Canada Revenue Agency (CRA) Lien Questions Answered

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.

We’re going to try to address and answer the most commonly asked questions right now.

  1. 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 re-finance 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 re-finance 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? 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 support 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 will help Taxpayers who have liens registered against them by the CRA.

Lien email.

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?”

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.

 

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. You can send an email to us at info@intaxicating.ca 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.

Ottawa estimates corporations dodged up to $11.4 billion in 2014 tax payments

Very interesting article published on June 18th, 2019 via the Canadian Press, regarding what appears to be Canadian Corporations avoiding the payment of $11.4 billion dollars in taxes owing to the CRA.

My initial reaction to that headline was likely similar to what others who saw this headline probably felt – that corporations are not paying their fair share of taxes, that corporations get all these tax breaks and that the government allows corporations to not pay taxes.

But before I would be able to properly comment on this, I would have to read the article a few times to figure out what the actual story is.

According to the article, the issues are these;
“Corporations avoided paying Ottawa between $9.4 billion and $11.4 billion in taxes in 2014″, according to a new federal report created by the Canada Revenue Agency (CRA), which estimated these figures.

The report estimates the “tax gap”, or the difference between what is owed to the government and what was collected by the CRA — for small and medium enterprises is between $2.7 billion and $3.5 billion and for large corporations, between $6.7 billion and $7.9 billion.

“The corporate figures bring the total estimated 2014 tax gap from a series of studies by a dedicated CRA unit to between $21.8 billion and $26 billion — or 10.6% to 12.6% of revenues — not including funds recovered or lost due to audits.”

By not including funds recovered or lost during audits, and not going into detail as to what “audit” specifically means, it could represent the amount of taxes assessed during an audit (where the CRA found additional taxes owing), or lost (where the CRA had assessed a corporation, only to find out during an audit that the assessment was inaccurate or invalid, and thus reversed, revised or reduced).

Taking a closer look at the figures, might be a huge shock to anyone who feels that corporations get it easy in Canada.

In 2014, Corporate tax filers reported approximately $298 billion in taxable income and $40.9 billion in total federal tax payable. Even though they made up only about 1% of the 2.1 million corporate tax filers, large corporations reported about 52% of the total corporate taxable income and contributed about 54% of the federal tax.

More than half the taxes collected in this country come from large corporations!

After being fed data which explained that the corporate tax gap for 2014 was between $9.4 billion and $11.4 billion, then the government goes on to mention that the “total” estimated 2014 tax gap is $21.8 billion and $26 billion, meaning between $12.4 billion and $14.6 billion is taxes owed by individuals who are not paying their taxes…

Then the government explains that after the audits, which were left out of the equation, are finalized, the corporate tax gap will actually be reduced by between 31-40% for small enterprises and between 64-75% for large corporations, which means overall, the corporate tax gap for 2014 is actually somewhere between $3.3 billion and $5.3 billion and not $9.4 billion to $11.4 billion.

Clear, right?

So that means the actual tax gap, taking into consideration the post-audit figures that the CRA anticipates, is actually between $15.7 billion to $19.9 billion, and of those taxes owing, most of it is owing from individual Canadians who are not paying.

Meanwhile, large corporations pay 54% of the total taxes paid to this country to fund services, roads, healthcare, and the many benefits that we have all come to appreciate.

Why is this article geared towards corporations? Shouldn’t it be thanking the corporations and pointing fingers at the Canadians who are not paying their fair share? Why was it positioned this way?

Since that answer could be anything, ranging from inaccurate reporting to political manoeuvring, then the only question that remains from this article surrounds what constitutes “taxes owing”? Is that figure based on amounts reported by Canadians who just never paid the taxes, or does that figure include assessed amounts owing that the CRA created, and which may or may not be owing? If it’s the latter then it’s highly likely that the tax gap is even smaller.

