Here is What is NEW for the 2014 Canadian Tax Filing Season

  • Children’s fitness amount – Under proposed changes, the maximum amount of eligible fees for each child has increased to $1,000.
  • Search and rescue volunteer amount – As a search and rescue volunteer, you may be able to claim an amount of $3,000.
  • Family Tax Cut – A proposed non-refundable tax credit of up to $2,000 is available to eligible couples with children under the age of 18, and is effective starting with the 2014 tax year.
  • Universal Child Care Benefit (UCCB) - Under proposed changes, this benefit is being increased for children under age six. Effective January 1, 2015, parents will be eligible for a benefit of $160 per month for each eligible child under the age of six – up from $100 per month. Under proposed changes to expand the UCCB, parents may also receive a benefit of $60 per month for eligible children ages six through 17. Payments of the additional amount and expanded amount will start in July of 2015.
  • Emergency services volunteers – Rules for the $1,000 exemption for emergency services have changed.
  • Adoption expenses – The maximum amount of eligible expenses for each child has been increased to $15,000.
  • Medical expenses – Amounts paid as salary for designing of personalized therapy plans for persons eligible to claim the disability tax credit and costs for service animals used to help manage severe diabetes, are now eligible as medical expenses.
  • Investment tax credit – Eligibility for the mineral exploration tax credit has been extended to flow-through share agreements entered into before April 2015.
  • GST/HST credit – You no longer have to apply for the goods and services tax/harmonized sales tax (GST/HST) credit. When you file your return, the Canada Revenue Agency (CRA) will determine your eligibility and will advise those who are eligible to receive the credit.  If you have a spouse or common-law partner, only one of you can receive the credit. The credit will be paid to the person whose return is assessed first. The amount will be the same, regardless of who (in the couple) receives it.
  • Online mail – When you register for online mail, you’ll have instant access to your tax records anytime, anywhere. Choose to receive an email notification that your notice of assessment or reassessment is available online. You can register for this service, which begins February 2015 by either adding your email address on your T1 return, or by registering directly at www.cra.gc.ca/myaccount.
  • Mobile application: In February 2015, the CRA will be launching a mobile app for individual taxpayers.

CRA online services make filing easier and getting your refund faster

The CRA’s online services are fast, easy, and secure. You can use them to file your income tax and benefit return, make a payment, track your refund, receive your notice of assessment, and more, which is great for keeping on top of your taxes and especially should there be an issue.

The only concern I have, surrounds the notice that the Government of Canada is switching to direct deposit for all payments that it issues? This includes your tax refund and benefit payments. They would like you to sign up for direct deposit.  More information is available here: www.cra.gc.ca/getready.  However, by providing the CRA with a bank source for direct deposit, also means that they have a source for collection purposes should you run into tax trouble and have a balance with the CRA.

Stay connected by subscribing to this blog, or to any of the CRA’s social media sites, below:

You can also visit our YouTube Channel for tax-related videos.

The Horse and Pony Protection Association (HAPPA) Sought Voluntary Revocation of Charitable Status From CRA

The voluntary revocation of the registered charitable status of The Horse and Pony Protection Association (HAPPA) as a result of a CBC investigation could leave Canadian Taxpayers who donated to this organization owing back monies to the Canada Revenue Agency (CRA).

Almost one year ago, the CBC Investigates reported on accountability issues at the Newfoundland charity after former members of the Board of Directors raised concerns about the operation of the group, which at the time continued to take donations from the public 18 months after closing its flagship horse sanctuary.

As a result of strict confidentiality guidelines, the Canada Revenue Agency (CRA) are unable to say who made the request to have HAPPA’s charitable status removed, however after the CBC investigation was published, the website was removed, and further investigation turned up a significant breach in reporting requirements on behalf of the charity as it would appear that they filed incorrect information with federal charity regulators, claiming that all board members are “arm’s length” from each other.

According to the CBC, the only current active members of the Horse and Pony Protection Association (HAPPA) board are what appear to be a mother and daughter and what appear to be a long-time couple.

Family members and common-law partners are considered “not at arm’s length” by the Canada Revenue Agency — something that can affect how the agency assesses a charity’s status.

Charities are required to file a form outlining those relationships and the CBC reported that on HAPPA’s website they found their filing for the year ending December 31st, 2011 in which there were 8 directors listed as being “at arm’s length” from each other.

