CRA Acting Unusually, or Cabot Business To Be Charged With Tax Evasion

In what is either a case of the CRA acting in an unusual manner, or a business has misplayed their hand  – and is being charged with tax evasion under the Income Tax Act (ITA) and the Excise Tax Act (ETA).

Time will tell who is in the wrong.

The CBC has reported that a St. John’s car dealership and a director of the dealership, are being accused of tax evasion and making false and deceptive statements on tax returns by the Canada Revenue Agency (CRA).

The CRA filed charges under the ITA and the ETA against Cabot Ford Lincoln Sales Limited and director Frank Clarke, for the 2009-2011 taxation years.

The CRA has alleged in their court documents that Cabot Ford overstated their expenses in those 3-year by more than $240,000 in order to evade taxes owing by around $45,000 and on the GST side, they underpaid around $14,000 in GST through “false or deceptive statements” provided on their GST returns.

The director, is accused of personally evading more than $76,000 in taxes by failing to declare more than $270,000 in income over that same three-year period.

What I find really unusual, is that this case is not yet before the courts, so just by reading this, we are automatically coming to the conclusion that this company and director have done something illegal, however, that might not be true.  The director told the CBC that they are “still trying to understand everything ourselves, especially since the Canada Revenue Agency has not yet informed us of all details of the situation.”

If that is the case, having this go public is the worst case scenario for the business if the CRA’s claims turn out to be true.

On the other hand, if the CRA’s claims turn out to be false, then this would be another case where the CRA have stepped beyond their means to force an issue which was incorrect or inaccurate.

The director believes that the investigation is still underway, when he told the CBC that he [has] “been in touch with the CRA during their investigation and will continue to co-operate with them as this all moves forward.”

The charges were filed last week, and the matter is scheduled to be back at provincial court in St. John’s on March 26th.

We will be watching to see if this gets resolved ahead of time and what the long-term repercussions of this position taken by the business and by the CRA will be.

I would like to say that I would never let the CRA issue a press release about a client of mine which could do harm to their day-to-day viability – these issues can always be worked out in advance, however, not knowing all the details, it’s hard to say why this was done and who pushed for it.

If you have tax troubles with the CRA, or need them to stand down or back off, you need to contact inTAXicating Tax Services!  Visit our website at www.intaxicating.ca, or email us at info@intaxicating.ca

Former CRA Collections expertise to help resolve a CRA Collections problem.

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2018 Federal Budget Highlights: 12 Changes Related to Taxation, the CRA, and you, the Canadian Taxpayer

The Federal Liberal government has just unveiled their 3rd budget, and in doing so will be increasing spending by roughly $20 billion dollars, bringing the federal deficit to roughly $670 billion dollars.

Looking at the tax issues, here are the main items which come from the budget this afternoon;

  1. 5-Week “Take-it-or-leave-it” Paternity Leave.

The government implemented a 5-week “take it or leave it” parental leave, pretty much like what Quebec has, in order to entice more dads to take paternity leave.  This would begin June 2019 (not sure why it takes this long to implement) and the Liberals expect it to cost taxpayers $1.2 billion dollars.

What this does not do is change the corporate culture which deters dads from taking time off, nor does it entice more moms to join the workforce.

What might have helped, would be more available daycare spaces, or fixing the Live-in Caregiver program which worked very well until it didn’t.

2.  Throwing bad money after bad money – Phoenix Pay system

If you have been following the Phoenix payroll fiasco that has been going on in the CRA, you would know that the CRA has already spent a lot of money on a payroll system which didn’t work, and then a ton of money to try and fix it.

Now, the Liberals have announced that it intends to eventually move away from Phoenix and explore the “next generation of the federal government’s pay system, but before doing so, the Liberals provided $16 million over the next 2 years to “research” a new pay system.

I’ll do that on my own, for half that amount.!

While “researching,” the CRA will now have $431.4 million over 6 years to try to fix the existing Phoenix system.

When you add the hundreds of millions of dollars that the Liberal government has already invested in fixing the Phoenix pay system, and the researching costs, and the budgeted costs, you will come to a figure of roughly $900 million on a system that this government will move away from.