NOTE

Ask me one day to tell the story about the notional assessments that I raised while working at the CRA at the request of my team leader to “get the attention” of the business… It got the attention of more than the business! It got the attention of the Minister of Finance. Lesson learned.

So, to conclude, there is a tax gap. There will always be a tax gap because not every Canadian has the ability to pay their taxes in full and on time, each and every year. As well, not every Canadian files their taxes on time, or are required to file on time, which means the full picture will never be forthcoming because of all the moving parts.

The timing and content of this article leads me to believe that the Federal government and the CRA going to come after corporations.  They shouldn’t, based on the actual figures, but corporations do not vote in elections – people do.

What the true intent of this article is, however, is very unclear to me.

Happy Father’s Day!

Happy Father’s Day to all of the father’s out there!

Make today the day that you brighten the day of someone who is a father or has been a father to you and wish them the best today.

Also remember that in most cases, there is a mother behind the father, so be sure to thank them for their role in the equation, no matter what that relationship is like today.

Winnipeg insulation company to pay nearly $500K in fines and back taxes for tax evasion

The Canada Revenue Agency (CRA) has announced on their website that a Winnipeg-based insulation company has been fined after underreporting its taxable income by more than $1 million.

The CRA’s Investigators found irregularities in the books and records of Thermo Applicators Inc., such as, that the company’s president included personal expenses in the company’s books, including construction costs for a cabin near Kenora, Ont. and a vacation home in Mexico, as well as a fly-in fishing trip. None of these are eligible tax deductions.

Thermo pleaded guilty in Manitoba provincial court on May 21 to two counts of making false or deceptive statements in the 2009-14 tax years. The court found $1,139,000 million in taxable income went unreported, in addition to the claiming of ineligible expenses.

As a result, the company is being ordered to pay $190,142 in income tax and $47,611 of sales tax that should have been withheld. In addition to paying the taxes, the company was fined $237,753.

Once penalties and interest are added to the debt dating back to 2009 the balance will shoot up well over $500,000.

This conviction is a clear reminder that failing to declare income and claiming false expenses can be very costly should the CRA perform and audit and find it.

Keep good records, report all income and claim eligible expenses.

Gifting Scheme Conviction. Be Careful With Your Hard Earned Money!

A Coaldale, Alberta man has been arrested for fraud after allegedly being one of the central figures in a so-called “gifting” scheme which has taken in about 500 individuals across the province of Alberta.

Gifting schemes have been under the microscope at the Canada Revenue Agency for over a decade, and in all cases, the CRA have rejected these schemes, and denied the donation receipts of the contributors.

While these cases play out in Tax Court, the participants are left to fend for themselves, often accruing penalties and interest which far exceed the amount of their contribution or their tax benefit.

In this specific scheme, Steele Cameron Tolman, 57, was charged with fraud over $5,000 and possession of the proceeds of crime over $5,000. He is scheduled to appear in court in Lethbridge on May 17 to answer LPS charges he is a “main presenter” or “promoter” of a gifting circle fraud which began in September 2018.

These schemes – and this scheme specifically – operate under false pretences, whereby people are recruited by telling them that if they contribute $5,000 they will eventually receive $40,000 with no risk.

The fraud occurs when that $5,000 is used to payout the $40,000 to one of the earlier members which means new members must be recruited in order to continue paying out members.

If this scheme was promoted out of a parking lot, and some guy’s back of their van, they are going to say this scheme was completely ridiculous, however, this was promoted by friends and family who received the $40,000 payout which added additional legitimacy to the scheme.

The fraud is criminal in nature because the recruitment of new members occurs under the false pretense of “no risk. Those who participated and received their $40,000, are in receipt of the proceeds of crime, which is illegal, and those who received their payouts must declare that income to the Canada Revenue Agency.

What is truly amazing is that people who participate in schemes and scams like these can claim that they did so thinking it was legal, and have used that argument in conversations with the police and the CRA.

