Owing Taxes to the CRA: Real options to consider

The Canadian Tax Filing deadlines for regular filers and for filers with self-employment income are rapidly approaching.

Due to the COVID-19 pandemic, the Canada Revenue Agency (CRA) has pushed out the tax filing deadline for regular tax filers from April 30th, 2020, to June 1st, 2020.  Canadians with self-employment income were due to file by June 15th, 2020, and that date has remained the same.

Any payments for the current tax year are due by September 1st, 2020, which applies to balances and instalments under Part 1 of the Income Tax Act due on or after March 18th and before September 1st, 2020.

If you earned significant self-employment income, for the first time, you might be in for an unexpected surprise when you file your tax return, because there will likely be a balance owing to the CRA. This balance owing is a result of having to pay the amounts that an employer would have normally deducted from your pay, including both portions of the Canada Pension Plan (CPP).

If you haven’t made other provisions to cover your tax debt at the end of the year, you could have a problem.

If this were not a pandemic year and the CRA was fully operational, I would warn that tax debt is serious and should be dealt with immediately.

As we are all aware, the collections staff at the CRA have considerable “power” to find and collect money that are owing to the Crown.

With the amount of government benefits being offered up this year, Canadians have been providing their banking information to the CRA in record numbers, and it is that banking information which the CRA can, and will, use to recover the taxes owing to them, likely in record time.

In effort to deter Canadians from not paying the CRA, they charge penalties and interest (which compounds daily) on your overdue taxes.

They can withhold payment of your Child Tax Credit and GST rebate. They can take money from your bank account or garnishee your wages.

If those methods do not result in full payment of taxes, the CRA will then check to see if you own real estate, as they can register a lien against your property.

When a lien is registered against your property it can prohibit you from refinancing or selling your property until the outstanding debt is paid in full.

You may also find that if you are non-compliant (not filed up to date with the CRA), you may not be able to secure mortgage financing to purchase a home, buy a cottage, get a loan, or access equity in your property.

Many Canadian banks and credit unions will not provide an unsecured loan for the payment of income tax debt and they generally cannot refinance an existing mortgage to cover the debt either. When they learn of a lien, they deem you a credit risk and are more comfortable walking away from you as a customer then take a risk lending you funds that you either cannot pay or that the CRA will end up taking.

 

What Can You Do

Normally, you would contact the CRA immediately – but these are COVID times – and the CRAès collections division is presently not taking collection actions or weighing in on payment arrangements.

Pay what you can, as much as you can.  Because paying anything less than the balance owing is going to result in interest accumulating.

There is no need to pay more to the CRA, unless you absolutely have to.

If these were normal times, you might be able to negotiate a re-payment arrangement covering 3-6 months, but the interest continues to accrue.

 

What NOT to do

This is important to note – filing for bankruptcy, or filing a consumer proposal, does not discharge a lien against your property. If you go bankrupt on your CRA debt, the lien remains and – even worse – accrues interest over time. Even after your discharge from bankruptcy, the lien remains in force, until you eventually sell your home. Transferring a tax problem for a credit problem is not always the best option.

Do not transfer any assets, or your property, to another person. That will not solve your problems, but rather cause other ones.

Removing assets from the reach of the CRA will result in the raising of a Section 160 (325), non-armsè length assessment, which takes your tax debt and makes it jointly and severally liable with the person who now owns your property.

Do not ignore it. Far too often, Canadians ignore the requirement to file and pay their taxes. This means a balance owing to the CRA continues to grow and grow. When the balance gets to be too high, people feel they have very few options, and consider bankruptcy or insolvency to be one of them. Worse that this scenario, is when one of the parties with a large tax debt falls ill, passes away, or becomes separated from the other, and now the ability to resolve the tax matter becomes that much more difficult.

 

A Better Solution

If you are a homeowner then having an experienced mortgage broker working for you can save you both time and money when seeking a solution to your CRA problem. If you simply can’t pay the full amount of your back taxes, consider refinancing your mortgage and using the equity in your home to consolidate all of your debts, including credit card debts, at a rate which might even be better than the rate you are currently paying.

Mortgage brokers have access to lenders that will allow a refinance of your existing mortgage or second mortgage options to pay off outstanding CRA debt.

If you have tax debt, or are going to be facing some tax arrears, do not worry. Contact inTAXicating and let us provide you with the truth around your tax options and help you find the best solution for you.

info@intaxicating.ca

intaxicatingtaxservices@gmail.com

 

Looking After Canadians Tax Interests During and After COVID-19

The COVID-19 pandemic has changed the way Canadians do business for now, for the immediate future and possibly forever. One thing, however, that has not changed forever, is taxation.

