inTAXicating Helpful Tax Tip: Hold Your Change!

Have you ever walked into a store, paid for something with cash, then dumped some of your change into one of the donation tins / boxes which are situated on the counter?

It feels good to give some change to those in need.biz name official

If, however, you are someone who often donates in this manner, I think you should stop doing that immediately, and here is why:

When you drop your change into those donation bins, the money goes to the charity advertised, that we know for certain, but did you know that institution that has the tins, usually turns over that money to the charity and in turn, they receive a donation receipt which reduces their tax payable.

You are MUCH better off holding on to your change and then making a donation online to a registered Canadian Charity (The CRA provides a list of registered charities you might want to bookmark, here) and claiming the tax receipt for yourself.

It might seem like an insignificant adjustment to make, however, every dollar counts and it’s better to have the money in your pocket than in someone else’s!

Plus, the receipts add up over time, and before you know it. you can have a considerable amount of credits built up to use to reduce an amount owing or increase a refund.

Do you have to report a donation in the year you receive a receipt?

The CRA says, No.

You can carry forward donations you do not claim in the current year and claim them on your return for any of the next five years. But, you can only claim donations once. Also, you have to claim donations you carried forward from a previous year before you claim donations made in the current year. For donations of ecologically sensitive land made after February 10, 2014, the carry-forward period is ten years.

inTAXicating Tax Services is a full-service Canadian Tax Solutions company which can help you with and Tax needs you have ranging from Accounting, Bookkeeping, Audits, Assessments, and we specialize in Collections and helping you understand where you stand with the CRA in an open and honest manner.  We value your hard earned money as much as you do, and we don’t want to see you throwing it away unnecessarily.

Visit us at http://www.intaxicating.ca, or find us on Facebook, Twitter, or for tax tips, come to our blog at http://www.intaxicating.wordpress.com.

If you want to see what sets us apart from everyone else, check out our LinkedIn account and that of our Director, Warren Orlans, and see what real CRA experience can do to help alleviate your fears and concerns.

Lien on Me: Canada Revenue Agency (CRA) Policy and Procedures around Property Liens

Quite a few questions this morning surrounding liens and the Canada Revenue Agency (CRA).

I thought a re-post of this article I wrote might provide some clarity.

When searching for lien information relating to the CRA in Ontario, this post comes out 1st in Google, for obvious reasons as it mixes CRA policies with their internal procedures.

 

 

Lien on Me: CRA Policy and Procedures around Property Liens.

The Truth and Myths Around the CRA’s Taxpayer Relief Program

Reposting this because I just read some other articles on this topic which were full of lies, made-up details and were meant to scare people into using their service instead of learning about the CRA and the Taxpayer Relief Program.

 

Shame on them for misleading the public!

 

The Truth and Myths Around the CRA’s Taxpayer Relief Program.

Why Your Tax Representation Matters

Every couple of days I receive a call from a taxpayer or corporation regarding huge sums of money they have paid to other so-called “tax solution” firms, without any apparent movement or resolution of their file.  Usually these stories involve secrecy and the requirement for additional funds in order to bring the file to a close.

Would you go to a dentist who treated you like that?

Or have your vehicle repaired at a shop where you were not even sure they had any mechanics there?

When dealing with tax-related matters there should be no secrecy.  There should be questioning whether work was done or not and there certainly should not be doubt that the job was not completed.

Unfortunately this happens more and more.

The representation you chose, when under fire by, not just by the CRA, but all areas of government, like the WSIB, RST, or CRTC, is far more important than you could possibly imagine.  Especially in light of the fact that the CRA, for example, keeps a permanent diary record of your conversations and their attempts to resolve your tax file.  They also carry forward an account summary every 6-months, so in the instance where an account has been transferred to another collector, that new collector will know within minutes how the CRA wants to treat you and / or your representative.

Lie to them.

Break promises.

Call them names, like the “taxman”.

It’s all there and its used against you… Forever.

Case in point:

A couple of years ago I met a couple of directors of a corporation who booked a 2-hour meeting with me for only $500 plus HST. They had come with the intention of having me assist them in negotiation with the Canada Revenue Agency (CRA) who were in the process of raising a Director’s Liability Assessment against them the unpaid debts of the Corporation they operated.  They could not afford to pay the balance in full and were worried the CRA would take their house.

