Tax Strategy: Rental income from US must be reported

Logo of the Internal Revenue Service
Logo of the Internal Revenue Service (Photo credit: Wikipedia)

I came across an interesting article from the Montreal Gazette which covers a couple of interesting issues, and one of keen interest to Canadians as to whether to declare a vacation home in Florida, and if not, what the consequences are.

Did you know that you are required to report it to the IRS on a form 1040 and as well to the CRA, and that it is a credit on the Canadian side?

Read on!

Tax Strategy: Rental income from U.S. must be reported.

Learn How to Lodge a Service-Related Complaint with the CRA

[109/365] Taxation.
Taxation. (Photo credit: kardboard604)
Have you ever had an issue with the Canada Revenue Agency which was so upsetting that you wanted to complain but did not know how?  Well, once you finish reading this post you will know how to do that, when you can do that and what you need to do that.

The first think you will want to do is to follow this link, to the CRA website and read their brief section on service-related complaints.  If everything looks good, then download this form, the RC159 fill it in, and send the completed form, together with supporting documentation and any authorization forms, separately from other tax forms to the CRA.

You can fax your form and supporting documentation to 1.866.388.7371 from Canada or the US or 1.819.536.0701 from outside Canada and the US, or you can mail them to the following address:

CRA – Service Complaints Supporting documentation
National Intake Centre
P.O. Box 8000
Shawinigan-Sud QC. G9N 0A6
CANADA

Make sure to include all relevant documentation that you feel may be helpful in reviewing your complaint or feedback.

This is a service complaint;

A service complaint is an expression of dissatisfaction with the service, quality, or timeliness of the work performed by the CRA which could include, but is not limited to, the following:

  • undue delays;
  • poor or misleading information;
  • staff behaviour; or
  • mistakes, which could potentially result to a misunderstanding or omission.

This is not a service complaint;

If your service complaint does not relate to a service matter, other options are available, for example:

  • normal delays in the processing of your income tax returns – see Service Standards or for more information on what you can expect from the CRA.
  • dispute an assessment, determination, or decision – see Complaints and disputes.
  • disagreements related to the Income Tax Act – the CRA is responsible for administering tax legislation, not amending it. If you have a complaint about the Income Tax Act or other tax legislation matters, contact the Department of Finance Canada.

Additional information can be found by reading Booklet RC4420, Information on CRA – Service Complaints.

What keeps me busy during the day…

I like taxation, and I have worked in the industry for over 17 years, and no, I am not a CA / CMA / CGA… Yet.  I did not wake up one day deciding this was my passion, but after almost 11 years at the Canada Revenue Agency (CRA), I certainly have learned a thing or two about Canadian taxation, and in the private sector afterwards I learned a thing or two about US tax, the MRQ and I had the opportunity to manage staff on a permanent basis and test out those MBA skills I worked so hard to learn.

Now I get to help people solve their tax problems and that is what makes me happy.

Here is a little biography about myself and my work-experience;

I graduated from University here in Toronto with a specialized honours degree in Public Policy and Administration.  The economy was in a downturn so I began to sell promotional items which I would customize for clients, such as; Pens, mugs, sports uniforms, etc. and I did that for just over a year-and-a-half until I applied to the CRA at the suggestion of a friend.  Seven months, later and I was settling in for my first day of training.  I will never forget the horror of walking through the office and seeing one fellow sleeping at his desk and another doing the crossword…  Little did I know what would come next.  The CRA, or maybe all governments, are unique in many ways.  They have goals, they have mandates and they have unions.  The fact that someone was resting had no bearing on the amount of work they accomplished, or how much they knew.  I certainly learned that you cannot judge a book by it’s cover.

11 months in to a job working in Collections, I was part of the most recent hiring group which was let go due to budget issues, however we were entitled to write entry exams allowing us to be re-ranked for potential re-hire.  I wrote all the exams, completed the interview and was ranked 1st, meaning if the CRA decided to hire anyone from that list, they would have to offer me a position first, and sure enough they did.

The next 10 years was a giant blur of exams, coffee breaks, crosswords and discussion about the amount of work which needed to get done vs. the amount of work allowable under the union guidelines.  For the most part this was never an issue.  During my time there I moved from an entry-level collector to a field officer and then to a resource officer and I touched a lot of areas during my time there including; compliance, GST/HST, Taxpayer relief (then fairness), Director’s Liability, Audit, Training and Learning, and so much more.  I also completed 3 years of accounting towards a CGA/CMA and my MBA degree.  I took 2 parental leaves and I worked with management to set up a collections conference and a mentoring program which I ran for 2 years.  I also performed a ton of training for all of the new hires and the rest of the staff.  I found I had an ability to take legislation and break it down into English and explain it to everyone, which helped with training and resolving complex issues.