Yes, the government of Canada has pushed off some tax filing deadlines, paused Canada Revenue Agency (CRA) collections actions, and provided “benefit” payments to those in need (and those who don’t really need), but in the midst of this massive outlay of money, there are some key facts to keep in mind to keep you safe and secure.

1. File Your Taxes

Life will go on, businesses will slowly open, and people will get back to work. As of the writing of this post, April is coming to an end, and the June 1st Personal Income Tax (T1) filing deadline is fast approaching! While any funds owing to the CRA on those taxes are not due until after August 31st, if you are going to owe and your account is going to wind up in Collections, it’s best to start making payments as soon as you can.

Don’t wait until you’re back to what resembles a “normal” work day, to realize that you cannot file your taxes because the likely response from Taxpayer Relief is that you had plenty of time while self-isolating. Don’t take that chance. You don’t need to pay interest to the CRA for filing late. File on time!

2. Beware Direct Deposit

If you signed up for any of the federal government’s “benefit” programs, and in doing so, provided the CRA with your Direct Deposit information, then you need to ensure your tax compliance is a priority for you going forward.

By giving the CRA access to your bank account, and with the current deficit of $20 billion dollars set to double due to the benefit payments, the CRA is going to be in a hurry to recoup those funds. If you delay paying, they’ll issue a Requirement to Pay (Garnishment) and take the funds from your account.

3. Do NOT Ignore CRA

Once the pandemic is under some sort of control, and life goes back to “normal”, if you are ever contacted by the CRA’s Collections department there are two things you should not be do. 1) Do not ignore them – if you get a letter or a legitimate phone call – speak to them. 2) Do not Lie. With hundreds of accounts in their collection inventories, you are just a name or number to the CRA unless you lie to them. Then it gets personal… Tell the truth. They probably know it already anyways.

4. Pause Before Bankruptcy / Insolvency

Times are tough for everyone, but if you have debts which are tax-related, or if your inability to pay other creditors is based on a tax debt, then before exchanging your tax debt for bad credit, reach out to someone who knows how the CRA works with Canadians like you, and don’t jump into something just because advertising makes you think that this “government program” is available. There are lots of better “government programs” available which can help you without something negative happening to your credit in return.

5. Explore Resolution to Tax Debts / Compliance Issues

If you are behind on tax filing – personal or corporate – owe money to the CRA, or locked in a dispute with the CRA about amounts owing? Now is the perfect time to get filed up to date, apply for Taxpayer Relief, and get the truth about your tax liability and your chances of success. Take the time to invest in yourself and resolve your tax issues.

6. Questions? 

If you have questions, ask them in the comment section. If we can answer them, we will. If you leave a valid email and the question is specific, you’ll get an email. If the answer to your question requires more information, then you’ll be asked them, and if there is an opportunity to help you further, you’ll get the truth about what benefits you, not us, not the CRA.

Two Canadians Sentenced to Prison for Bitcoin Fraud in the US

Oregon’s Attorney General has reported that 2 Canadians – Karanjit Singh Khatkar, 23, and Jagroop Singh Khatkar, 24, residents of Surrey, British Columbia – were sentenced to 24 months in federal prison and three years’ supervised release for conspiring to commit wire fraud and money laundering in a scheme to steal bitcoin from a resident of that state.

According to the indictment, beginning in October 2017 and continuing until August 2018, the defendants used a Twitter account with the name @HitBTCAssist to trick victims into thinking they were communicating with a customer service representative from HitBTC, a Hong Kong-based online platform used to exchange virtual currency. HitBTC provides its customers with web-based “wallets” to store virtual currency and make transactions.

Using the fraudulent Twitter account, the defendants responded to the Oregon victim’s questions about withdrawing virtual currency from her HitBTC account and they convinced her to send information they could use to log on and take over her email, HitBTC and Kraken accounts. (Kraken is a U.S.-based online platform that offers services similar to HitBTC).

The defendants initiated transfers of 23.2 bitcoins from the victim’s HitBTC account to Karanjit Khatkar’s Kraken account. Karanjit in turn transferred approximately half to Jagroop’s Kraken account.

Two days after illegally accessing the victim’s account, Karanjit Khatkar bought a Mercedes-Benz with $56,598 in Canadian dollars. The Khatkars also traveled to casinos. Karanjit Khatkar gambled with tens of thousands of dollars while staying at high-end casinos in Las Vegas, Nevada.

On July 18, 2019, Karanjit Khatkar was arrested upon arrival at the McCarran International Airport in Las Vegas and later ordered detained pending trial. Jagroop Khatkar appeared voluntarily for his arraignment and change of plea on December 16, 2019.