This system was supposed to save the government roughly $70 million per year, starting in the 2016-17 fiscal year, and the Auditor General even said that scrapping the pay system would be the worst thing the government could do because if they start from scratch, they could have the same issues with another system!

3.  Help for the CRA to answer their phones!

The Liberal government is providing $206 million over 5-years to the CRA to help the Agency answer their phones.  This issue came up in November when the Auditor General noted that the CRA’s call centre only picked up the phone about one-third of the time.

The money will be used to improve the CRA’s telephone service, improve their online services and increase the number of community-based programs which help low-income people prepare their tax forms.  Ideally the call centre hours will also be expanded, and more training will be provided to ensure that more correct answers are provided.

4.  Private Company Passive Investment Income

Beginning taxation year 2019, there will be a phasing out of access to the small business deduction for Canadian Controlled Private Corporations (CCPC’s) which earn more than $50,000 of investment income.  The current rules for the refundable tax on dividends paid by CCPCs will also be amended.

CCPC’s are entitled to a preferential tax rate on up to $500,000 of qualifying active business income – the “small business deduction.”

Going forward, CCPC’s who earn income or net capital gains from property (not properties used in an active business) will be treated as follows; For each $1 of investment income earned over $50,000, the small business deduction limit will be reduced by $5, so once a CCPC has investment income greater than $150,000, they will lose their small business deduction entirely.

The government has decided that Canadians who earn income passively, ie/ rental income, deserve to pay more tax because either;

a. It’s not fair to Canadians who have to “work” to earn income

b. The Liberals got elected taxing the “rich” and by earning money this way – damn you – you are on their list, or,

c. The Liberals would tax a tax if they could because they need tax revenue to pay for all their promises.

5. New Tax Rules for Trusts to begin in 2021.

The government needs more taxes, hence the new tax reporting requirements for trusts which were unveiled in the budget.  The intention of these new rules is to provide the CRA with information related to beneficial owners, or potential beneficial owners of trusts.

Currently, trusts which do not earn income or make distributions in a taxation year are generally not currently required to file a T3 trust return.  (Trusts are required to file T3 returns if there is tax payable in the year or if the trust distributes income or capital to its beneficiaries.)

These new rules apply to express trusts which are resident in Canada as well as to non-resident trusts currently required to file T3 returns.  Each trust will have to provide the CRA with the identity of all of its trustees, beneficiaries and settlors, as well as each person who has the ability – through the trust terms or related agreements – to exercise control over trustee decisions regarding the appointment of income or capital of the trust, such as a protector.

The budget currently grants an exemption to mutual fund trusts, segregated funds, trusts governed by registered plans, graduated rate estates and qualified disability trusts, non-profit organizations and registered charities, and certain trusts that have been in existence for less than three months or that hold less than $50,000 in specified passive assets.

6. Tiered Partnerships Losses and At-Risk Rules

Essentially, partnerships wanted to use losses from one partner to lower the income of another partner, but the CRA disagreed.  The matter went to court and the CRA lost.  This budget reverses the CRA’s loss, making it a win, and worse than that, it is effective the date of the budget, which was February 27, 2018.  Losses are now lost.

7. Increased Assessment Period for CRA on Foreign Interests

Effective February 27, 2018, the CRA will have an extended reassessment period of taxpayers in respect of income arising in connection with foreign corporations in which they have at least a 10% interest in because it’s a long, often difficult process for the CRA to audit these foreign affiliates.

8. Reduced Filing Deadline to 6 Months for T1134.

Effective 2020, Taxpayers who currently had 15-months to file Form T1134, now have 6-months to do so.

9. Fighting Aggressive International Tax Avoidance

The Liberal government committed to fight international tax avoidance by strengthening rules related to controlled foreign corporations, addressing issues of treaty abuse, adopting the OECD revised Transfer Pricing Guidelines, and of greatest significance is the pledge to abide by tax reporting requirements of countries which Canada bilateral exchange agreements – and providing information to the tax authorities of these countries.

