Foreign Tax Credit

[karmaseeker]

Why would his ex being getting a foreign tax credit?

Interest on a stash of money hidden out of country Perhaps?

[Mominneed]

Not an expert by any means but could be due to any income from investing in an international company (even a US one). I believe you have to report your worldwide income including interest, dividends and capital gains on any foreign capital but you would get a tax credit for the tax deducted from the country of origin.

Hope this helps - I'm going way back to my university tax class so it's a little foggy but hopefully at least points you in the right direction. Could be for a mutual fund which invests in US market so unless it's large, I suspect it's not tonnes of money hiding.

[karmaseeker]

Could be investments. - but none of them are being declared on the financial statement. That's why something is amiss. Whether it is interest on a bank account or investments it is being hidden. It's not the amount - it is that is shows something isn't being claimed.

The financials a wrought with errors. Missing life insurance policies worth $100,000, claiming unclaimable daycare (it's a private baby sitter - someone could get is serious trouble with CRA for that one), undervaluation of property, not claiming getting tax breaks which is clearly shown on the tax returns.

[Spoonz]

In order to claim a foreign tax credit you also must include in your income the foreign income that created the tax paid for which you get the credit.
Hope that isn't too confusing.
If it is employment income that income is on your tax return as other income (it is not lumped in with your Canadian source income) (i used to work in the US so thinking back to my returns), Also you must include your foreign income tax return with your Canadian income tax return.
If the tax credit is being claimed against investments then only the income from the investment needs to be listed as income ( i do believe).

[Mominneed]

Does he have any investments listed on his financials? May not be specifically identified just as a Mutual fund investment. If not, I agree, something isn't right. However, if he's claimed a foreign tax credit (I think this means he's paid tax elsewhere) he's already admitting to CRA that he's got income from it so chech the income lines.

If you think he's cheating on his taxes (daycare expenses), you can report him even anonymously. If someone is reported, they'll eventually get to an investigation on that person and if he's got no receipts to back-up a daycare claim they'll be disallowed and he'll have to repay the tax on it and possibly penalties.

[karmaseeker]

Sorry, I should have explained a bit better. This is my fiancee's ex wife we are talking about. We are going to court and I have been doing most of the prep to get stuff ready for the lawyer. In so doing, I have gone over the financials that were submitted to us with a fine tooth comb (although I am certainly no tax expert or investigator) but I found all these things that weren't being claimed in the section were she fills out her stuff.

The largest omission being the $100,000 joint policy (duh - we have the number and statements are sent to both him and her).

This foreign tax credit I spotted in her tax return - so clearly she claimed something to the accountant and just thought we wouldn't notice it or something. Same as her tax credits. DUH. She doesn't claim on page 6 (or which ever #) and then 10 pages latter there it is in the tax return.

As for the day care I have a whole other thread on that http://www.ottawadivorce.com/forum/f...-refused-9371/ . It is not my nature to rat someone out but man o man I'd sure be happy if it got discovered.

I wouldn't want to throw the sitter under the bus. Would she get in trouble if it had been made clear to all concerned that it was an under the table arrangement?

Thanks for all the help here guys.

[dadtotheend]

As a tax accountant I can tell you that what spoonz says above in the first paragraph of that post is correct.

Ask what the foreign income is that is giving rise to the foreign tax credit.

In most cases, it is investment income, but it can also be employment income or business income.

[karmaseeker]

Ok, I think I found it - an ITF account might invest in foreign shares???

[dadtotheend]

Yes, definitely. Was the income reported?

As an aside, one would have to be a complete idiot to try and claim a credit for foreign taxes on one's tax return without reporting the related income.

That would easily qualify for one of those "stupidest criminals" stories.

[karmaseeker]

Yes it is reported. But the mismatched claims don't have her out of the running yet for stupidest moves.

There is still the insurance omissions and they day care discrepancies.

on the topic of financials is it normal to put down NO (other)assets? (tvs, bikes jewelry etc) ???