Happy Canada Day! Don’t Forget About Taxation!

Happy Canada Day, Canada.  You don’t look a day over 150-years-old!

Happy 150th Birthday Canada!

There are so many things to be thankful of this Canada Day, beginning with Tim Horton’s and hockey and ending with socialized medicine and peace.  But in between there is a whole lot of taxation.  Taxes you pay which go to build new arenas, which pay for medicine, which support the troops who keep us safe, and fund programs which integrates youth of all backgrounds, races, religions and income levels together in order to keep violence as low as possible.

These are the taxes we cannot avoid paying – unless we stop spending – and they are the consumption taxes (GST/HST), gas tax, liquor tax, and many more, and there are taxes on wealth, like personal income tax, as well as Corporate taxes.  There are also payroll taxes and any other fee, levy or revenue tool (all taxes but given a different name).

For the most part, these taxes are unavoidable, and as Canadians we pay them knowing that money goes back into the economy and helps people.

What I do not understand, however, is why people pay more taxes than they are required to pay, or can afford to pay, and these taxes are viewed by people in the Canada Revenue Agency (CRA) as a “stupid” or “lazy” tax and what they are referring to are penalties and interest.

It is my belief that no one should pay any penalties or interest.  Ever.  Why give the CRA more money than they are seeking through the Income Tax Act or the Excise Tax Act.

If you work with an accountant or tax preparer, there should be no reason for late filings or late remittances, or for missing out on key deductions because that representative should know you, and the industry you work in, and be able to keep you current and free of penalties and interest.

But there are many legitimate reasons why people file late, and incur penalties and watch interest accrue on their tax accounts, and these people are then hammered by the CRA and need help, which is why I created inTAXicating.  My goal here is to help you get out of the troubles that you have gotten into and by help, I mean rehabilitate you and get you current on your filings, help you reduce your balance owing, apply for taxpayer relief (fairness) if it applies to you, and get you on a remitting and reporting schedule which ensures you are never late again.

Too many firms out there have watered down the “Tax Solution” process to the point where you pay them a ton of money, they “fix” your issue and then another one pops up, all because they are experts in taking money and not experts in resolving CRA debt issues.

The best part about working with inTAXicating is having the expertise where you need it.  If your problem is with collections or enforcement then you need the person who worked in that area, and trained and managed the collectors and who can tell you the CRA’s next move before they can.

Being audited?  Recently assessed?  Don’t understand a letter?  Balance looks too high?

There is no tax situation too scary, or too difficult to figure out.  Business taxes, personal taxes, GST/HST, payroll, T2’s, provincial, federal, liens, RTP’s, appeals, VDP… We’ve seen it all, handled it all, and have been successful with it all.

Just because it’s July 1st and summertime doesn’t mean the CRA stops working too.  In fact, it’s the opposite.  With more time on their hands, the CRA’s collections staff have the time to thoroughly research tax files which have balances on them to see what they can do to ge the account paid in full.

My experience working in the CRA for almost 11-years, tells me that the majority of in depth investigations occurs during the summer months.

Make summertime the best time to resolve that nagging tax problem.

If you have a tax problem, we have a tax solution.

You can also find us on twitter @inTAXicating or on Facebook @inTAXicating

Or email us: info@intaxicating.ca

 

What are you waiting for?

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“New” CRA Powers are Not so New after all! Unless…

Recent radio advertising and newspaper or online articles would have you believe that the CRA has been ramping up staff in order to break down your door in the middle of the night and arrest you for tax fraud.

Deep down inside you knew that you should have opened a BN number and GST/HST account for your child\s lemonade stand because even though they were significantly under the $30,000 sales threshold, if registered, you could have claimed the Input Tax Credits – but you didn’t and the CRA wants their money!

You also know that if you had a question, the CRA call centre were going to mislead you, or lie to you so that you would be forced to pay even more money.

You also know that you might need help for a tax accountant, tax lawyer, tax broker, tax solutions firm, or tax audit specialist… but you cannot choose because the different names must mean they do different things and you don’t know which category you fall into, and … the CRA are so coming to get you… now!

(Is that rustling in the bushes in front of my house?)

spyingWell all of these new powers and the threats that they are going to break-down your door and arrest you on the spot are not really true.

You only have to fear the CRA breaking down your door (really the RCMP, but I’m sure the CRA would be there somewhere along the way) if you have done something wrong.  Very wrong.  Criminally wrong.

You should be concerned if the CRA knows you’ve done something criminally wrong, or have been involved in terrorist financing or activity because they’ll pass that along to the police.

The Canada Revenue Agency gained the little-noticed new authority, which does not require a judicial warrant, through an amendment tucked into the government’s most recent budget bill.

Previously, confidentiality provisions in the law prevented the CRA from handing information about suspected wrongdoing, on its own initiative, to law enforcement.

The exception was information that pointed to tax-related crimes.

The new provisions apply to offences including breaking and entering, vehicle theft, arson, corruption and kidnapping and in return, the CRA can now receive information from local authorities about any offence with a minimum prison term, or one with a maximum sentence of 14 years.

