George Nkoke Nnane of Richmond Hill, Ontario, was sentenced in the Superior Court of Justice in Toronto to 4-years in jail for filing fraudulent tax returns, the CRA has reported.
The Canada Revenue Agency (CRA) is reporting that home-decor chain Bouclair Inc. its CEO, and former VP are scheduled to go to trial on tax-evasion charges in January 2021.
The CEO, Peter Goldberg, a Westmount, Quebec resident faces eight charges alleging he violated the Income Tax Act between 2009 and 2011. Bouclair Inc. is charged in the same case as their former VP, Erwin Fligel.
The charges were filed by the CRA in 2018 following an investigation where by the CRA alleges that the CEO and former VP willfully evaded payment of income taxes and made false statements when filing income tax returns for Bouclair Inc. and for Goldberg.
Fligel is charged with six charges while Bouclair has been charged with 4 charges. The charges do not specify the monetary figures involved.
During a hearing before Quebec Court Judge Jean-Jacques Gagné held at the Montreal courthouse on January 30th, 2020, both sides agreed to schedule a trial between Jan. 11-29, 2021.
In November, Bouclair Inc. announced it would file for bankruptcy as part of a plan to allow it to be acquired by a new investor group, Alston Investments Inc., which is also headed by Goldberg. At the time of the announcement the privately held company had 102 stores in Quebec, Ontario, Western and Atlantic Canada.
A liquidation order issued by a Quebec Superior Court judge on Nov. 15 indicated that Bouclair Inc. intended to close at least 29 of its stores.
Companies who can harm you include companies who want your dollars right away in order to maybe, possibly, provide you with a service, or who might instead take your money – tell you there is nothing they can do – and then suggest that you speak to a trustee.
That approach does not sit well with me. Never has. Never will.
What works for me if looking at a tax debt, or tax problem from all angles, and consider all approaches.
For example, some debts can be resolved through re-financing. I don’t do that. I do, however, work with a couple of mortgage brokers who take care of that service.
Other tax debts can be resolved through a filing, or re-filing of tax returns. Again, I do not do that, but I work with a couple of accountants who take care of that for you.
I don’t recommend bankruptcy or consumer proposals right away, however should the situation really warrant one, then I have a couple of firms that I could recommend.
In the process of helping someone with their tax matters, I always look at it in depth so that I can suggest the best plan of action for resolving it, and then let the Taxpayer decide the path they want to take. I don’t tell them. I suggest the options, and provide the steps for them to take in each scenario.
Recently, a firm called Personal Banker came onto my radar, so I met with the owners and absolutely love what they do and how they do it. They, like myself and my network, put the interests of the Taxpayer first and foremost and provide a service far more valuable that one could imagine.
Again, that’s my opinion.
What I like about Personal Banker is that they perform a function which I strongly recommend in the majority of the tax debt cases, and that is to have their previous 10-years worth of tax returns reviewed to ensure that all the eligible credits have been taken.
This is the best way to reduce a tax debt – if there are missing credits – because the experts at Personal Banker apply the credits, for a percentage of the findings, and you can either apply them to your tax debt, or take the money and run.
What’s more brilliant is that this company operates Canada-wide, and are growing on a daily basis. There is a significant need for their services, and they’re doing this at rates far below the rates that I have seen in the industry.
Don’t believe me? Check it out.
If you’ve used them before, I’d love to hear your feedback in the comments, or emailed to me at firstname.lastname@example.org
Recently saw a news headline relating to the Canada Revenue Agency (CRA) and collecting taxes, that caught my eye. The headline screamed something to the effect of; “Contractors buying from Home Depot beware — the CRA is coming after you.”
I immediately began to shake my head and wonder if what the purpose of this article was. Was it written in response to an action taken by the CRA, or was the headline intended to scare Canadians who are dealing in cash and not paying their tax, into using their services.
Afterall, this really is not news.
For as long as Canadians have found ways to evade paying taxes, the CRA has had to find ways to verify that taxpayers are reporting their accurate income – and reporting at all.