If you give someone $5,000 and they give you back $40,000 – which seems too good to be true… Means it is too good to be true.

Much in the same way that someone donating $1,000 to a “charity” and receives a tax receipt for a donation of $2500.  It’s illegal, and you’re going to get caught and the penalties and interest will far exceed the amount of benefit received.

Be careful with your hard earned money. There are no fast and easy ways to make a buck. Don’t fall for scams and schemes and get left with a tax debt, or worse.

BC Land Developer and Builder Sentenced For Tax Evasion

May 3, 2019 – Vancouver, British Columbia

The Canada Revenue Agency (CRA) has announced that Willi Isaak of Anmore, British Columbia (Canada), has been sentenced to pay a $23,100 fine after being found guilty on two counts of tax evasion and one count of making false statements under the Income Tax Act, and one count of goods and services tax / harmonized sales tax (GST/HST) evasion under the Excise Tax Act.

Mr. Isaak was a director and 50% shareholder of Baarak United Enterprises Ltd. (Baarak), a real estate development company. Baarak was responsible for the acquisition and subdivision of a 20-acre land parcel in the Village of Anmore, British Columbia.

The trial judge determined that Mr. Isaak willfully evaded the payment of tax, by failing to report taxable corporate and personal income totalling $181,902 for the 2009 and 2010 tax years. Bank and accounting records revealed that several client payments for construction management fees and a BC Hydro refund related to the Anmore development were deposited into Mr. Isaak’s personal bank account, and unaccounted for in Baarak’s general ledgers. Mr. Isaak also failed to remit GST/HST collected from business operations during that period.

All case-specific information above was obtained from the court records.

The CRA takes tax evasion very seriously. Tax evasion occurs when an individual or business wilfully ignores or disregards Canada’s tax laws. For example, those participating in tax evasion under-report taxable income or claim expenses that are non-deductible or overstated. Those who do not fully comply with tax laws place an unfair burden on law-abiding taxpayers and businesses and jeopardize the integrity of Canada’s tax base. For the 5-year period of April 1, 2013 to March 31, 2018, the courts have convicted 307 taxpayers of tax evasion. This involved $134 million in federal tax evaded and court sentences totaling approximately $37 million in court fines and 2,964 months in jail.

Wilfully failing to follow tax laws could result in serious consequences, including reassessments, the imposition of civil penalties and criminal tax investigations and prosecutions resulting in the imposition of court fines and jail time. Under the income tax and excise tax laws, persons convicted of tax evasion will face fines ranging from 50% to 200% of the evaded taxes and up to five years imprisonment. If convicted of fraud under Section 380 of the Criminal Code, an individual can face up to 14 years in jail.

The CRA has set up a free subscription service to help Canadians stay current on the CRA’s enforcement efforts.

inTAXicating.ca was down. But it’s fully functional and operating again. Thank you for your patience!

For those of you who have attempted to connect with me through my website, inTAXicating.ca, you may have noticed that it was down for a period of time… I had changed web-hosts and at some point in time, the new host changed routing and didn’t notify me, so the site and email went down.

Apparently, while all of these website issues were finally resolved, the email issues have been partially resolved. Some of the older emails were retrieved, whereas some may be gone forever.

As I try to get through the backlog of emails, and phone calls, I ask that if you have tried to contact me in the past month to month and a half, and if you have not heard back, or if we started correspondence and that abruptly ceased – and you still need assistance – to please reach out again via email (info@intaxicating.ca).

Thank you for your patience.

As a back-up, I have also begun using this gmail account: intaxicatingtaxservices@gmail.com.

If you have a tax question, need some assistance with a tax problem or want to hire me to assist with a tax diagnosis or write a Taxpayer Relief letter, please contact me.  If you would like to have me speak to a group, or conduct any media interviews, please mention in the subject line that the email is urgent.

Thank you for your understanding and patience.

Warren Orlans

inTAXicating