I found treating staff as resources got the most of them and I was afforded many opportunities to manage teams within my areas.  I also found that by picking up the phone and speaking to the so-called debtors, that I could get across to people who owed the CRA money and explain what steps the CRA would be taking and use that to discuss what was in their best interests and what was in the best interests of the CRA.  As a result, I closed a lot of files without having to take any legal or enforcement actions other than talking to them.   “How would you like to resolve this?” was / and still is, a very acceptable opening line.  No accusations, and no blaming.  When I needed to flex my muscles to get something done, I certainly did just that and when push came to shove if I needed something done that was being delayed I found ways to get it done faster, or I learned it myself and taught others how to do it.

I was awarded the CRA Employee of the Year one year for my work in the office and my extracurricular work (volunteering and course-work) and as you could expect, I was quickly realizing that I was wearing out my welcome there.  I needed a change.

So just before 11 years at the CRA, I threw my resume online and I was hired by the world’s largest transfer agent to run their investor tax reporting department which I happily did for 4 years.  In this role, I learned about investor slips, T4’s, T5’s, T3’s, T5008’s, and the US forms, W8’s, W9’s, 1099B’s, and got my feet wet with Cost Basis and FATCA.  I also had a brief dive into Qualified Intermediaries, but thankfully that nightmare was moved off to compliance and legal.

While working there, I was plucked away for an opportunity as an AVP at a bank which afforded me an opportunity to dive deep into FATCA and the mutual fund side of tax reporting; Contribution receipts, T3’s, and the like.

When that opportunity ended, I was asked to work as a consultant, leading FATCA for the bank, but from somewhere down near Dallas, Texas but I decided to remain here in Toronto and I’m glad that I did.

In case you were not aware, there was a recent study published – which for the life of me I cannot find right now – which revealed that 55% of all bankruptcies in Canada were due to the Canada Revenue Agency (amounts owing / collection / enforcement actions).  That tells me that there a LOT of Canadians with tax problems and many who have tax problems but don’t know they have tax problems because they never open the brown CRA envelopes.

Now, on to my current role:

As the Managing Director of a professional tax firm committed to helping Canadians who have tax problems resolve their matters with the CRA, I have the opportunity to do what I like doing the most – helping others.  In doing this, I also help the CRA resolve some of their most complex accounts and I help people get their debt in order and their tax accounts current and up-to-date.  The management team are incredibly knowledgable about the industry and my colleagues, peers and staff are second to none.  It’s a good fit all around.

Since I have taken over this role, I have met with, and spoken to, many Canadians across the country about their tax problems and together we have worked to help them become debt-free and resolve their CRA problems so they can go back to being able to sleep at night.  I am happy to help you or someone you know.

It’s amazing what all that CRA knowledge in so many different areas can do to move a file forward.

Beware of Fraudulent Communications! The CRA Does NOT Randomly Request Personal Information.

Canada Revenue Agency
Canada Revenue Agency (Photo credit: John Bristowe)

The CRA issued a warning, as the periodically have to do, to make sure that citizens are aware of some scams being committed via email, phone and mail whereby someone is pretending to be the CRA and they are asking for personal information such as a credit card number, social insurance number (SIN), bank information or passport information.

As in EVERY other situation, if someone, anyone asks you for this information, you should NOT be providing it.

If the CRA wants to contact you for information they already know all this information and will not be asking you for it.  Even worse is the fact that the fraudsters are arguing that this personal information is needed so that the taxpayer can receive a refund or benefit payment.

Again, the CRA knows this information and if you are eligible for a program or benefit, they will either enroll you in it automatically or they will send you a letter asking you to call the CRA general enquiries line.

Another common scam refers the person to a Web site resembling the CRA’s Web site where the person is asked to verify their identity by entering  personal information.

Again, this is not true.  The CRA website is http://www.cra.gc.ca where the “gc” stands for “government Canada” and the “ca” represents that the website is Canadian.  If the fraudster persists, please hang up and call the general enquiries line to confirm or call the RCMP (details below).

So just to confirm, and this is from the CRA website;

The CRA does not do the following:

  • The CRA will not request personal information of any kind from a taxpayer by email.
  • The CRA will not divulge taxpayer information to another person unless formal authorization is provided by the taxpayer.
  • The CRA will not leave any personal information on an answering machine.