The latest instance came to light recently as the CRA sought information from The Home Depot, in July, using a provision in the Income Tax Act (ITA), known as the Unnamed Person Requirement (UPR).
The CRA obtained a Federal Court order (which they are required to do) which legally required the Home Depot to disclose the identities of their commercial customers as well as the total annual amount spent by each of these customers between January 1, 2013 and December 31, 2016, Canada-wide.
Certainly, there are some Canadian Contractors who work solely for cash, and the CRA will use this information with the information that has been filed by these individuals, to determine if an audit is necessary.
The CRA will likely move quickly in cases where there are clear discrepancies, such as contractors who claimed $1 in income, who appeared at the top of the Home Depot list, and who live in, or own, millions of dollars of assets. In these cases, the CRA would send a letter, followed 30-days later by an assessment, and the taxpayer has 90-days to appeal that assessment with facts. Facts, being supporting documentation such as proof, receipts, explanations, and bank statements to prove that nothing untoward had occurred.
I’m not going to lie when I say that in the almost 11-year working in the CRA and the almost 11-years since I left the CRA, I have seen pretty much everything. Some good, some really good, but some bad, and some really bad.
The fact that the CRA found this tax evasion is part of the bigger problem around tax advice being given to people from people who have no idea what they’re saying. As a result, the CRA has to jump in, assume everyone is lying, cheating and stealing, and paint everyone with the same brush.
It gets worse, if these tax evaders filed tax returns and lied about having no income and received benefits based on earning no income, when in fact they earned considerable amounts of income and then took benefits they were not entitled to received from hard-working Canadians who pay their taxes. In those cases, these tax cheats can expect the CRA and the courts to come down much harder on them.
When taxpayers are convicted of tax evasion, they must still repay the full amount of taxes owing, plus interest and any civil penalties assessed by the CRA. In addition, the courts may fine them up to 200% of the taxes evaded and impose a jail term of up to five years.
Didn’t shop at Home Depot? You’re not out of the woods yet. In addition to this list from Home Depot, the CRA also compiled lists of municipal building permits by way of seeking out unregistered building subcontractors. The review of 8,396 building permits yielded 2,751 unregistered building contractors.
According to a CRA report released in late 2018, underground activity in Canada totalled $51.6 billion in 2016, which could have gone into the tax coffers.
When seeking permission from the court to have the Home Depot hand over their records, the CRA stated that 7% of an unidentified company’s customers had were not filed up-to-date on their personal tax returns, meaning a greater chance of tax evasion (which people think, but again, is totally not true).
Many audit and collection projects within the CRA make use of unnamed persons requirements (UPRs), tips from the CRA’s Informant Leads Line (Snitch line) and from Canadians themselves who fail to file tax returns on time.
If you, or someone you know falls into this category, you are best to contact us at inTAXicating, to help answer questions truthfully about how much exposure you might have to the CRA and what solutions are available to help.
We can be reached at: email@example.com
Common Audit Triggers
Audits in Canada are typically assigned randomly. There are, however, some reasons as to why some taxpayers are audited more often that others.
Here are some of the most common factors which may increase the chance of being audited by the CRA, from most common to least:
Screwing around with Trust Funds
Sorry to be so blunt, but there is nothing that raises the ire of the Canada Revenue Agency (CRA) more than finding out, or suspecting that you have been less than honest with Trust Funds – the money taken from employees or customers and held in trust for the CRA.
In these instances, the CRA comes to audit fast, and leave no stone unturned.
The addition of self-employment income, along with or instead of T4 income is an area of significant concern for the CRA.
Earning T4 income, means is likely that the sufficient amounts of tax, CPP and EI have been withheld and remitted to the CRA on your behalf and on behalf of your employer, making it low-risk.
Self-employed individuals, on the other hand, do not, in most cases, have taxes withheld at source, making it more under the scope of the CRA.
The Industry you operate in
This is a two-fold flag because not only are some sectors audited more than others – dentists, real estate agents, restaurants, construction companies, and corner stores that take cash, for example, but the CRA also uses the industry that all businesses / taxpayers operate in, and compares the numbers reported to those of the others in your industry.