The significance of the revocation of charitable status is that anyone who donated to the charity after that date, will not be allowed to claim the donation as a deduction from their income. If they do so anyway, the CRA will re-assess them plus penalties and interest. The Taxpayer Relief program will not granted penalty and or interest relief to those who donated to this charity, and in situations like these, as there are no categories to apply under.

Once the revoked, the charity should have transferred all of its remaining property — including cash — to an eligible donee, or be subjected to a revocation tax equal to the property’s full value.

If you have donated to this organization and are concerned that the CRA may disallow the charitable receipt, it is best to not submit it with your taxes. You have 4 years to claim charitable deductions.

November 14, 2014 National Philanthropy Day in Canada: Highlighting Tax Breaks for Charitable Donations

November 14th, 2014 is National Philanthropy Day here in Canada, and the Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P., Minister of National Revenue, was in Vancouver to applaud those Canadians who donate to charities and to remind Canadians to take advantage of the tax credits available for eligible charitable donations.

Receiving special attention was the new temporary donor super tax credit which provides an extra 25% federal tax credit on top of the original charitable donation tax credit which means that eligible first-time donors can get a 40% federal tax credit for monetary donations of $200 or less, and a 54% federal tax credit for the portion of donations that are over $200 up to a maximum of $1,000.

The donor super credit applies to donations made after March 20, 2013, and can only be claimed once between 2013 and 2017.

This is in addition to the provincial credits available.donation

Those who have donated before can still be eligible for the charitable donation tax credit, a non-refundable tax credit which allows taxpayers to claim eligible amounts of gifts to a limit of 75% of their net income.

For a quick estimate of your charitable tax credit for the current tax year, try the charitable donation tax credit calculator, which can be found here.

Minister Findlay also reminded Canadians that only Canadian registered charities and other qualified donees can issue official donation tax receipts.  This is extremely important because if you make a donation to a charity which is not eligible to issue donation tax receipts but they provide one anyways, the CRA will re-assess you for that donation deduction with penalties and interest.  A little due diligence up front goes a very long way.

If it seems too good to be true, it should give you reason for concern…

To find out if an organization is registered, go to the Canada Revenue Agency’s (CRA) website and search their complete list of registered charities in their Charities Listings.

For more information about donating, such as how to calculate and claim the charitable tax credit, go to the CRA’s site for making donations, which is here.

 

Some Quick Facts

  • Two years ago, Canada became the first country in the world to officially recognize November 15 as National Philanthropy Day.
  • There are more than 85,000 registered charities in Canada.
  • The benefit to charities of being a registered charity? Registration provides charities with exemption from income tax.
  • According to Statistics Canada, in 2010 almost half of all Canadians volunteered, giving more than two billion hours of their time. In addition, in 2012, 5.6 million tax filers reported charitable donations for a total of $8.3 billion in donations reported.
  • According to Statistics Canada, in 2012 the average age of charitable donors across the provinces and territories is 53 years old.
  • Follow the CRA on Twitter – @CanRevAgency
  • Follow inTAXicating on Twitter @intaxicating

 

Your Questions Answered About The CRA’s Informant Leads (Snitch) Line

The Canada Revenue Agency (CRA) has employed the Informant Leads Line, or “Snitch Line” for a very long time, and with incredible results. Only recently has it been getting a lot of attention in the media. The line has been so successful that the CRA (Canada Revenue Agency) is reducing their workforce – specifically related to investigations – because they get more detailed information through tipsters than they would if they had employees trying to locate this information.

Who uses this line? Still ex-wives and ex-husbands, former business partners and neighbours who have been confided in and either felt compelled to notify the government of the fraud being committed or who were hurt, harmed or cheated by the person who has been committing the fraud and who used this line as their way to ”get even”.

It is important to know should you decide to call the Canada Revenue Agency’s Informant Leads Line that that the CRA takes your privacy VERY seriously and they will never notify the person(s) / organization(s) that you call on that it was you who called their line.

The CRA will cite their “Privacy Notice”, meaning that they regularly collect personal information under the authority of the Income Tax Act (ITA) and the Excise Tax Act (ETA) and they will use that information as the justification for following up on information provided by callers to the Informant Leads Line to determine if there is an element of non-compliance with tax legislation, and if applicable provided to the corresponding compliance program for appropriate enforcement action.

Information provided on this line may also be referred to the Canada Border Service Agency (CBSA) or Human Resources and Skills Development Canada (HRSDC), in the event that the lead relates to one of the programs they administer.

The information provided is voluntary and will not affect any dealings you may have with the Government of Canada / Revenue Canada.