The acceptance of the OECD multilateral competent authority agreement now increases the countries which Canada can provide information to, and get information from.

Additionally, the CRA will be able to participate in what was called a “spontaneous exchange of information” on certain tax rulings with other tax administrations as part of a coordinated international effort to counter harmful tax practices.

The CRA also gets $38.7 million to expand its offshore compliance activities through the use of improved risk assessment systems and business intelligence, and to facilitate the hiring of additional auditors.

The anticipation is that the CRA will need these auditors to act on the new information they will be receiving as a part of the OECD/G20 Common Reporting Standard participation.

Another key tax issue relates to reassessment periods and non-residents of Canada to address a scenario where the CRA reassesses a taxpayer in order to reduce or eliminate a loss in a taxation year which results from a non-arm’s length transaction with a non-resident.  Currently, the CRA cannot reassess the taxation year to which that loss was carried back because the reassessment period has elapsed, but going forward, the CRA will have 6 years after the normal reassessment period to reassess the year to which the loss was carried back in such circumstances.

Another change impacts a scenario where a taxpayer contests a requirement for information (RFI) or an application for a compliance order – as this period will not be included when computing the time limit for the CRA to reassess.

This “stop-the-clock” rule is similar to the existing rule that applies for purposes of requirements for foreign-based information.

10. GST/HST

GST/HST is applicable on the fair market value of the management and administrative services provided by the general partner to an investment limited partnership where consideration becomes due or is paid before September 8, 2017.

GST/HST now applies to management and administrative services rendered by the general partner on or after September 8, 2017, unless GST/HST was charged by the general partner before that date.

The GST/HST is generally payable on the fair market value of management and administrative services in the tax year in which these services are rendered (however rules to calculate FMV, and what constitutes FMV were not provided at this time).

11. Excise – Cannabis Tax

A new excise duty framework for cannabis products under the Excise Act, 2001 applies to all products available for legal purchase, including fresh and dried cannabis, cannabis oils, and seeds and seedlings for home cultivation.

The cannabis taxation program will be administered by the federal government on behalf of most provincial and territorial governments on a coordinated basis. 75% of the taxation revenues from a combined $1 per gram / 10% of the price of the product, whichever is higher, excise duty rate will flow to participating provinces and territories, with the federal government receiving the remaining 25%.

12. Increased Funding to CRA and Tax Court of Canada

The budget provided money to the CRA and the Tax Court of Canada to:

  • $79 million over 5 years and then $15 million per year going forward in order to develop an electronic platform for processing trust returns;
  • $90.6 million over 5-years to help the CRA pursue domestic and international cases which have been identified as high-risk potential danger of loss through enhanced risk assessment systems;
  • $30 million over 5-years to enhance security measures aimed at better protecting the confidentiality of taxpayer information; and
  • $41.9 million over 5-year, and $9.3 million annually going forward to provide support for new front-line registry and judicial staff, most of whom are expected to support the Tax Court of Canada.

And so much more…

 

IRS Targets Crypto-Currency Exchange Coinbase and Wins!

A Popular cryptocurrency exchange, Coinbase, has been forced by a US court order to hand over a list of 13,000 of it’s customers’ names and assorted personal information to the Internal Revenue Service (IRS) so that the IRS can determine who has been reporting their Crypto-Currency transactions and to tax and penalize those who have not.

The link to the original article is here;

https://news.bitcoin.com/coinbase-compelled-by-irs-to-provide-13000-customers-information/

Coinbase, a San Francisco-based cryptocurrency exchange notified thousands of customers, to provide the IRS with “taxpayer ID, name, birth date, address, and historical transaction records for certain higher-transacting customers during the 2013-2015 period.”

While 13,000 is a lot, if you have used Crypto-Currencies in the US, or in Canada, you might want to get filing, and fast.

Apparently, Coinbase received a summons from the IRS in late 2016 asking for a wide range of records relating to approximately 500,000 Coinbase customers.  Coinbase fought this summons in court – not sure if they won and the 13,000 is the win or if that matter is still pending but the 13,000 is a different attempt by the IRS to gather information they are entitled to under the IRC.