These directors had also heard about a way to reduce penalties and / or interest and they wanted more information.

They had already met with 2 other tax solution firms and one of them had fed the CRA with a sob story which the CRA did not buy, and after failing to return calls, and have any meaningful conversation with the CRA, disappeared with their money.  The CRA kept trying to reach this representative and the directors had no idea how quickly the collections efforts had progressed and how upset the CRA had beceome.

The second firm charged them a lot of money, then set out to make a payment arrangement with the CRA, even accusing these directors of “fudging” their records in order to show less income than they actually had.

They were frustrated, had spent a lot of money and had now incurred the wrath of the CRA.

Then we sat down together to talk, and after only a few questions and a review of the notices they brought with them, I notified them of the statute of limitations the CRA must follow when raising a Director’s Liability Assessment under s.227.1 of the Income Tax Act and S323.1 of the Excise Tax Act, which was 2 years from the date the corporation ceased to operate or the date the director officially resigned from the corporation.

They said the business closed 3 years ago, and that their accountant had officially closed the corporation with the government.

We talked about the Taxpayer Relief Program and about key language to use when speaking to the CRA in order to begin to change the permanent diary record they keep on the corporation and the directors.

The meeting concluded.

I immediately pulled a corporate profile report, checked that against the date of the assessments the CRA were raising and found them to be beyond that limit.

I used the signed authorization forms to contact the CRA, and that 5-minute conversation resolved the account… Forever.

I provided the directors with a report of the meeting, including the information we discussed, the CRA’s actions to date, their likely next steps, plus recommendations about how to deal properly with the CRA going forward, and I explained to them that there was no need for a payment arrangement because the account had a zero balance.

Luck?

No.

Additional fees?

No.

Were they happy… You could say that.  After they wiped away the tears and finished squeezing the life out of me, they talked about the relief they felt knowing this matter was finally behind them, and how they had other tax matters they wanted me to handle for them.

If representative #1 or representative #2 knew anything about collections or looked beyond their huge payout, they could have helped these directors with this assessment, with the 9-month-long audit that followed or the issues with WSIB, and the CRTC so that these directors owed nothing and their files were closed and in good order.

Does representation matter?

You bet it does!

#inTAXicating

Canada Revenue Agency (CRA) Auditor Convicted of Corruption

CRA LogoI came across a news article this morning that a Canada Revenue Agency (CRA) auditor from Montreal was convicted on Friday June 12th on charges of corruption for attempting to extort $90,000 from a restaurant owner in lieu of a $600,000 audit assessment.

Upon seeing the article, I went to see if I knew any of the people involved, which I did not, and it brought back my memory of the only time I was offered a bribe while working at the CRA, which I obviously declined.

I was the Resource and Complex Case Officer in a Collections unit here in Toronto and one of my accounts involved a gentleman who had a habit of opening and closing companies over a 27-year period.

He would never file, the auditors would assess his balance, he would bankrupt the company and the next day he would open a new one. He even used the same bank, but would open and close accounts over-and-over again.

It was quite funny given that he denied everything, even his $1 / year income but with a $5-million dollar house all paid off, it took me one phone call to put everything together.

He was a nice guy… Honestly. His house was built by him and his kids, on land his father bought 45-years ago, and the assessments the CRA were charging him with – prompting him to bankrupt the companies – was not even related to the business he was in.

He didn’t know why they were assessing him. He was afraid the CRA was going to put him in jail.

The CRA thought he was a criminal and kept on top of him.

One giant misunderstanding, which was quickly resolved after I taught him how to file HST returns.

But when I first met him and presented him with a list of companies that he had opened and closed year-after-year, he said this to me;

“I’m connected to the mob.”

I said to him, “Okay. That’s not my business. What is my business is finding out why you keep doing this and what the CRA can do to help you.”

He said, “If you can make this balance go away, I’ll give you Toronto Maple Leaf tickets.”