The list of offences is broad and is a significant shift in confidentiality policy allowing the CRA to pass along information to law authorities without a court-ordered warrant, even when the alleged crime(s) have nothing to do with taxes.

Interim procedures for administering the new powers were issued to all CRA employees in June 2016 not too long after the legislation received royal assent.

The intended use of this new tool, is that an exchange should occur when an employee gathers information in the course of their regular duties.

This information exchange was intended to be one-way and would be closely controlled through a set of strict criteria.

As an aside, it would have been nice to know who might be carrying on criminal activity, when I was working at the CRA and went to visit a business to determine why they stopped filing GST returns, only to learn that they were conducting illegal activities and was physically threatened before getting the heck out of there.

The following day the RCMP showed up, cleaned out the place and arrested the operators.

I never did get my outstanding GST returns, however, which could have been prosecuted as a criminal offense (but was not).

All potential referrals to police will be vetted by the agency’s criminal investigations personnel and must be approved by the assistant commissioner of the department’s compliance programs branch, CRA has reported.

The key points to remember are this;

  1. If you happen to have partaken in a criminal activity, you might not want to disclose that to the CRA collector.
  2. Make sure to stay compliant!  File up to date and don’t give the CRA reasons for looking for stuff.
  3. Take all of the tax-related advertising with a grain of salt.  Their intention is to scare you and force you to drop a ton of cash at their business.  Instead, I recommend you do your research, ask questions and get the solution that fits your tax problem.
  4. If you’re not sure… Ask.  Then use your judgement.

 

Tax Freedom Day, 2017. Working For Ourselves Now… Theoretically.

June 9, 2017 is Tax Freedom Day!

What is Tax Freedom Day?

Does it really exist?

What might it mean to me?

In their annual report, the Fraser Institute, a Vancouver-based think-tank added up all forms of taxation — from income and sales taxes, to more hidden costs such as gasoline taxes, carbon taxes, tobacco and alcohol taxes, municipal property taxes, payroll taxes and even CPP and EI premiums — to come up with a figure for the overall tax burden for Canadian families, and this year, they have determined that the average Canadian family with two or more people will earn $108,674 and pay 43.4% in taxes.

Based on the Fraser Institute math, 100% of income earned thus far in 2017 has been gobbled up by government in taxes, and only now are you working for yourself until the end of the year.

Last year, in 2016, it came a day earlier, on June 8th and because of variances in all types of taxes in different provinces, Tax Freedom Day differs across the country, ranging from May 21st in Alberta to June 25th in Newfoundland and Labrador.

One of the reasons for the extra day is to account for the fact that Canadians’ tax bill has risen, on average, by $1,126 this year, according to the Fraser Institute. Of that increase, $542, came from higher income taxes, but sales taxes (up $311) and other energy-related taxes (up $204) also took a bigger bite while liquor, tobacco, amusement, and other excise taxes, payroll and health taxes, and import duties all decreased.

The Ottawa-based Broadbent Institute, however, disputes the math behind the annual Fraser Institute report, because the Fraser Institutes uses “average” tax rates instead of median tax rates.

To come up with its “average” tax rates, the Fraser Institute simply adds up the amount of cash income earned by a taxpayer, and then divides that by the number of people. It then takes “outliers” and excludes those extremes from the calculations.

The Broadbent Institute said that skews the numbers in a certain way, and a better way than the average would be to use the median — the exact mid-point between the top and bottom and the rationale behind this surrounds the fact that the average income of Canada will always be higher than the median because of the small number of very high-income earners in Canada, which skews the average income amount higher.

Adding up only federal and provincial income taxes, the “average” Canadian in prime working years (between 25 – 54 years of age) earned $62,600 last year, and paid $12,000 in taxes, or around 19%, according to tax filings. Using the Broadbent method of calculation, the median for that group earned $50,500 last year and paid $7,000, or 14%, in income taxes.

Another main difference is that the figures used by Fraser Institute report doesn’t just include income taxes. It tabulates all sorts of fees that taxpayers don’t directly pay, such as payroll taxes and resource royalties that companies pay when they extract things like oil, minerals and timber.

It also only considers what it calls “cash income” on the other side of the ledger. That excludes employee benefits, investment income from pension plans and other forms of cash income.

The Fraser report also takes into consideration indirect costs like payroll taxes and other taxes which businesses pay in their calculations because even though businesses pay these taxes directly, the cost of business taxation is passed on to Canadians.

So now that we’re working for ourselves, let’s push all levels of government to treat our tax dollars more wisely, and let’s earn as much as possible (while continuing to pay our taxes on time!)

Your Canada Revenue Agency (CRA) Tax Collections Questions Answered

Here are the answers to the most frequently asked CRA Tax collections questions from the past weekend:IMG_7817

  1. Can you bribe a CRA officer in Canada?

Answer: NO.

First off, bribing a CRA officer is a criminal offense and you could quickly wind up with the RCMP at your door, or under investigation, but more realistically, the staff at the CRA tend to be lifelong civil servants and one of the great benefits of working in the civil service is the great pension.  Few civil servants are willing to even entertain the thought of giving up their pensions, let alone going to jail for someone when they have hundreds of other people to collect from.