If you stand out for one reason or another, expect to be asked why, in the form of an audit.
Additionally, in around November of each year, the CRA computers match and compare many pieces of taxpayer information, looking for slips which were not declared, or for outliers.
3rd Party audits
Often times taxpayers are audited simply because a related party is being audited. Sometimes this means that family members or shareholders of a closely-held corporation are audited in the course of the audit of the corporation. Other times various corporations in a supply chain may be audited because of the audit of one of them. Sometimes contractors are audited because of a payroll audit at the corporate level.
There is nothing that can be done to minimize this risk factor. Unfortunately, the more businesses and taxpayers that a particular taxpayer is involved with, the greater likelihood of a CRA audit.
We represented a construction company which had immaculate books and records, yet were under audit by the CRA for almost a year. It made no sense, because every single item requested by the auditor matched and was reported correctly.
It finally came to light that a customer of this company from 8-years-ago had tried to commit fraud and claim a receipt for services which were never performed by this company (they had changed the date and written “CASH” across the invoice).
After proving the invoice was fraudulent, the audit suddenly ceased and the taxpayer who changed the invoice was charged with fraud.
You just never know!
Informant Leads Line Tips
The Informant Leads Line / or Tips line or Snitch line, has provided way more tax and audit leads that the CRA could have ever imagined – and still does.
In light of the fact that tips relating to offshore tax evasion may yield a reward for the informant, it may never end.
Moral of the story: taxpayers who are cheating the system should not count on staying under CRA’s radar forever. They should also be careful as to who has incriminating evidence which could be reported to the CRA.
Common leads come from; ex-spouses, former employees, and neighbours. So the next time you piss someone off, you might want to make sure they don’t reported you to the CRA.
Living Beyond your means – Net Worth Assessments
Taxpayers who live in a $4 million dollar house, and who report income of $1/year, can expect to have caught the attention of the CRA. The same goes for taxpayers who have debt to the CRA and are unable to pay, yet post publicly on their social media of their travels and lavish expenditures.
Lifestyles which appears to be incongruent with the amount of declared income can expect to be audited.
Using your Vehicle for business / Claiming vehicle expenses
Vehicle expenses are often arbitrarily determined. When preparing their tax return, often times taxpayers and their accountants pick a reasonable number for vehicle expenses based on an estimate of the percentage of the vehicle usage used for business purposes.
Few taxpayers actually keep a log of every trip, yet every one should!
Not having a log, and corresponding calendar means that few taxpayers can prove to the CRA with absolute certainty, the use of a vehicle for business purposes – thus making it easy for the CRA to deny the expenses.
Real estate transaction
Thank you Liberal government and your out of control spending.
As a result of the need for tax revenue to pay down the debt and deficit, the CRA began cracking down on real estate transactions in the past 5-years. Had the Liberals won a majority government in the 2019 Federal election, there would be capital gains taxes on the sale of principal residences. Right now, it is a requirement for Canadians to track and list on their tax returns the sale of their principal residence.
To say that the CRA pays careful attention to real estate transactions would be an understatement. The CRA frequently audits HST rebates, pre-sale condo flips, new home construction, principal residence exemptions, and many other real estate transactions.
Being involved in multiple real estate transactions sharply increases the chance of being audited.
Home office expenses
The CRA loves auditing home office expenses. Home office expenses are often arbitrary and over-declared, along with the percentage of time the home office is actually used, and the percentage of the house used for the purpose of earning income.
Operating a cash business
When there is a lot of cash being received by a merchant, there is more opportunity for the CRA to recover taxes on undeclared cash income. One common trick the CRA will perform involves the deposits going into the business or personal bank account which are significant, repetitive or unsupported. In these instances, they are declared as income, and a 50% gross negligence penalty is applied.
Adjustments / Amending returns
The CRA is on top of the business or taxpayer who declares a little income and then amends their returns after the fact to report the actual, and much higher balance. Not only is the prohibited, but it’s a great way to be audited.