Still shocking to us at inTAXicating is how few Canadian and US crypto enthusiasts had even bothered to address the tax issue.

Many on both sides of the border claims that both the IRS and the CRA have been really vague on how they plan to address Crypto-Currencies, however than cannot be further from the truth.

On March 25th, 2014, the IRS issuesd this release; https://www.irs.gov/newsroom/irs-virtual-currency-guidance; and

On March 17, 2015, the CRA issued a release about how the Canada Revenue Agency will be handing Crypto-Currencies and they have been on top of it with the most recent detailed release being January 18th, 2018.

Whether you believe in taxation or that taxation is theft – something brought in from the BNA Act of 1867, or there are privacy rights stemming from the 3rd Amendment in the US, the bottom line is this.

If you don’t report your interactions with these digital currencies, you are going to pay that tax plus penalties and interest.  Why give the government more than they are asking for?  Include the currencies on your tax return, pay the tax, and be fully compliant.

If you have failed to include your adventures in Crypto-Currencies on your tax returns, you are in trouble.  You need to contact inTAXicating and we can assist you in filing your returns to reflect those amounts.

Remember, the CRA’s Voluntary Disclosure Program is changing as of March 1st, 2018.  Once that loophile closes, it’s going to be very difficult to get a fair shake from the government.

Don’t wait, hoping there is going to be miracle court order or that the CRA or IRS will decide that they have enough taxes already.

File!

inTAXicating can be reached at info@intaxicating.ca to book an appointment.

Copy of Court Order;

Coinbase Compelled by IRS to Provide 13,000 Customers' Information
There’s plenty of misinformation regarding tax preparation and how to report digital currencies, however the CRA and IRS have been very clear.

If you have transacted publicly on any centralized exchanges such as Coinbase and are US or Canadian residents – and regardless of your opinion on the morality of tax – the IRS and the CRA have courts on their side and they can sentence you to jail.

 

CRA: Cannabis Taxation at a Glance

Beginning likely in 2020, the Government of Canada will begin to legalize, regulate, restrict and tax cannabis to keep it out of the hands of kids, and profits out of the hands of criminals.

The Government of Canada believes that the total of federal and provincial-territorial taxes on cannabis products should not exceed $1.00 per gram, or 10% of the producer’s sale price of a product, and that this tax room should be shared equally between the Federal government and the Provincial government.

The proposed federal excise duty rate would be 50 cents per gram of cannabis, or 5% of the producer’s sale price of that product.

An additional rate would apply for an agreeing province or territory.

The proposed duty would apply to all cannabis products available for legal sale, including fresh and dried cannabis, cannabis oils, as well as seeds and seedlings for home cultivation.

The rate will also apply to the sale of medical cannabis.

It is important to note that excise duties are not paid directly by consumers. Rather, they are paid by manufacturers.

Cannabis product sales will be taxable under the Goods and Services Tax/Harmonized Sales Tax (GST/HST), as is currently the case for medical cannabis, for example.

The following example, provided by the government of Canada, illustrates the final price paid by consumers at a combined rate of $1.00 per gram, or 10% of the sale price:

One gram of dried cannabis

Pre-duty price: $8.00

Excise duty (per gram): $1.00

Subtotal: $9.00

GST/HST: $1.17

Total: $10.17

60 ml bottle of cannabis oil

Pre-duty price: $130.00

Excise duty (%): $13.00

Subtotal: $143.00

GST/HST: $18.59

Total: $161.59

 

 

Canada Revenue Agency (CRA) Voluntary Disclosure Program (VDP) Changes March 1st, 2018.

The Canada Revenue Agency (CRA) have announced that effective March 1, 2018, changes will be made to the Voluntary Disclosures Program to narrow its eligibility criteria.

What is the Voluntary Disclosure Program (VDP)?

The VDP provides Canadians a second chance to change a tax return which has been previously filed with the Canada Revenue Agency (CRA), OR to file a return(s) which you should have filed with the CRA.

