Category Archives: Uncategorized

Small discrepancies

Last week I got a message from the Canada Revenue Agency about my own 2015 income tax. I did not read the main part. I went to the bottom line and saw that they wanted me to pay them 14 dollars. I know that I could possibly fight this assessment but it would take a lot of time and energy. In addition to that they might decide to question other items on my return. I sent them the 14 dollars.

For a long time I have told tax clients not to worry about small items like this. If there is a large difference of course I will look into it. If the amount was a couple hundred dollars I would spend a couple of hours going through their assessment notice to see if I could find out exactly what they were objecting to. Then I could decide what to do about it.

Last week Revenue Canada sent a letter to one of my tax clients. They specifically asked him for one information slip. It was for a withdrawal from an RRSP (the Canadian equivalent of an IRA but with a much higher contribution limit.) This was amazing because there were only 2 items on the information slip, the withdrawal and the tax withheld.

They did not ask about the withdrawal, only the tax withheld. The brokerage firm that held the RRSP send in their copies of information slips to the tax authorities electronically.  I had to conclude that there had been a glitch in transmission so that the tax withheld did not appear to be 25% of the withdrawal.

This is not supposed to be possible. The only time I have seen such glitches was when I wrote a C program and discovered that the villains in Redmond had filled their new operating systems with read errors. I could write a file whenever I wanted to and then read it when they wanted to let me read it.

I can’t help mentioning that one of my buddies came to see me the first season that I worked on income tax. He had received a letter asking about 3 specific points on his return from the previous year. He was badly rattled and seemed to be very frightened. I went through it with him and showed him that in each of the 3 cases there were some points in his favor. He seemed relieved. When he came to see me the next time he did not remember anything that I had told him, except that now he knew that there were some points in his favor on each one. We went through it all again and this time he paid more attention.



Donald Trump’s Income Tax Return

Some of the Democrats have complained that Donald Trump has stated that he will not release his current income tax return until after the audit is finished. I think that this is reasonable.

Someone found a copy of his 1995 return in which he showed a huge Net Operating Loss. The calculation of the NOL is complex and difficult. I have only prepared a couple of them. They often take a couple of hours to fill in. The corresponding Canadian form takes only a few minutes.

The concept of Net Operating Losses is to decrease the effects of varying income levels. A typical one would be for someone like a realtor who made money when real estate was moving in the early 2000s and had huge losses when the real estate market died, because he was still making the same advertising expenses. Companies in mining or oil exploration would have the same problems. The NOL permits taxpayers to decrease the tax on other years to compensate for the losses of the loss year.

People whose income varies from year to year are quite likely to use NOLs. Some examples are a newspaper, a grifter, and an angel investor. I specifically mentioned these because the New York Times, Hillary Clinton, and Mark Cuban all recently condemned Trump for using NOLs recently without realizing that they had done the same. I have no idea why Mark Cuban made such a stupid mistake. Until recently I thought that he was smarter than that.

I would not expect to see anything interesting in Trump’s tax returns in any case. Anyone buying real estate developments in the US has to form a new corporation for each project. If the address is 123 Main Street you would try to set up a corporation with a name like 123 Main Street Ltd.

This is necessary because there are huge numbers of lawyers who are looking for business and nearly all of them would be glad to get a chance to make a claim against a property owner. Many lawyers make a practice of filing trivial actions against companies like real estate owners in the hope of getting a quick out of court settlement. They typically ask for an amount that is significantly less than the cost of going to court.

Trump says that he does not pay off these shysters. He makes them go to court. If there was only one or two it would be cheaper to pay them off than to go to court. He takes the position that if he paid off one of them he would be besieged by trivial lawsuits.

As a sidelight here, Al Sharpton’s daughter filed a claim against New York City stating that she had sprained her ankle because she tripped on something on the sidewalk. She went ahead and posted photos on the internet of her dancing in high heels later the day of her supposed accident, and climbing a large hill or small mountain a couple of days later. How stupid can they get?

To take money from a corporation to an individual owner is not difficult. The company can pay a dividend, a management fee, a director’s fee, or some similar thing. All of these would simply go onto a form 1099 and these would be added up, either directly or on a schedule C.

In Canada it used to be necessary to have the owner of a private company receive a draw during the year. Near the end of the year the accountant had to figure how much was a salary and how much was a dividend. The objective was to select the distribution of income types to minimize the total tax bill. Similar calculations are done in the US. Naturally they are more complex when a large number of corporations are involved.

There is an additional complicating factor in Trump’s case. Because he has interests in a couple hundred corporations, some of these are probably treated as separate businesses and some of them consolidate the accounts of some other corporations, which are officially owned by the mother corporations instead of the shareholder. It requires some pretty fancy calculations to figure out the best distribution.