If the amending results in a refund, or a refund is issued and then the correct filing results in a balance outstanding, then – you can expect an audit.
Donations – Large and Tax Shelters
If charitable contributions are suspiciously large and do not seem to be possible or likely within the confines of a taxpayer’s income, such donations or contributions are very likely to be audited.
As well, charitable contributions made to organizations suspected of being involved in tax schemes are even more likely to be subjected to an audit.
As long as there are taxes there will be individuals and organizations selling (and conning) taxpayers into participating in tax schemes to reduce taxes. Some of these schemes are outright frauds, while others have no fraudulent intent, but for one reason or another fail.
The Canada Revenue Agency actively and aggressively audits taxpayers who are involved in a tax shelter, a gifting program, or any other tax scheme.
In many circumstances, taxpayers are able to receive refunds and benefits from these programs for several years prior to the CRA auditing, and then reassessing the donation. Unfortunately, since it can take a bit for the CRA to learn of the scheme, and refunds are issued / debts reduced, the participants often bring in family and friends and get them caught up in the program.
Typically, in these schemes, taxpayer may receive tens or hundreds of thousands of dollars of CRA refunds to which they were never entitled only to have the CRA come back and audit and reassess years later, along with gross negligence penalties and interest. $100,000 in illegitimate refunds can turn into more than $200,000 once penalties and interest and the passage of time have been taken into consideration.
The rule of thumb is that if it appears too good to be true, it is.
Shareholder loans which are not repaid within a year after the year-end of the corporation are often audited, because the CRA suspects they are not legitimate and were simply paper transactions.
Loans where shareholders took revolving loans from the corporation, paying each off just prior to the deadline and then taking a new loan, are also on the CRA’s radar for audit due to their tax benefits.
It shouldn’t need to be said, but taxpayers who are both shareholders and employees of the corporation should be very careful with shareholder home loans, and should have all supporting documentation available.
In order for a home loan to be treated as an employee home loan rather than a shareholder loan, the loan must be made because the person is an employee, rather than because they are a shareholder and should be available to all other employees.
The CRA regularly conducts mini-audits to ensure that parents who claim childcare expenses maintain proper documentation, and that the children actually attend the establishment for child care and not just for playdates. Claiming childcare for children who hang out with their grandparents a few days a week while the parents are not both working out of the home, would prompt an audit.
Employees who are issued a T2200 form by their employer are entitled to deduct certain employment expenses from their income. Perhaps the employee has to pay for their own vehicle to travel to sales calls, or perhaps they have to maintain a home office. As long as the employer requires that the employee pays these expenses in respect of their job, they likely can be deducted from income.
Since this is an abused area (each expense is paid for with pre-tax dollars and reduces the overall tax paid by the taxpayer) the CRA audits many employees with the T2200 to ensure that a) their form is properly completed and may be used to deduct the expenses in question and b) each of the expenses claimed was legitimate and for the purposes of their employment, as outlined in the T2200.
If the CRA keeps coming back and auditing and re-auditing every aspect of a business – and if they keep finding issues – that business or taxpayer can expect to be on the audit list for each and every year.
All business profits are subject to taxes. This includes both legitimate and illegal businesses. As far as the CRA is concerned, if you are earning income you should pay taxes. Period.
So if a taxpayer is accused of or convicted of a crime and the CRA learns about the illegal business which was taking place, they often audit and reassess the taxpayer for taxes on the proceeds of crime – whether or not the taxpayer still has such proceeds. Often times, criminal activity is weeded out during an audit, as opposed to the CRA knowing there is an illegal business and pretending that it is legitimate.
These audits usually require the supporting documentation to justify expenses, and often there are none provided resulting in extremely large assessments.
Keep your records together by year, and expect to be audited each and every year. When you are not, be thankful.
There are many questions around writs and liens – each situation can be very different – but there are some commonly asked questions which pop-up when someone realizes that the Canada Revenue Agency (CRA) has registered a lien against their property.