2.   Is there GST/HST on a lien?

Answer: Let’s presume that the question is asking if there is additional GST / HST on a lien, and the lien has been registered by the Canada Revenue Agency (CRA).  In that scenario, the answer is no.

The CRA would register a lien for unpaid or unfiled (and assessed) GST / HST, and the amount used for the lien is the amount owing on the day it has been registered in Federal Court.  This fact is important because from that day forth, interest continues to accrue and accumulate on the tax account with the CRA, but the lien only reflects the amount owing at a point in time.

Often, a lien will get paid out and then the CRA’s computer system kicks out an update Notice of Assessment with an additional balance owing  and taxpayers are puzzled having just paid off a lien.

They did pay the lien.

Now they pay the rest of the balance owing.

3.   Where can I get the truth about Voluntary Disclosure?

Answer: From the CRA website, of course.  The link to the VDP section of their site is here;  http://www.cra-arc.gc.ca/voluntarydisclosures/

4.   Can I claim mileage drive to and from work at the CRA?

Answer: I hope you enjoy your career at the CRA and are not an auditor, because you should know this answer!  You cannot claim mileage driving to and from work.

From the CRA website; http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/229/slry/mtrvhcl-eng.html

“If you use a motor vehicle for both employment and personal use, you can deduct only the percentage of expenses related to earning income. To support the amount you can deduct, keep a record of both the total kilometres you drove and the kilometres you drove to earn employment income. We consider driving back and forth between home and work as personal use.”

Get Ready to File your Personal Income Tax Return (T1). Make Sure You Have All Your Slips Accounted For!

Are you getting ready to file your Personal Tax (T1) Return here in Canada to the Canada Revenue Agency (CRA)?

Are you chomping at the bit to get your refund?

Before you push forward and get that return in, make sure to check that you have received all the tax slips you should be getting?

Then check again.

If you forget a tax slip – T3, T5, T4, T4A, etc – the CRA does not accept the argument that you just “forgot it”, but rather they believe that you have willingly omitted the slip in order to reduce the amount of income that you are reporting, so you end up paying less taxes.

The penalty for missing slips can be quite steep.

Forget to include slips year over year and the penalty increases.

At inTAXicating, we encourage our clients to keep track of slips expected and slips received through a spreadsheet based on the slips received in the previous year, and any transactions in the current year which will result in the generating of a tax slip.

In the inTAXicating Personal Tax Spreadsheet, we go further by identifying which member of the family the slip belongs to, when it was received the previous year and which institution produced the slip.

Remember that slips produced by institutions are also sent to the Canada Revenue Agency (CRA) so they know what you should be filing before you do unless you keep track.

Then take this list, and staple it to a box or file folder which is kept in the house / place of business for all potential tax-related materials for the year.  At tax time, it’s an easy checklist to make sure all is in order and that when filing, everything is included.

If, however, you have forgotten to include a slip, the Canada Revenue Agency (CRA) will eventually use their copy of the slip notify and re-assess you if you have not had the time to amend your return.

If you don’t get to the CRA first, the next thing you know, you likely will have a balance owing and along with the penalty for missing the slip, the debt is accruing interest.  It can easily escalate from there!

A little organization will reduce the amount of penalties and interest paid to the CRA.  As the Tax Manager for Computershare Trust Company of Canada / Computershare Investor Services, I was responsible for the preparation, filing and submission of tax slips to the millions of investors Computershare kept track of, so I understand more than anyone the importance of getting slips out to the holders on time, and accurately, and then to the government on time and without penalty.

So here is a copy of my list of slips, their mailing date from the provider.

RRSP – If you were one of the many who used the March 1st deadline to make your contribution for the previous year, then you would be receiving that slips beginning March 15th.  All other RRSP contributions which were made prior to the 60-day extended period saw their tax slips mailed beginning at the turn of the calendar.  They are T4RSP slips and RL2’s for residents of Quebec.

T5 / RL3 and NR4’s begin to get mailed around January 15th.

T4RIF / RL2 withdrawals from a RRIF, are mailed the 3rd week of February.

T5/RL3 for investment interest income coming from a mutual fund are mailed the 3rd week of February.

T3 / RL16 reporting dividend income from mutual funds are mailed by the 3rd week of February.

Receipt of contribution from an estate rolling over funds to a spouse produce a T4RSP / T4RIF / RL2 – issued for receipt of contributions from an estate rolling over funds to a spouse – sent  out the first week in February

T4A / RL1 are issued for RESP withdrawals and are produced and mailed the first week in February.

NR4’s showing income for non-residents of Canada are mailed the 3rd week in February.

If during the year you received Employment Insurance (EI), Old Age Security (OAS) or Canada Pension Plan (CPP) payments, you can follow this 3-step process from the government website to make sure everything is in order and get your tax slips online directly from Service Canada.

Happy filing.

inTAXicating Tax Services for all your tax needs and specializing in providing solutions to your tax problems.

info@intaxicating.ca