In summary I expect that when his 2015 return is published it will not contain anything interesting because it will only show the funds that went from his companies to his personal account. This will be quite close to his cost of living plus whatever additional amount he wants to put into his stock trading account.

If the Dems really wanted to know what was in his tax return they would instead look at the 104 pages that he filed a few months ago. One financial writer looked at this and found that Trump owned a large amount of shares in a particular company that did not fit in with his other investments. He looked at it, examined the company’s filings, and recommended that his readers all buy shares in it.

Saving Receipts

Some people will tell you that you do not need to keep receipts  for deductible expenses. This is not correct. The IRS or Revenue Canada may ask to see your receipts any time that they want to ask.
When they ask it is your duty and responsibility to provide receipts. If you do not do so they may completely eliminate the business expense. You could end up with a big tax bill. Most likely, if this happens, you will be audited for the next 2 or 3 years.

This brings us to the question of how to collect and categorize your business or employee expenses. The system that seems to be simplest is to put all of January receipts in one envelope, all of February in another and so on. This is not a very good system.

A much better system is to look at last year’s tax form and make a list of the types of expenses that are listed. Prepare an envelope for each one. Place the receipts in the appropriate envelope.  The reason for doing it this way is that whoever prepares your tax return will need to sort them into these categories. If they are already in the correct categories this is no longer necessary.

On some occasions I have spent a long time sorting office supplies from internet service etc. Once they are sorted I like to handle them in the easiest way, which is to take a batch of receipts for one thing and enter them all into an adding machine that produces a paper tape. As soon as I get to the end I wrap the tape around the receipts and put a few staples through the package. Then I write the name of the category on the tape and go on to the next batch. With a little practice this becomes very fast and easy to do.

I use the same system for adding up prescription receipts.

I am sending this to you now because I hope that you do not wait until the last minute to start preparing for your tax preparation.

A new feature this year is that the sales tax that you pay on large items may be deductible if you itemize deductions. The sales tax on an SUV may be a very large figure that would look really good on your Schedule A.


Notice to 1040 Extension Filers

If you filed an extension form in April you are expected to send in a complete form 1040 by the middle of October. There is not much time left. If you want me to do it for you please scan the relevant documents and email me the scans. I will prepare the form and send it to you in pdf format. You will print it, sign it and mail it. I recommend making a paper copy as well but this is up to you. Please send the information as soon as possible so that we will have time to exchange emails about anything that is not clear. I would hate to have you miss a deduction because I did not ask enough questions.

Let me remind you that I will need to know about any changes from last year. These changes include marriages, divorces etc. For the last few years the IRS have been stating that if you were married legally in any jurisdiction and have not been divorced you are still married, whether or not your state of residence accepts marriages like yours. This applies to same-sex marriages and heterosexual marriages.

I need to know the name of the county that you live in to make sure that I calculate the sales tax deduction correctly.  Please send me a copy of last year’s form 1040 so that I can get all of your dependents and their Social Insurance Numbers correctly.

If the form seems to be especially complex I will let you know my preparation fee before filling it in. Otherwise I will ask for the average price that is paid in the US.




Spam Attack

I had a big spam attack today, April 21. I was getting 10 or 20 comments a day but it increased sharply this week, to over 100 per day. This morning it sped up to over 100 per hour for a while. Almost none of the comments were specifically related to the post that they were stated as being related to. For a while I was deleting them as fast as I could but they were coming in faster. The main problem was that my email server did not initially recognize the notices from my web host as spam. I had to delete these in stages over the day. I had a second attack in the afternoon and the notifications from my web host went directly into my spam folder.

The most unsettling thing was that these looked just like the comments that I normally receive. This leads me to believe that I do not have anywhere near as many readers as I thought. I am seriously thinking of simply taking this blog down.

The Truth About Cancer – A Global Quest

I hope that most of you are following the Truth About Cancer series. I have seen the first 3 of 9 episodes. The first showed how medical education in the US was hijacked a century ago by the Carnegie and Rockefeller organizations. They had most medical schools closed down as being unscientific, and took control of the American Medical Association and similar groups. This put thousands of herbalists, naturopaths, homeopaths, and chiropractors out of business.

They provided funds for the schools that taught the subjects that they wanted them to teach, which consisted almost entirely of how to prescribe patented chemical compounds which could be sold at huge markups over the cost of production. Most doctors spend about one hour of their med school days studying nutrition.

The Federal Drug Administration, which is supposed to be protecting consumers from the excesses of the pharmaceutical industry, went over to the other side long ago. This phenomenon is usually known as regulatory capture. The average time until complete capture is about 20 years. At the advanced stage, as seen in the FDA, people move back and forth between the industry and the regulatory body in a process that is often described as a revolving door.