Commonly asked questions:
- When does a lien have to be dealt with. A:When the property needs to be sold or refinanced. Unfortunately, many Canadians realize that the CRA has actually registered a lien when the property owner is attempting to sell or refinance their property, which is also the worst time to attempt to get the CRA to work with you.
2. Can I negotiate with the CRA? A: No, the CRA will not / does not negotiate tax debts. You can negotiate a payment arrangement under certain circumstances, and you can “negotiate” penalties and interest by applying to the CRA’s Taxpayer Relief program, but no other negotiations exist outside of bankruptcy.
3. Will the CRA remove a lien if I file for bankruptcy? A: No, liens survive bankruptcy.
4. Once I pay the lien amount, my debts to the CRA are done, finished, over? A: No, actually, the lien amount represents an amount owing in your account at the time the lien was registered. There is still interest accumulating on the debt (possibly other assessments too). Once the lien is resolved, there is the additional amount(s) which must be cleared up.
5. How can I get a lien removed? A: Great question! You can, provided you are doing so for a reason. If you need the lien removed in order to refinance because that re-financing will result in the CRA getting paid, then you might be able to have the CRA temporarily lift the lien to allow for that transaction to proceed.
6. Can I transfer the property out of my name / remove myself from title? A: NO, NO, NO!!! This is very dangerous because if you transfer an asset from your name into another person’s name when you have a debt to the CRA, or may have a debt to the CRA, and that transfer is for less than the fair market value, then the person who received that asset can be held liable for your tax debts.
7. Is the CRA going to act on the lien and kick me out of my house? A: No. If there was a lien on a secondary property such as a cottage for example, then the CRA might be prompted to take action and force a sale, but for a principal residence, no they are not.
8. If I leave it long enough, will it go away? A: Unfortunately no, unless you knew something about the way the CRA operates and there were specific criteria which applied to you and your financial situation.
To help clear up some of the confusion around this topic, here is an email we received recently regarding a CRA lien. This email contains some common questions, along with some common misinformation.
Hopefully this example will help Taxpayers who have liens registered against them by the CRA.
Question: “When the CRA puts a lien on a property, we are advised to contact a lawyer. Why is that? Can we not get written confirmation from the CRA ourselves, that after the lien amount is paid, the lien will be removed within a set period of time? If they agree to do it, do they just delay anyway or check whether they want anything else from you first? Is this all true?”
Answer: There is a lot here, but let’s break it down into manageable pieces.
When the CRA registers a lien against a property – which is a regular CRA collections technique in order for the CRA to secure their debt – they know what the outcome will be. As a result, while it might be a huge inconvenience, it’s usually not a concern unless the property is going to be sold, or if it needs to be re-financed. In that case, the lien needs to be addressed. Otherwise, the amount the CRA registers the lien for is the amount owing on the day the lien was registered and interest and possibly debt continues to accrue on the account.
The CRA cannot and will not provide confirmation that once a lien is paid that the lien will be removed because there might be additional debts which the CRA is going to need to register a lien for. They prefer not to put things in writing which could come back to cause them problems collecting tax debts.
If, however, there is a just a tax debt, and the collector registers a lien and that lien is satisfied (paid) – that means the balance was paid in full through re-financing or selling the property.
The major problem that occurs here is that once a tax account is paid, that account is automatically removed from the inventory of accounts that the collector has – often without them knowing. This means they do not have the opportunity to remove the lien from the property and need to be reminded there is a lien in place so they can finish it up, remove the lien and close the account.
Otherwise, it can be very difficult to get a lien removed after the fact because there is no one assigned to it, and no one wants to take responsibility for working an account which is not assigned to them.
So if there is a lien registered and you pay it, make sure to follow up in a timely manner to ensure it’s been taken off.
Lien / Writ / Certificate Help
If you, or someone you know has a lien registered on a property that they own and are looking for suggestions, recommendations or solutions to resolve this, then look no further than inTAXicating Tax Services.
We can be reached via email at firstname.lastname@example.org, to get the ball rolling.
Our services will cost you much less than you expected, and your results will be far greater than you could have imagined.