Your application under the VDP – if approved – allows you to file or amend a return without the CRA prosecuting you, or assessing penalties.

Who Can Apply?

Taxpayers!

Taxpayers can be;
• Individuals
• Employers
• Corporations
• Partnerships
• Trusts
• GST/HST registrant / claimants
• Registered exporter of softwood lumber products

You can apply, or you can have an authorized representative – like an accountant, or tax professional like inTAXicating, submit the application on your behalf.

How Many Times Can You Apply?

The CRA would prefer you use VDP once and stay up-to-date on filings from that point onwards, however should circumstances warrant it, you can apply again.

Conditions of a Valid Application

To qualify for relief, the application must:
• Be voluntary – You come to the CRA before the CRA gets to you.
• Be complete – You cannot file for one year, for example, you have to file everything and disclose everything.
• Penalty: Involve the application or potential application of a penalty and, for GST/HST applications, the application or potential application of a penalty or interest
• Time: Include information that is at least one year past due for income tax applications and, for GST/HST applications, at least one reporting period past due; and
• Include payment of the estimated tax owing.

The Process

Submit an application to the CRA, and if the CRA approves it, the returns in question are filed or amended and there is no penalties or fear of prosecution (unless you are engaged in criminal activities).

The CRA then expects you to pay the balance owing – or make arrangements to pay – because while there is no penalties, there is still interest accruing on the account.

* The above information applies until February 28, 2018.

The CRA will update their VDP guidelines as of March 1, 2018, so in order to be considered under the existing VDP, the CRA must receive your application, including your name, on or before February 28, 2018.

What Changes March 1st, 2018? 

On March 1, 2018, when the new VDP comes into effect, it narrows the eligibility criteria to access the Program and imposes additional conditions on applicants, making it more difficult for those who intentionally avoid their tax obligations to benefit from the VDP.

Income Tax Disclosures

With the changes to the program, two tracks will be created for income tax disclosures:

1. Limited Program

The Limited Program provides limited relief for applications that disclose non-compliance where the facts suggest that there is an element of intentional conduct on the part of the taxpayer or a closely related party.

Under the Limited Program, taxpayers will not be referred for criminal prosecution with respect to the disclosure and will not be charged gross negligence penalties, however, they will be charged other penalties and interest as applicable.

2. General Program

Under the General Program, taxpayers will not be charged penalties and will not be referred for criminal prosecution related to the information being disclosed. The CRA will provide partial interest relief for years preceding the three most recent years of returns required to be filed.

GST/HST, excise tax, excise duty, softwood lumber products export charge and air travellers security charge disclosures

For GST/HST, excise tax, excise duty, softwood lumber products export charge and air travellers security charge disclosures, three categories will be created:

1. Wash Transactions

Wash transactions are generally transactions where a supplier has failed to charge and collect GST/HST from a registrant entitled to a full input tax credit. This category provides relief only for applications involving GST/HST “wash transactions” that are eligible for a reduction of penalty and interest under the policy set out in GST/HST Memorandum 16.3.1, Reduction of Penalty and Interest in Wash Transaction Situations.

Registrants will not be charged penalties nor interest and will not be referred for criminal prosecution related to the information being disclosed.

A registrant must now disclose information on any non-compliance during the four years before the application is filed.

2. Limited Program

This category provides limited relief for applications that disclose non-compliance where the facts suggest that there is an element of intentional conduct on the part of the registrant or a closely related party.

Under the Limited Program, registrants will not be referred for criminal prosecution with respect to the disclosure and will not be charged a gross negligence penalty, however, they will be charged other penalties and interest as applicable.

3. General Program

All of cases fall under the General Program where registrants will not be charged penalties and will not be referred for criminal prosecution related to the information being disclosed.

The CRA will provide partial interest relief and a registrant must now disclose information on any non-compliance during the four years before the application is filed.

How to Determine if a Disclosure Falls under the General or Limited Program?