The series describes the mechanism by which genetically modified organisms (GMOs) were approved. An executive from Monsanto was transferred to the FDA. Once there he ignored all of the advice from FDA scientists and stated that, since GMOs are similar to naturally occurring plants, no studies were necessary. Later he went back to Monsanto, and is now back at the FDA, where he is blocking attempts to bring Monsanto under control. Studies have shown that GMOs are harmful, and the series shows photos of lab mice that have lived on GMOs for months. The tumors on their bodies are easily visible from 2 or 3 feet away.

GMOs are harmful in 2 main ways. They permit very high concentrations of the poison in Roundup. These kill beneficial bacteria in the digestive system, making it easier for harmful bacteria to flourish. Some of them also produce poisons, which are supposed to kill insects that attack the growing plant, and of course also attack anyone who eats them.

Surveys have shown that 90% of the US population does not want to eat GMO foods. To counter this the FDA has produced regulations that make it essentially illegal to advertise any product as being non-GMO. Recently Congress passed a bill that is colloquially referred to as the Monsanto Protection Act. Its purpose is to make it more difficult to market non-GMO products.

The series describes historical facts about Europe. It is stated that the big 3 German chemical companies were the chief supporters of the Nazi ascension to power in the 1930s. Once it was clear that a war was coming they had enormous factories built to produce explosives, ammunition, synthetic gasoline etc. One factory was 5 miles by 2 miles. To supply labor they built large prison camps, such as Auschwitz, right beside each of them. It seems likely that they supported the Nazi cause because they saw themselves as part of the armaments industry.

Many of their leaders were imprisoned after the Nuremburg trials. It is not mentioned here, but one of the executives imprisoned after the trials was placed back in his old position as soon as he got out of jail. This told me all I needed to know about the morals and ethics of the European pharmaceutical companies.

They have managed to make it very difficult to buy food supplements like minerals and vitamins in Europe. After all, healthy, well-nourished people are harder to sell drugs to.

He interviews a lady who was dying in a chemotherapy ward in St. Petersburg, Russia. She was completely bedridden when her family carried her out of there and took her to a clinic in Lithuania. The first doctor there looked at her lab results and asked why she was still living. Within a few weeks she was able to move around. She contacted the ladies who were in her old chemotherapy ward, told them what happened, and invited them to go to Lithuania with her. None of them went. They all died where she had met them. This interview is very moving.

One of the things that was brought out in this series is that chemotherapy and radiation are themselves causes of cancer so there is very little logic in using them as cancer treatments. They are very profitable to the industry, of course, whereas there is virtually no profit to using naturally occurring treatments. The series mentions a preparation that was used to cure 70,000 cancer patients in Australia when it was sold over the counter. The industry had it changed to a prescription-only drug and it was no longer available to anyone.

It is shown that chemotherapy has only a 2% success rate against cancer, even though it costs $10,000 to $30,000 a month. It kills the daughter cells but not the stem cells so the cancer often comes roaring back stronger than ever. The pharmaceutical industry has made enormous efforts to suppress information about natural cures because they are cheaper and more effective. There is no way for them to make billions of dollars from cheap, effective treatment methods.

US Income Tax Deadline Approaching

The deadline for US income taxes is April 15 in nearly all states. It is only later in 1 or 2 states that have a statutory holiday on the 15th.

If you want to become my tax client send a message to by the afternoon of Thursday April 14 giving your name, address, and Social Security Number. I will fill them out and mail them the morning of the 15th.
Of course, if you change your mind and want to have someone else prepare your taxes later that is okay. The extension is 6 months for the tax form 1040 but you are still expected to pay by the 15th of April. The extension is for time of filing, not for paying.
It is not clear at this time whether the extension of time is also for the FBARs needed when your foreign financial accounts sum up to more than $10,000 but it looks like it does.

The Truth About Cancer

Last year I saw a great series about cancer. I know that this does not have anything to do with income tax but it does have a lot to do with personal finance. One study said that more than a fifth of personal bankruptcies are caused by medical bills, even for people who have medical insurance. Cancer and heart disease seem to be the most expensive. In this series Ty Bollinger visits and interviews many of the doctors who are at the front of the effective research studies. He shows that some of the most expensive treatments are among the least effective. If you are never diagnosed with cancer there is a strong chance that a close family member will, so it is a good idea to find out all about it now.

He is broadcasting this series again beginning on the 12th of April. To get the times and details, click on

Medical Insurance

I want to tell you about a few things that can happen in medical insurance and provide a little guidance in case you need it. This is a big complex subject so it is easy, and very expensive, to make a mistake.

In Canada medical insurance is run by the provinces, not the federal government. You must actually be living in a province for more than half the year to participate in their insurance. There are provisions for someone moving from one province to another.