On December 16, 2019, the Khatkars pleaded guilty to conspiring to commit wire fraud and money laundering. As mandated by their plea agreements, the Khatkars delivered a check of $142,349 as a prepayment of restitution to their victim at their change of plea hearing.

At sentencing, the Khatkars were ordered to pay an additional $42,162 to their victim for a total restitution order of $184,511.

The moral of this story is two-fold. Firstly, the government doesn’t take too kindly to people stealing crypto-currency, and secondly, before giving out sensitive information, make sure you know who you are talking to.

This case is akin to the CRA scam where Canadians are threatened with jail from the “CRA” but it can be “resolved” if bitcoins are transferred into a “CRA” wallet. That scam has entrapped way too many Canadians. The CRA doesn’t even consider crypto currency to be legal tender, rather, they treat it like a commodity meaning once it’s sold, taxes are due on the Capital gain.

Be Careful Who You Use for Tax Preparation: Ontario tax preparer sentenced to 4-years in jail

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.

A CRA investigation found that Nnane, the chief executive officer of Golden Capital Management Inc., a tax preparation business, prepared individual tax returns for the firm’s clients with false charitable donations credits, as well as fictitious business and rental losses.
The false claims enabled the firm’s clients to evade nearly $2 million in federal tax for the years 2009 to 2013, the release said.
The investigation also revealed that Golden Capital Management failed to report net income totaling about $500,000 on its corporate income tax returns for the same taxation years.
The firm failed to remit Goods and Services Tax (GST) / Harmonized Sales Tax (HST) totaling about $53,000 for the quarterly filing periods from 2009 to 2013.
Unfortunately, the view from the CRA is that each and every client of this tax preparer knew that their returns were being faked and thus are a willful accomplice to this fraud and thus will be re-assessed as a result.
Those re-assessments are likely (if not certainly) to include a 50% Gross Negligence penalty which is equal to 50% of the tax evaded, plus be accountable for the tax evaded. That is just the tip of the iceberg.
In its release, the CRA noted that taxpayers convicted of tax evasion face fines ranging from 50% to 200% of the evaded taxes and up to five years’ imprisonment.
If a taxpayer is convicted of fraud under Section 380 of the Criminal Code, an individual can face up to 14 years in jail, the release said.
For the five-year period from April 1, 2014, to March 31, 2019, the courts have convicted 25 tax preparers/promoters for tax evasion, resulting in a total of $2.5 million in fines and 38 years of jail time, the CRA said.

Bouclair Inc, its CEO and former VP charged by the CRA for Tax Evasion

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.

Introducing Personal Banker – Finding Tax Credits for you, and more

In effort to provide you, the reader, with the truth about your tax arrears and dealings with the Canada Revenue Agency, it would be a disservice if I did not provide information about companies who can help in addition to companies who can harm.

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.

It’s brilliant.

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 think that there might be tax credits that you have not claimed, visit their website, sign up and let them do the rest.

If you’ve used them before, I’d love to hear your feedback in the comments, or emailed to me at info@intaxicating.ca

Ontario Contractor Pleads Guilty to Tax Evasion

The Canada Revenue Agency (CRA) has reported that a Vaughan, Ontario based, general contractor has been fined for evading GST/HST.

The press release by the CRA announces that Gilles Larocque of Nobleton, Ontario pleaded guilty to tax evasion. He was sentenced in the Ontario Court of Justice in Newmarket and fined a total of $301,125.

Larocque pleaded guilty on January 7, 2020, in the Ontario Court of Justice in Newmarket, Ontario to two counts of failing to report income by not filing income tax returns, thereby committing tax evasion under the Income Tax Act.

He also pleaded guilty to two counts of failing to remit Goods and Services Tax / Harmonized Sales Tax (GST/HST) under the Excise Tax Act.

A CRA investigation revealed that Larocque, who owned and operated a construction company in the Vaughan, Ontario area, provided general contracting work to clients that included dry walling, framing and ceiling tile installation for gas stations.

Larocque used several aliases and business names and charged clients for GST/HST, which he used for his personal expenses.

Larocque failed to report income in both 2013 and 2014 tax years and evaded a total of $180,401 in federal taxes.

He also failed to file GST/HST returns in both those years, totalling $120,724 in unremitted GST/HST.

The total amount of federal tax evaded and unremitted GST/HST for the years 2013 and 2014 was $301,125.

Charging GST/HST to clients and then keeping it for your own use is not only against the law, but it’s a pretty sketchy way to get another 13% of income. A common rule to avoid this from happening it to always make sure that you ask for a receive a receipt. The receipt pretty-much (but not always) ensures that the seller is reporting the GST/HST that they collect from you, and the income earned from your purchase.