Here are some answers to the most common questions asked of me, relating to the Canada Revenue Agency’s (CRA) Informant Leads / Snitch Line, starting with:

1) When should I call the CRA’s Informant Leads Line:

When there is “Tax Evasion”, which is an illegal practice where a person or business avoids paying taxes or reduces their taxes by misrepresenting their activities.

2) How can I report tax evasion?

Over the Internet (I have linked the CRA page and provided it here in case you’re nervous about clicking the link)

Link: http://www.cra-arc.gc.ca/gncy/nvstgtns/lds/menu-eng.html#ntrnt

By phone, mail or fax

Phone: 1-866-809-6841 (toll free)

Fax: 1-888-724-4829 (toll free)

Office hours: 8:15 am. to 5:45 pm. (Eastern Time).

Mailing address:

National Leads Centre

Business Intelligence & Quality Assurance Division

Canada Revenue Agency

200 Town Centre Court Scarborough ON M1P 4Y3

3) Some examples of tax evasion are:

  • not reporting all income
  • claiming deductions for expenses that were not incurred or are not legally deductible
  • claiming false GST/HST tax credits
  • failing to remit source deductions
  • providing false information on marital status or children to obtain benefits and credits

4) What happens to the information provided to the CRA?

The CRA diarizes everything and determines if they need to take immediate enforcement action or if they need additional information before moving forward. Either way, you will never be notified as to whether or whether not the CRA took action as they are prohibited from doing so under section 241 of the ITA and section 295 of the ETA.

5) Does the CRA pay for the information I provide?

No. The CRA does not pay for information received from informants. The CRA does now have the Offshore Tax Informant Program (OTIP) which offers financial awards to individuals with information about major cases of international tax non-compliance resulting in more than $100,000 of additional federal tax being assessed and collected. For more information, please visit the OTIP website, including how to make a submission.

6) What do I get for reporting tax fraud?

Well, besides feeling great, you are helping to ensure that all Canadian taxpayers are paying their fair share of taxes and this benefits all Canadians. The CRA will tell you that if everyone pays what they owe taxes might go down… I’m not holding my breath, but you never know.

7) Will the CRA ever reveal who provided the information to them?

Never!  However, you can provide them with consent to release your identity, should you want that person(s) / organization(s) to know. The CRA has a legal obligation not to disclose the identity of informants, any information that might disclose an informant’s identity or even information that might reveal the existence of an informant is removed, even in the case where an Access to Information request is made.

8) How can you send information by email?

You can submit general informant information to the CRA using their secure Internet portal. If you want to provide supporting documentation you are best to mail or fax it.

9) Does the CRA really look at EVERY lead, and take them seriously?

YES.

10) If I submit a lead, then want to revoke it, is there a way to do that?

NO.

11) What stops someone from phoning in a fake lead?

Well, before the CRA is able to take any action, they require more information that just “My ex has a job working for cash.” They would like any or all of the following information to help them prioritize the severity of the tax evasion and whether they need to get more information or get working on it right away, such as:

  • names and contact information for the person(s) / organization(s) you suspect
  • this can include address, phone, email, and so on
  • social insurance number (SIN) / business number (BN)
  • date of birth
  • spouse’s name
  • business name
  • names of shareholders if a corporation is involved
  • related companies
  • type of fraud you suspect:
    • income tax (personal – T1 or corporate – T2)
    • provincial tax (PST)
    • GST/HST
    • non-filing
    • fraudulent refunds
    • Canada Child Tax Benefit (CCTB)
    • Universal Child Care Benefit (UCCB)
  • details of your observations
  • documents: have you seen these documents? Do you know where they’re kept?
  • does the person deal in cash only? Do you know what they do with the cash?
  • net worth information, such as assets, including those outside Canada (cash, name and address of banks, house, land, cottage, vehicles, boats, etc.)
  • liabilities (loans, mortgages, credit cards, etc.)
  • personal expenditures (food, housing, trips, restaurants, hobbies, etc.)
  • your name and phone number (this is optional)

The CRA will ask you if they can contact you if they require more information. That is up to you.

If at any point, the CRA determines this information is incorrect, fabricated or provided to them for the purposes of committing fraud, not only will they indicate the details on your permanent diary record, but they will also take actions against you.

Once you have submitted a lead to the CRA, it’s good to have an understanding of the fines and/or penalties which can be levied upon the individual / organization, as they can be as high as 200% of the taxes which were attempted to have been evaded.

