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Audit Defense - Will it help for 20(11)/20(12) questions from CRA?

I have a question about TurboTax Audit Defense and 20(11) 20(12) complexities.

 

Short story: Will TurboTax handle the details with Canada Revenue Agency on my behalf if I have the same 20(11)/20(12) complications next year as I have had in recent years?

 

Long Story:
My wife and I have a Joint Unregistered investment account that holds stocks in several different countries. Each year we have some Foreign Income (T5 Box 15) and Foreign Taxes Paid (T5 Box 16).
Each year I receive a Warning near the end of my TurboTax Online experience to "Please verify that you are entitled to claim a 20(11) or 20(12) deduction. See help for further information". The "Help" is not helpful and since the logic and decision about this 20(11) or 20(12) deduction is entirely being done by TurboTax, and there is no way for me to change the calculations anyways, I have no reasonable way to verify this entitlement.

For the past couple of years, CRA has sent a letter asking for more details about Line 23200 (which is calculated by TurboTax, not entered by me) and the related Subsection 20(11) or 20(12) deduction.
TurboTax cannot or will not provide me with further details about how their calculations arrived at the number for Line 23200.
So, I send all of my T5 details back to CRA with a further explanation.
After a short time, they follow up with a reassessment and notice that the deduction is not allowed so additional taxes are owing.

Since even TurboTax is warning me about these calculations, I do not know how to justify these calculations with CRA.

Will Audit Defense be of value to me if this situation arises again for future tax filings? Do you have any alternate suggestions?

 

Thank you.

2 Replies

Audit Defense - Will it help for 20(11)/20(12) questions from CRA?

TurboTax makes it's calculation based on the numbers that have been entered, the software doesn't know anything about tax treaties. The 20(11) or 20(12) deductions are based on tax treaty information, which is why TurboTax Online asks "Please verify that you are entitled to claim a 20(11) or 20(12) deduction." . You have to make sure the numbers entered for the 20(11) or 20(12) deductions are correct based on the country of origin of the income/tax paid because TurboTax Online doesn't know. If you're not sure, then it's best to get that information from the CRA or from someone knowledgeable in the treaties you are dealing with before you file, instead of waiting for an audit.

 

 

Audit Defense - Will it help for 20(11)/20(12) questions from CRA?

Thank you Susan.

 

Recall, I'm not the one who enters the 20(11) or 20(12) deduction; TurboTax enters it, in my case by including an amount in line 23200. Let's pretend that I'm able to perform this research and I decide that this number is incorrect. (Apparently that is the decision CRA made last year.) I have performed some research already, using a dreaded AI tool, and learned that the foreign taxes paid should have been claimed as "Foreign Tax Credits" instead of a 20(11) deduction. Still, I didn't do the math; TurboTax did.

 

To my knowledge, TurboTax does not permit me to change this number on my return. Unless I am missing something, TurboTax calculates it, adds it to my return, warns me that it might be wrong, and then forces me to use it no matter what I think about the warning.

 

Is there a way I can override it after TurboTax warns me about it? If I am forced to accept it, then I don't understand the value of the warning.

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