When in doubt, ask yourself the following:

  • Am I expecting additional money from the CRA?
  • Does this sound too good to be true?
  • Is the requester asking for information I would not include with my tax return?
  • Is the requester asking for information I know the CRA already has on file for me?
  • How did the requester get my email address?
  • Am I confident I know who is asking for the information?

The CRA will continue to post notifications of fraudulent communications as they become aware of them and encourages you to check their Web site should you have concerns.

Examples You will find examples of a fraudulent letter, emails, and online refund forms from the CRA’s website in the links provided.  Notice how shoddy and unprofessional the request are.  As per telephone calls, the CRA will occasionally leave messages for taxpayers on their answering machines, including a callback number, and a request for the taxpayer to have their SIN handy when they call, however, it is important to note that not all telephone messages claiming to be from the CRA are genuine.  If you have any doubt and wish to verify the authenticity of a CRA telephone number, agent name, or location. you should contact the CRA directly by using the numbers on our Telephone numbers page.  For business-related calls, contact 1-800-959-5525 and for individual concerns, contact 1-800-959-8281.

If you have responded to a fraudulent communication and have become a victim of fraud, please contact the Royal Canadian Mounted Police’s Canadian Anti-Fraud Centre by email at info@antifraudcentre.ca or call 1-888-495-8501.

Be careful when giving out personal information to anyone regardless of where they claim to work.  The CRA won’t get offended.  They’ll try again a different way if necessary.

Interesting: CRA Employee Fired over Video Game About His Job

Not CRA-Approved
This child will now never create a video-game about her CRA job!

I was a little caught aback when I saw that the Canada Revenue Agency (CRA) fired an employee over a video game that he had created based on his job.  Getting fired from the CRA is not easy task – as I used to tell people when I worked at the CRA, you could stand on your bosses desk and pee on his / her papers and not come close to getting fired.  I had to do some research and ask around to get more details in order to see what really happened to cause this termination. My immediate reaction to this article – before reading it and researching for more details, as that I would have thought that someone with this kind of wit and abilities should not be fired from the CRA, but rather, promoted in the CRA, right into the IT or marketing departments where his skills could be used to help the CRA make peace with the general public. Then again, I’m not often surprised by the decisions made by the CRA.The video game this employee made, was not solely based on his job, but rather, on the disdain of his job – which makes a pretty big difference. in my opinion.  In case you would like to locate the game and check it out, the developer’s name is David S. Gallant and the name of his game is “I Get This Call Every Day”.  Based on details of his location and that he would be receiving calls every day which are similar, I came to the conclusion that he worked in the call centre somewhere out near the Toronto West TSO.

In the game, users listen to a customer call and are given options for how they can respond to the inquiry.  The game prompts the user to respond to the calls, and having never seen the game I cannot be 100% sure, but I understand that there are common responses and some shall we say are a little less than professional, such as the often cited snarky response like “I’m not your buddy, sir” which is intended to rile up callers instead of helping them with their problems and moving on to the next call.

While it’s true that the CRA are not your buddies, I can honestly saw in the 11-years I spent at the CRA and the 7 years since dealing with call services agents on the phone, I am more concerned when an employee is unable to navigate their system (because they are new or not adequately trained) so they cannot provide me information I require or are unwilling to, but I have never, ever had an agent be rude to me even in the slightest – for which I give the CRA top marks because within the CRA everyone knows the call centre is like a prison because the agents are handcuffed to the phones and have no opportunities to wander from their desks as say, collections or audit staff would.   Advancement opportunities are also quite limited, but the training these guys get is top-notch and I have personally hired staff from the call centres for private sector work because of their knowledge and they customer service skills.

Mr. Gallant was quoted as saying that; “I felt the need to express myself, and despite the fact that I could’ve lost my job for it, I still wanted to ensure that I got my art out there and I made it available to people.”

The Minister of National Revenue, Gail Shea, however failed to see the humour in the situation.  “The minister considers this type of conduct offensive and completely unacceptable,” a statement released from her office.  The CRA will now proceed with the common practice of conducting a full investigation into the access of Mr. Gallant to ensure no confidential information was compromised, and no illegal activities took place while Mr. Gallant was employed there.

While I personally witnessed much more severe acts which should have resulted in termination, the CRA does not like to get embarrassed, and that is probably what they feel this was.  Unfortunately, unless the game clearly identifies Mr. Gallant and his position at the CRA, then this is another circumstance of someone from within the CRA outing an employee and getting them punished which happens a lot in bureaucracies, especially in the CRA which I can attest to.