After I stopped laughing, I said to him, “Are you kidding me? I’m a huge hockey fan, and I love the Leafs, but if I were to even consider a bribe that would result in me losing my job, going to jail, and not being able to see my children, it would have to be for a hell of a lot more than Leafs tickets, and to be honest, if you have THAT much cash, you’re better off paying your debts and never falling behind on filing or paying again.”

He replied; “I was just kidding.”

I said, “Of course you were.”

I mentioned it to my Manager who, after reviewing the file, suggested I run this by the Special Investigations unit. I spoke to SI and they knew of this gentleman and that he has been suggesting his ties over the years in hopes of having the CRA back off, and only when I explained the reasoning behind the debt did the SI manager mention that he was told this many years ago but didn’t believe it to be true.

I wonder what happened to that guy…

I hope he stayed compliant!

Back to this case.

This case relates to an auditor named Francesco Fazio who, in 2005, was auditing a restaurant named “La Belle Place.” and after completing the audit, told owner Stamatis Argiroudis that he would owe $600,000 in taxes based on Fazio’s estimate of unreported revenue, according to a Montreal Gazette report.

According to testimony from the trial, Fazio told the owner that a more favourable estimate could be made for $90,000.

The owner refused to pay the money and probably words were spoken and the file was transferred to another CRA auditor. The auditor said the owner mentioned connections to organized crime, however the judge presiding over the case did not believe this to be true and ruled against the auditor.

In this day and again of recording devices in our phones and the CRA snitch line, it’s important to be careful what you say, and to whom you say it. Same goes for using social media. Be careful what you say about people and businesses when it’s not true.

I hope the CRA conducts an investigation into all the companies that this audit has audited to see if there is a recurring pattern or if this was a once-off situation.

CRA Reminder! This Monday, June 15th 2015, is the Deadline for Self-Employed Individuals to File their 2014 Income Tax and Benefit Return!

inTAXicating and The Canada Revenue Agency (CRA) would like to remind those taxpayers who are self-employed individuals (and their spouses or common-law partners) that the 2015 personal tax (T1) tax filing deadline is midnight on Monday, June 15, 2015.

If you had an outstanding balance for 2014, it would have had to be paid to the CRA on or before May 5th 2015, which is different from the normal April 30th deadline as a result of that extension granted by the CRA this year.

If you miss the deadline, you might be liable for a late-filing penalty (cumulative if you have been filing late in multiple consecutive years), and / or a late-filing penalty on amounts owing which applies to returns received after the June 15, 2015 deadline.

The CRA suggests you file electronically, using NETFILE , which allows you to file your individual income tax and benefit return over the Internet quickly and easily.  For a list of software and web service options, including those that are free for everyone, go to http://www.netfile.gc.ca/software.

If you have a balance owing, you can make your payment using your financial institution’s telephone or Internet banking service. For more information about online payments, go to http://www.cra.gc.ca/payments or contact your financial institution, or search through the blog posts at inTAXicating.wordpress.com for a post on how to make payments to the CRA.

You can also pay using the pre-authorized debit online service offered through the CRA’s “My Account” feature. The pre-authorized debit allows you to:

  • Set up a payment to be made from your bank account to the CRA on a pre-set date
  • pay an overdue amount
  • make instalment payment

You can also make your payment using the CRA’s “My Payment” service. My Payment lets you make one or more payments in one simple online transaction.  You can use this service if you have access to online banking at a participating financial institution.

You can also sign up for direct deposit to receive your refund in your account at your Canadian financial institution-no more waiting for a cheque to arrive in the mail, however as I have mentioned in many previous posts, signing up for this service provides the CRA with your banking information which is the first place they will try to seize if you ever have a balance owing to them.

Save time – go online!

The CRA’s online services make it faster and easier to handle your business’s tax matters. You, your employee, or your representative can file, pay, and access detailed information about your tax accounts-all online, all at your fingertips. To learn more about the CRA’s electronic services for businesses, go to http://www.cra.gc.ca/businessonline.

If you have questions or concerns regarding your taxes or a letter / notice you have received from the CRA, drop us an email at info@intaxicating.ca or intaxicatingtaxservices@gmail.com.  Take advantage of our free consultation.