For both income tax and GST/HST disclosures, the determination of whether an application should be processed under the General or Limited Program will be made on a case-by-case basis and in doing so, the CRA may consider a number of factors, including but not limited to:
• The dollar amounts involved;
• The number of years of non-compliance; and
• The sophistication of the taxpayer/registrant.

Other Significant Changes to the VDP

1. Payment

Payment of estimated taxes owing: Payment of the estimated taxes owing will be required as a condition to qualify for the program (When a taxpayer does not have the ability to make payment at the time of filing the VDP application, they may request to be considered for a payment arrangement.)

2. Anonymous Disclosures Eliminated

The “no-names” disclosure method has been eliminated and replaced by a new pre-disclosure discussion service.

The process for taxpayers and authorized representatives to make disclosures on a no-names basis has been eliminated. Under the new “pre-disclosure discussion” service, taxpayers or their authorized representatives can have a conversation with a CRA official on an anonymous basis, but that discussion does not constitute acceptance into the VDP.

3. Large Corporations

Generally, applications by corporations with gross revenue in excess of $250 million in at least two of their last five taxation years, and any related entities, will be considered under the Limited Program.

4. Transfer-Pricing

Due to the complexity of transfer pricing issues, applications will now be referred to a specialized Transfer Pricing Review Committee, which will review the applications instead of the VDP.

For efficiency, taxpayers may send their applications directly to this committee.

5. Review by Specialists

Applications involving complex issues or large dollar amounts will be reviewed for completeness by the relevant specialist from the program area prior to being accepted.

6. Disclosure of Advisors

The name of the advisor who assisted with the non-compliance should now be included in the application.

7. Cancellation of Previous Relief

The new VDP regulations provide the CRA with the ability to cancel relief which was previous provided to a taxpayer if it is subsequently discovered that a taxpayer’s application was not complete due to a misrepresentation.

8. Mandatory Waiver of Rights of Objection and Appeal

Under the Limited Program, participants will have to sign a waiver of their right to object and appeal in relation to the specific issue disclosed.

 

If you need assistance with a Voluntary Disclosure – at any time – we can help!

Email: info@intaxicating.ca

On the phone: 416.833.1581 (If you are outside of Toronto, and would like to speak to us live, please email us, and we will gladly call you at your convenience)

On our website: http://www.intaxicating.ca (Portal coming soon – currently under construction).

Statute of Limitations for Tax Debt: Canada

Statute of Limitations for CRA Debts – Truth vs Myth

There is a common belief that there is a statute of limitations on tax debts and that taxpayers can ride out these periods and ultimately pay no taxes.  Google it, and you will see all kinds of information out there, but it’s the Canada Revenue Agencies information which matters the most.

A Collections Limitation Period (CLP) is the time in which the Canada Revenue Agency (CRA) can begin actions to collect a tax debt.

Myth: After the CRA issues a notice of assessment, it has either 6 years or 10 years to collect the debt. If you don’t pay what you owe within that time, the CRA can no longer collect the debt.

Fact: Each tax debt has a 6 or 10 year collections limitation period (depending on the tax) and the limitation period can be restarted or extended by the CRA when certain events occur.  At that point, the total amount of time that the CRA has to collect the debt will be longer than 6 or 10 years.

Even after the collections limitation period ends, you can still have a tax debt and interest will continue to accrue until the tax debt is paid in full.

 

Start of the collections limitation period

The limitation period starts on the date that a notice of assessment or reassessment is sent, or 90 days after that date, depending on the type of tax debt.

 

Types of tax debt

The collections limitation period start date and duration will be different depending on the type of tax debt. Some tax debts are subject to collections restrictions, while others are not.

The following are some of the most common types of tax debt:

 

Individual (T1)

The Collections Limitation Period (CLP) starts on the 91st day after the CRA issues the notice of assessment – unless there is an objection filed.  There is a 10-year CLP on T1 debts which can be re-started and extended by the CRA.

 

Corporate (T2)

The CLP starts on the 91st day after a notice of assessment or reassessment is sent unless a NOA or appeal has been filed.  The 10-year CLP applies, however the CLP can be restarted and extended.