In addition, the CRA publishes the results of its prosecution activities on its Convictions Web page.

Of course, if you have found yourself to be in violation of any of these requirements and are worried that the CRA will find out, or that someone will call the snitch line on you, you should contact us and we can begin to discuss the steps to help you which may or may not include the CRA’s Voluntary Disclosure Program.

It is ALWAYS better to get to the CRA before they get to you!

inTAXicating Is 6-Years-Old! Happy Anniversary. Let’s Share Links!

I received a surprising message from WordPress on Sunday, September 21st that this blog, inTAXicating,has celebrated it’s 6th anniversary!

Time flies!

Happy Anniversary inTAXicating.keep-calm-and-happy-6th-anniversary-1

That means it has been 6-years since I have been posting suggestions, tips, and recommendations surrounding the ins and outs of the Canada Revenue Agency (CRA), the IRS, Revenu Quebec and the WSIB.  I have written about these government organizations based on my practical work experience at the CRA and in private industry working closely with all of them.

I have posted some great stories and have so many more to come!

Compliance, Collections, Cross-Border issues, FATCA, Assessments, Liens, Director’s Liability, Audits, Negotiations, Accounting… I’ve done it all, and I’ve shared a lot of inside information that no one else hears about, or knows about.  Having all of this knowledge and wanting to share it is the driving reason behind maintaining this blog, and opening up a tax solutions business at www.intaxicating.ca.

I am also always looking for great Canadian tax content to read and discuss, so if you are a tax blogger, or if you have a different go-to site for Canadian tax information, please either post a comment on this post, or send me an email at info@intaxicating.ca and I will add the site to my blogroll.

The more Canadian tax information we can get together as a community, means we can help Canadian taxpayers that much better!

 

Director’s Liability Overview, Plus A Due Diligence Defense We Are Unlikely To See Used Again

Director’s Liability Overview, Plus A Due Diligence Defense We Are Unlikely To See Used Again.

 

Great view of the way the Canada Revenue Agency handled Director’s Liability Assessments from a former CRA resource officer who was responsible for these assessments for 2-years.

Director’s Liability Overview, Plus A Due Diligence Defense We Are Unlikely To See Used Again

I had a nice long conversation with a client the other day regarding the potential that either the Canada Revenue Agency (CRA) or the Provincial government (in Ontario) were going to pursue a Director’s Liability assessment against him for the debts of his now-deceased corporation.  Part of the discussion surrounded how the Canada Revenue Agency and the former Ontario Retail Sales Tax (RST) group handled assessments, and the criteria they used when reviewing whether or not to pierce the corporate shield, plus the importance of a due diligence defense.

Director's Liability Section from the Income Tax Act and Excise Tax Act.
Director’s Liability Section from the Income Tax Act and Excise Tax Act.

During my employment at the Canada Revenue Agency (CRA), I felt I needed to gain a more thorough understanding of Director’s Liability and figure out why there were so few assessments raised in our office compared to other offices.   I personally had not raised any Director’s Liability assessments mainly because I was effective on the phone and combined with meetings, was able to resolve many debts prior to the assessment stage.  Still, Senior Management encourage the Collections staff to utilize this collection tool more, so as the Resource and Complex Case Officer, I asked for, and was given, the Director’s Liability inventory to control.

By controlling the Director’s Liability inventory, that meant I needed to know the ins and outs of Director’s Liability – section 227.1 of the Income Tax Act and section 323 of the Excise Tax Act, because if anyone in our office wanted to raise an assessment, I would have to review their account, ensure all of the much-needed grunt work had been completed, then ensure they had spoken to the Director(s), given them sufficient notice, provided them time for a Due Diligence Defense, at which point I could sign off and begin to track the file.

After organizing that inventory and rolling out the new procedures, I began to scour the accounts in our office for potential Director’s Liability assessments, then, in addition to my other inventories, provide recommendations and suggestions to the staff on how to proceed if I felt there was a possibility for an assessment.  Management decided instead of burdening the staff, I should just take those accounts I felt were ready for Director’s Liability assessments and work them, plus all of the other accounts I was tracking where assessments were raised too.

It was a fair amount of work, but more importantly, it was very enlightening, to review the government’s policies on Director’s Liabilities plus review the procedures in place, compare that to how other office’s handled their files and really tighten up the process.  If an account was a sure-fire Director’s Liability assessment, it was raised, and if there was no chance, or not the right time, the file was returned to active collections.