A few years ago one province printed forms saying that you had to live there 153 days in a year, but I believe that they meant 183 days and their stuff was not proofread very well.

There have been cases where a person normally had a couple of seasonal jobs in different provinces and was not eligible for government insurance at all. There have been cases where a person lived in the US and commuted to a job in Canada. He or she paid for government medical insurance in Canada but was not entitled to collect on it. In these cases a person who has received medical care can receive a large bill for it.

Quite a while ago a socialist government was elected in Ontario. True to socialist dogma, they eliminated individual payments for medical care and put the bill onto those awful employers. This caused a couple of predictable results. Less people were hired, and the number of people insured went up to 105% of the population. A Chicago police officer told me that every time she had to search anyone from a particular European country the person searched had an Ontario medical insurance card.

There are a few things that you should know whether you are insured or not. You should know exactly where the nearest emergency room is and how to get to it. This requires that you actually go there. People have died because they followed a road that was on a map but either did not really exist or had been permanently closed. You do not want to spend precious time looking for a hospital when you really need one.

If you have a heart attack while you are alone in your car it is recommended that you cough as deeply as you can and keep on coughing until you are inside the emergency room. If you doubt the wisdom of this advice look into it now, not while you are having a heart attack.

The fine that you have to pay if you are in the US and not covered by Obamacare will go up very sharply for the next couple of years. This is in line with the reasoning that a successful government power grab will show the benefits before the next election and the costs sometime after, but hopefully soon enough that the voters will forget it before the following election.

The question arises of what to do if you are uninsured or have a high deductible on your medical insurance. First you must understand that the medical education system was kidnapped by the pharmaceutical industry a century ago. Doctors are trained to write prescriptions for all patients. Their education in non-pharmaceutical treatments is missing, in fact they are trained to believe that these are dangerous and ineffective. Once they have left school and gone into practice they are expected to spend all of their time writing prescriptions and filling out insurance forms, which are set up to discourage any treatment that does not benefit the pharmaceutical industry.

If you are uninsured or underinsured please start following the medical columns on the Internet, with special emphasis on those which describe any ailments that you may have. Start with Mark Hyman and his comments on diet and supplements.

Consider, for a moment, the most expensive medical procedures.

A few months ago a Florida doctor wrote, for publication, that all of cardiology is fraud. I am sure that his legal team is very busy. I have heard at least 2 people tell me that they went to a cardiologist and each was told that he had a badly clogged artery, he was a walking time bomb, and he could collapse and die on his way to the parking lot. His artery was so badly clogged that he had to be operated on early the following morning. There was no time to consider or to get a second opinion.

Some studies have said that getting a heart bypass operation does not increase your life expectancy and that most of the people who have this operation cannot possibly benefit from it. Estimates of the number who could potentially benefit range from as low as 3 % to as high as 17 %. If you are concerned about your arteries being clogged consider looking up EDTA. It also removes many heavy metals from the body, especially lead. It does not require 2 or 3 months of convalescence or cause memory loss. Cost is very minimal.

Many people are afraid of cancer. If you are one of them look up Ty Bollinger and his series The Truth About Cancer. The first cancer cure to be popularized was the Johanna Budwig treatment, developed about 60 years ago. A doctor who Ty Bollinger interviewed stated that this treatment had been used on 2200 terminal cancer patients and cured over 80 % of them. Cost is about $40 a month. It is so cheap that I took it for a couple of months as a general tonic when I felt blah.

By contrast chemotherapy can cost up to $30,000 a month. Cure rates with it have run as high as 2 % in the US but only 1 % in Australia.


Yesterday I prepared a Canadian tax return for a student who had been in Canada since August of 2013. He had no income for 2013 or 2014. He was filing for those years to declare his tuition and other allowable school expenses to carry forward in case he decided to work in Canada for a while before returning to China. We prepared the return as if he was a Canadian resident, but had to warn him that he might not be considered as a Canadian resident because he had no ties in Canada. The Canada Revenue Agency might take the position that he was only in Canada on a temporary basis and disallow his claim.

This is often a problem. If you are moving from one country to another they will usually accept it if family members are moving with you but are very unlikely to accept it if you are just working
somewhere else but returning home frequently. Residency is very important on the Canadian side of a cross-border return. It is less important on returns for US persons.

One other thing is that a few years ago New York state tried to tax non-residents who were telecommuting to New York jobs. I have prepared returns in other years for a person who lived in Niagara Falls, Ontario but worked in the US. He had a corporation which I believe was registered in Canada. This required another form on his US return.

The critical point of all of these residency problems is that most government bodies are pressed for revenue so they want to collect as much as they can from people who they might consider to be residents. The concept is that they want to collect revenue from these people but do not want to pay to provide services to them.