 

Large Corporations (as defined by the Income Tax Act)

The CLP starts on the 91st day after a NOA or reassessment is sent.   The 10-year CLP applies, however, the CLP can be restarted and extended.

This type of tax debt is subject to a 90-day collection restriction for the period after a notice of assessment or reassessment is sent, however, the CRA can act to collect 50% of the amount owing by a large corporation as soon as a notice of assessment or reassessment is sent.  The CRA can start collection action on the 91st day for the remaining 50% of the amounts owed by a large corporation, unless a notice of objection or appeal is filed.

 

Payroll (T4) Deductions

The CLP starts the day after the Notice of Assessment is sent.  There is a 6-year collections limitation period, however this CLP can be restarted and extended at any time.

NOTE: There is no collections restriction on Trust funds, so the CRA can begin collections actions the day after a Notice of Assessment has been sent.

NOTE: If a Notice of Objection or an appeal has been filed, the CRA can continue to collect the debt(s)

 

GST/HST

The Collections Limitation Period starts the day after the Notice of Assessment is sent and while the 10-year CLP applies, it can be re-started and extended at any time.

NOTE: Additionally, since GST/HST are also Trust Funds (funds held in trust for the Crown), there is no collection restriction once the Notice of Assessment has been sent.

NOTE: If a Notice of Objection or appeal is filed, the CRA can continue to collect the debt(s).

 

Collection Restriction Period

For tax debts subject to collection restrictions, the CRA cannot start collection action:

  • during the 90 days after a notice of assessment or reassessment is sent
  • during the time that you dispute your debt by filing a notice of objection or appeal

However, if the CRA determines that it might not be able to collect a tax debt because of collection restrictions, it can apply to the Federal Court (Canada) for a jeopardy order.  If granted, this order will let the CRA take collection action immediately.

 

Restart of the collections limitation period

The limitation period is restarted when either you or the CRA takes certain actions. Tax debts subject to the 6-year limitation period are restarted for another 6 years and tax debts subject to the 10-year limitation are restarted for another 10 years.

The following are examples of actions that will restart the collections limitation period. This is not a complete list.

 

Actions you initiate

The collections limitation period will restart when you:

  • Make a voluntary payment
  • Write a letter to the CRA proposing a payment arrangement
  • Offer to provide security instead of paying the amount owed
  • Make a written request for a reassessment of an amount assessed
  • File a notice of objection with the CRA
  • File an appeal with the Tax Court of Canada
  • Ask the CRA if you can make pre-authorized debt payments

 

Actions the CRA initiates

The CRA takes various actions to collect tax debts when taxpayers don’t make voluntary payments.

The collections limitation period will restart when the CRA:

  • Issues a garnishment or statutory set-off to collect an outstanding tax debt when you don’t make voluntary payments
  • Applies a refundable credit to your tax debt and notifies you by sending a letter or Statement Of Account
  • Issues a NOA or reassessment against a third party for amounts you owe
  • Certifies your tax debt in the Federal Court of Canada
  • Initiates seizure and sale action to collect your outstanding tax debt

 

Extension of the collections limitation period

The events listed below can extend the collections limitation period. When this happens, the clock stops running on the date that an event begins and it will not run during the event.

This has the effect of stalling the collections limitation period.

When the event is completed, the collections limitation period resumes where it left off.

Other events can then restart the limitation period.  It will end when the 6‑year or 10-year limit has been reached, even if it took more years than that to reach that limit if you include the stalled time.

The following events can extend the collections limitation period:

  • You file an assignment (bankruptcy or proposal) under the BIA, CCAA or FDMA.
  • The CRA accepts security instead of payment of a tax debt.
  • You become a non-resident of Canada after the CRA issues a NOA or reassessment.
  • The CRA postpones collection action without accepting security for an objected or appealed GST/HST debt. This applies only to GST/HST tax debts assessed under the Excise Tax Act.
  • You file a Notice of Objection with the CRA. This will extend the limitation period only for tax debts subject to collection restrictions.
  • You file an appeal with the Tax Court of Canada. This will extend the limitation period only for tax debts subject to collection restrictions.