I found the first common misconception around Director’s Liability was that the issuance of the Director’s Liability Pre-Assessment Proposal Letter (which notifies director’s that we are reviewing them for Director’s Liability) was being used as just another letter by the Collections staff to remind directors of their obligations, when in fact the CRA intended on using this letter to notify Directors’ that an assessment was beginning.  Internally, the Canada Revenue Agency was actually starting to investigate the personal ability to pay of the director(s) at the time this letter was issued.

Going forward, that letter was not to be used lightly, and it was not to be sent to the Director(s) numerous times.  A Director would then have the assessment raised against them and wonder why it was raised this time, and not earlier when one of those letters went out, so in order to prevent a possible loss in Tax Court, the decision was made to send it once, and then follow-up with the Due Diligence defense letter before raising the assessment.

Ignoring the Due Diligence defense letter (which happens often) meant the one opportunity a Director had to start their case on the record was lost, and with the CRA building their case in the permanent diary, the Director(s) stood little chance of preventing the Canada Revenue Agency from raising the Director’s Liability.

Once that waiting period passes, the file usually gets very quiet…

From the Director’s point of view, either the assessment is raised and they receive a letter from the CRA stating that, or the assessment is raised and the letter gets lost in the mail (tossed out), or the assessment is raised and before the Director is notified, their personal assets come under fire.  There is of course, the possibility that nothing happens and the Director(s) are left in limbo, but without having a dialogue with the CRA, or experience around the policies and procedures, there is no way that the Director(s) will know when and if the CRA is coming – if at all.

Once raised, the Director(s) have quite limited options.

A recent court case, which I will highlight below demonstrates a situation where an assessment was raised, and in Tax Court, the decision was turned over and the assessment cancelled.  I guarantee it won’t happen again, as the CRA will ensure their processes are tightened even more to close this loophole.

The case was Bekesinski V The Queen.

The link to the case on the website for the Tax Court of Canada, is here.

In this case, Bekesinski was the Director of a corporation who was personally assessed by the Minister of National Revenue (CRA) in the amount $477,546.08 for the corporation’s unremitted income tax (T2) and employer contributions of CPP and EI for payroll (source deductions) plus penalties and interest for the 2001, 2002 and 2003 fiscal years.

Under Director’s Liability, the CRA can assess directors for payroll and for GST/HST, but not Corporate Tax liabilities.

The Tax Court of Canada held that since the taxpayer had resigned as a director of the corporation more than two years after the CRA’s assessment, the CRA was statue barred from raising the Director’s Liability assessment.

This was something the CRA should have known before raising the assessment and something that the director (or his representatives) should have mentioned at any point during the pre-assessment proposal period, especially at the due diligence defense stage, but was never mentioned.

Brief Overview of the Facts

In 1992 the taxpayer purchased D.W. Stewart Cartage Ltd., a general cartage, trucking and warehousing company where he served as a Director of the corporation.

When the corporation fell behind on filing obligations and as the balance owing to the CRA began to grow, the Director began to receive numerous letters from the CRA warning him that he could be held personally liable for the corporation’s tax debts as a Director of the corporation.  He did not notify the CRA at any time that he had resigned as a Director of the corporation.

On October 15, 2010 the CRA raised Director’s Liability and issued a Notice of Assessment (NOA) to the taxpayer for unremitted income tax, employer contributions plus penalties and interest in the amount of $477,546.08.

The Director then argued that he should not have been assessed as a Director because he resigned as Director of the corporation on July 20, 2006 by way of a Notice of Resignation which would have made the raising of the assessment statute barred.

The CRA argued that the taxpayer was in fact a director and that the taxpayer had backdated the resignation to qualify for the exception, which happens more than you could imagine, and to counter this trick, the CRA often requests an “ink date test” to determine the authenticity of the Notice of Resignation.

Unfortunately for the CRA, the results from the ink date test was excluded by the Tax Court because the CRA did not advise the Court that they felt the Notice of Resignation was back-dated.  Even the judge felt the Notice of Resignation was backdated, however since the CRA failed to mention it, it was not open for review in the Court.

In summation, Bekesinski avoided Director’s Liability for the corporate tax debts due to a litigation misstep on the part of the CRA, a mistake they are unlikely to be repeat.

It is highly advisable for corporate directors to carefully document their resignations so as to avoid potential future Director’s Liability assessments, because I guarantee, the CRA will challenges to the authenticity of backdated resignations on each and every case going forward.