Are There Really “Red Flags” At the Canada Revenue Agency (CRA)?

Are there “Red Flags” at the Canada Revenue Agency (CRA)?

How not to get noticed for the wrong things, this Tax Season.

One of the most commonly asked questions of me is about being “flagged” by the Canada Revenue Agency (CRA) and how to avoid getting flagged, or, what gets your flagged.

I hate to break everyone’s bubble, however, there are no red flags!

For the majority of Canadians who file their taxes year-in, year-out, and who make remittances, make their payments, open businesses, close businesses, make money, lose money, and everything in between, your tax account is just a record of transactions, conversations and payments received and made.  Even for those Canadians who should be doing the above and don’t or who fall behind and catch-up on one mass filing, their accounts have a bit more information due to CRA research, however, No flags.

For those engaged in criminal behaviour, however, there are no “flags”, because you are being investigated criminally and whether you know it or not, the CRA knows you and is watching your activities and comparing that to what you file.  Your tax account is known because it is being actively worked by someone.  There are words or phrases placed in your permanent diary which tell anyone who reviews your account what you are up to, but it certainly doesn’t mean you’ve been red flagged.

So why do people talk about flags?

They’re actually talking about stuations like some described below which catch the attention of the screeners on a case-by-case basis, and could result in them being audited outside of their normal audit review period.

1) When you get your tax returns completed and filed for the year, and there are issues, possibly mistakes, which the CRA catches and in anticipation of getting the solution, have a hard time getting a hold of you.

2) You are suddenly self-employed and you are not sure what to claim, or how much you are entitled to, or you claim things or amounts different from your industry standard.   The CRA compiles industry profiles which they use to assign you a “SIC Code” and they compare your returns with the Industry Standard to ensure you fall in line.

3) The dreaded “Net Worth Assessment”.  If you appear to the CRA to be unable to afford the lifestyle that you are currently living in, then the CRA can, and will, issue a Net Worth Assessment and force you to prove that you are not hiding income.  Yes, this can be a challenge, especially in light of the assessments being done from tax centres outside of the Greater Toronto Area who cannot fathom a million dollar house and a $75,000 income.  They don’t take too kindly to the concept of being being helped by family or personal wealth.  Just be warned that a tax return showing $1.00 of income for the year and an address in a wealthy neighbourhood is cause for further questioning.

4) Big changes from year-to-year.  If there are major changes in your income or expenses whether personal or business-related, are going to draw the attention of the CRA.  The CRA wants to make sure that you have not made a mistake, or worse, that you have bought into a tax scheme.  Expect questions, so get proof ready!

There are some tax situations that are just automatically looked at closer – each the year the CRA with the help of the Department of Finance choose a sector of industry to look at in closer depth usually because something has been detected in previous years or because there is a lot of cash floating around these business, such as construction, or dentists, doctors, IT consultants…

Home office deductions for example are frequently looked into as this is often a common problem for taxpayers claiming the home office in order to use deductions without actually utilizing their home as their office.

Even if you honestly never ever use your company vehicle for personal use, it will take some hard doing to prove to the CRA that this is true. Just driving back and forth to work in the business vehicle is classed as personal use. Your best protection here is to keep very detailed records concerning the business vehicles.

6) Renting for income:  Do not assume that rental losses are going to be accepted at face value by the CRA.  While the CRA will give you some grace time to start generating a profit from your rental business, it will still be watched with a close eye based on your industry, location and address(es).

7) Who prepares your return matters!

The CRA is starting to follow the IRS and taking a long hard look at tax accountants and tax preparers to see if there is a pattern among certain firms / indivuduals who either claim deductions they are not allowed to claim on your behalf, or who are missing certain expenses or deductions.  The CRA’s hope here is to weed out the bad apples, and educate the current crop to ensure they take advantage of the deductions and tax credits available to each client.

Should be a valuable change to the Canadian tax filing scheme.

But at the end of the day, doing it right, and on time, is the best way to stay out of the CRA’s bad books.

If, however, you have any questions, concerns or comments, please feel free to reach out to me at any time, at worlans@intaxicating.ca.

 

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