Comments on: Cheating on taxes and Benford’s Law

By: Shoppers Drug Mart, Clutter, Budgets and More | Million Dollar Journey

Shoppers Drug Mart, Clutter, Budgets and More | Million Dollar Journey — Fri, 16 Apr 2010 10:30:52 +0000

[...] Cheating on taxes and Benford’s Law @ Canadian Capitalist [...]

By: Doctor Stock

Doctor Stock — Tue, 13 Apr 2010 02:16:37 +0000

Interesting… never heard of it being applied to tax audits. Nice.

By: Djaypee

Djaypee — Tue, 13 Apr 2010 00:50:33 +0000

I first heard about Benford’s law doing Sarbanes-Oxley pre-auditing. I’m not at all surprised the CRA are using it.

Cheaters beware!

And to Rob and Alex: you are absolutely right! Learn the rules and stay within reason!

By: Rob

Rob — Mon, 12 Apr 2010 22:05:18 +0000

Want to stay out of trouble with CRA and still save money?

Learn the rules (most don’t), follow the rules (most don’t), but adjust your situation to fit within the rules (most don’t).

Easy.

By: MCarriage

MCarriage — Mon, 12 Apr 2010 18:24:45 +0000

Very good read. Its apparent that I need to brush up on my tax law. Like Alex says, its prob the best idea to not cheat on the income side especially. Just don’t go out of control with the deductions because that still can raise red flags and result in some unwanted headaches, I watched a friend go through it and it pretty much scared me straight.

By: Alex

Alex — Mon, 12 Apr 2010 17:34:32 +0000

My opinion: Never cheat on the income side. On the expense side (if you’re self employed) and if you’re not sure of a deduction – claim it! Within reason, of course. If you’re a fashion model, claim your hair-do, noserings, etc but not if you’re a doctor. In which case claim your lab coat, stethoscope and tongue depressors, etc. Benford’s law be damned!

By: Ben

Ben — Mon, 12 Apr 2010 17:18:50 +0000

Checked that post – good lord, what an epic discussion!

By: Canadian Capitalist

Canadian Capitalist — Mon, 12 Apr 2010 14:57:25 +0000

@Jon D: IIRC, CRA wanted to see the receipts for the first year our kids were in daycare but not the second. Perhaps, CRA surely checks the receipts for the first year and randomly thereafter? It is going to be impossible to check everyone’s receipts for the HRTC. I think CRA will probably just do random checks. I’m keeping my receipts around just in case.

@Ben: Charitable donations are gamed here as well through charitable tax shelters. Check the comments on this old post to see how surreal it can get:

http://www.canadiancapitalist.com/beware-of-tax-shelter-donation-arrangements/

By: Ben

Ben — Mon, 12 Apr 2010 12:23:45 +0000

Very interesting – I’d never heard of Benford’s Law. Appears there are a lot of people in the US cheating on their charitable donations!

By: Jon D.

Jon D. — Mon, 12 Apr 2010 12:13:39 +0000

2008 was our first year where we had a full year’s worth of child care ($12,000) and could claim the full $7,000 and bang on CRA requested to see the receipt. Same thing for 2009 so we’ll see come the summer again if they request it.
The HRTC will also be another one will be interesting to see how they treat it. I had a roof and windows replaced so nearly reached the max with 2 receipts – but can you imagine someone sending in dozens of Home Depot receipts?