 

NOTE: Filing a Notice of Objection with the CRA or an appeal with the Tax Court of Canada will restart the collections limitation period for all types of tax debts because both of these actions are considered acknowledgments of debt.

Similarly, if your tax debt is subject to collection restrictions, filing an objection or appeal will extend the collections limitation period.

 

End of the collections limitation period

Once the period ends, the CRA cannot take any further action to collect the debt, however, the tax debt still exists and you can make voluntary payments.  Voluntary payments you make after the limitation period ends will not restart it.

Full Disclosure Alert: Know Who You Are Dealing With!!

I had the most interesting comment sent to me today, by someone who used to work at the CRA.

She noticed on my blog, and on social media, that I “claimed” to have been a “Former CRA Employee of the Year” and she, having worked at the CRA, was not familiar with the award.

She questioned my legitimacy!

I love it.

It reminded me that I had not finished updating the “About Us” section on the inTAXicating website, and in doing so, I will include the details of this honour.

I was nominated for the “Most Valuable Player” award – which was the wording they used for the Employee of the Year – by a colleague of mine in 2002.

The nomination was his acknowledgement that I went way above and beyond the scope of my employment not only professionally but personally to support my colleagues, staff and to represent the CRA in a positive manner.

This was before my MBA, and before children.

I had recently started a Mentoring Program for the Collections division at our CRA office and the program was so successful, that we began running it through the rest of the departments in our building and in other Tax Services Offices. I was also responsible for overseeing the Write Off inventory, managing a New Intake collections / compliance team, heavily into training staff and had recently taken over the Director’s Liability inventory and was in the process of cleaning that up.

Personally, I had just gotten married, had been right in the middle of taking accounting courses towards my CGA designation and was volunteering my time with a Big Brothers and Big Sisters Program here in Toronto.

I was also on the board of the Government of Canada Charitable Workplace Campaign, and in the role, I went to each and every employee in the Revenue Collections division in our office and spoke to them one-on-one about the program and their contribution.  They donated record amounts.

I had several inventories of business collections accounts, and when the office renovated floors and we had to move staff between floors, I was the coordinator.  I was also the employee who received the sensitive issues from the Director’s Office to hand, with care.

I was busy.  Could have been much busier, but certainly I was fully engaged.

I was nominated and both myself and the nominator received recognition for the honour.

I was deeply honoured and appreciative.

Then I won.

I was shocked.

I drove to Niagara Falls, accepted the award from then Commissioner of the Canada Revenue Agency Ruby Howard, and I drove back home to attend class later that evening.

The following day, the first person I met when I arrived into the building greeted me like this;

“Hey Warren. Congratulations on the award. I just don’t feel that you deserved it.”

“Thank you”, I replied to him. “Neither do I.”

“Sorry, that might have been harsh”, he said to me.

“I’d rather you speak the truth, than keep that from me” I said.

“You know what”, he said. “Maybe I just don’t know you well, enough, but time will tell.”

Just a year before this man passed away from a long battle with cancer, he said leaning over the cubicle right beside me where he sat; “You know what, Warren. I’m surprised you only won one of those things.”

That comment from one of the smartest people the CRA had ever employed, meant a lot to me.  Not many people got along with this gentleman because he was all business, all the time, but I deeply respected him and I let him know it.  He earned that respect from everyone, but few knew how to pass it along to him.

But, getting back to my “claim”…

I decided to attach the picture of my award;

Me accepting the award in Niagara Falls;

My certificate of my 10-year’s of service to the CRA;

…and a word of advice for anyone who has tax problems…

Know who you are dealing with. Understand their expertise in the field you are looking for expertise in.

What makes inTAXicating so successful is that Taxpayers, business owners and other professionals read my words, Google me, check out my LinkedIn profile and determine that I know my stuff.

Which I do.

Then they reach out.

I expect each and everyone of you to do the same.  Read some posts, Google me. Check out my LinkedIn profile and reach out for tax help, to have questions answered, to learn more about the CRA, or to help your clients so you can help them.

Email: info@intaxicating.ca