If anyone has seen the game or played it, I would love for them to comment with their feedback in order to add additional facts to my post, or email me at realurbandaddy@gmail.com with your thoughts and I can keep them anonymous and add the facts at the bottom of this post.

The Canada Revenue Agency Informant Leads aka “Snitch” Line

You have come to this blog for more information on the Canada Revenue Agency’s (CRA) Informant Leads or Snitch Line.  Yes, the line does exist and if you are looking for the number in order to use it, that number is 1.866.809.6841.

You may have heard me speak on CFAX1070 about the CRA Snitch line, or possibly you heard my interview on CBC.ca regarding the existence and use of this line.  If you have not, then let me take a moment to clear the air on this line.  The Informant Leads line does exist.  In fact, it has become such a popular tool for finding new collection sources that it’s increased volume of calls can be directly attributed to a reduction in the need for collections staff / auditors and investigators who were responsible for digging up new leads.

It is absolutely not possible for someone to call the line, make up a story and have someone investigated.  Anyone who states that does not know the purpose of this line and obviously has no experience working in the CRA.  To say that is irresponsible and fear mongering.   The CRA will act on leads but there must be some proof provided.  Simply asking for your neighbour to be audited because they drive a nicer car than you is not going to begin years or investigations-hell for them.  If, however, you purchase an item from a retail establishment, and are charged taxes, but you notice that the teller never ran the purchase through the till, then you can be assured that they are pocketing the taxes instead of remitting it to the CRA.  Or, if you notice on the receipt that they have charged you the wrong rate of tax, then you need to notify the CRA.

In one case, while I was working at the CRA, I purchased a large ticket item from a local store only to find out later that the taxes on the bill totaled 28%.  I went back to the store to ask for it to be corrected, only to have them advise me that it was a “US cash register” and that the rate was incorrect.  I took the receipt into the office hoping to launch an internal investigation but was told it would be 6-weeks before they were able to look at it.

So I walked over to a phone beside my desk, called the snitch line, explained the issue and after providing the receipt as proof, found that an investigation was launched the next day and heard through the grapevine that over $200,000.00 was recovered from the company.

That is where the snitch line can be put to good use.

If, however, you hear your neighbour bragging about how much money he makes under the table and he lives way better than you do?  You can call the snitch line.   Or if your ex-spouse is unwilling to file their outstanding tax returns because it would mean they would have to increase child support payments, then you can call the snitch line.  The CRA will take the information, begin with an internal investigation to see if there is merit, then possibly drop by the home or business to get a feel for whether an audit is required or if a net worth assessment is needed.

At the end of the day, the intention of the snitch line is to provide a direct link to the CRA’s Audit department and it assists the CRA as they use these “tips” to recover funds from professional tax avoiders.

Key words the CRA likes to hear includes;

Their names, their address, an amount of unreported income greater than, say $50K, maybe a second set of books, or 2nd property in the name of their cat…

It never hurts to call.

It always hurts to not call.

This line is anonymous and believe it or not, the majority of “tips” come from exes who are left holding the bag while their ex-spouses are living it up.

I figured I would post this since it is the most frequently asked question I get.  Yes a line exists and yes it gets acted on… and fast if the dollar amount to be recovered is high.

I have actual experience seeing this line work and I know for certain of instances where people have called this line in effort to discredit or attack someone and at the end of the day, the CRA  has investigated that person or party and punished them for making a false claim.  Those in glass houses should never throw stones.

Snitch Logo

The Canada Revenue Agency is actively looking for Offshore Accounts too…

I have received confirmation from a senior official at the Canada Revenue Agency that the CRA is in fact actively investigating individuals suspected of being involved in the recent offshore account problem overseas.  Thus far, no one has been named publicly and my source at the CRA has confirmed that each person contact thus far has willingly come forward to pay amounts owing in full and that the number of people thus far targeted by the CRA totals less than 100.

The list remains private because the CRA does not want to tip-off those involved that they are coming for them, nor do they want to admit that they are severely short of qualified staff needed to make arrangements with these taxpayers and their numerous numbers of representatives.

The CRA suspects that the list is available elsewhere and that it might be coming to light sooner than many wish which could hurt the CRA and will certainly shame those involved.

The CRA will certainly be looking for additional offshore funds with speculation abound that there will be incentives down the road for taxpayers and financial organizations to disclose to the CRA situations where an individual or organization is placing it’s assets out of the reach of the CRA for tax evasion purposes.

Stay tuned!