able to take on a little more risk or try something different from their RRSPs in their investment portfolios. They also tend to be less up-to-date or “insulated” on financial products. Tax fraud promoters rely on “newness” to promote whatever tax fraud scheme is trending.
- Consistent RRSP contributors
Every year hospital workers make regular contributions to their RRSPs with the expectation of receiving a tax refund. This has two consequences. First, the fact that legitimate financial tools such as RRSPs or RRIFs generate tax refunds makes it easier to believe that new seemingly legitimate financial instruments or business arrangements will do the same. Second, over time, hospital workers become desensitized to receiving tax refunds believing it is to be expected.
- Hospital workers and their families that self-identify as “middle class”
The middle class generally feel as though the “top one per cent” of Canadians have access to a network of professionals and advisors (such as bankers, financial planners, tax lawyers and accountants etc.) that have insider information and know something they don’t.
Other important tax considerations for hospital workers:
- Hospital workers such as nurses may work in multiple locations in different capacities. If they work in three different locations, they could have a different employment arrangement at each of those places. Improperly reporting an employment arrangement could result in being under or over charged by the CRA.
- Hospital workers who work offsite may receive a T2200 from their employers allowing them certain deductions for automobile expenses etc. Importantly, these deductions may not be deductible across-the-board for all employment arrangements.
- There is a lot of misinformation between hospital workers in different employment arrangements. Though your colleagues may have the best of intentions, they could be inadvertently giving you advice that is not applicable to you and could end up costing you serious penalties.
Medical services are delivered across in a broad spectrum of environments. Accordingly, hospital workers are employed in ever-changing capacities and employment arrangements. As this trend accelerates, tax compliance becomes more complex. If you have any doubt about your tax situation meet with a licensed accountant or tax lawyer familiar with your specific industry. It could save you thousands and empower you to be victor, not victim this tax season.