CRA to finally accept payments via Interac Online

Monday 5 October 2009

 

The Canada Revenue Agency (CRA) has integrated Interac Online, an internet payment method which enables Canadians to make income tax payments directly from their bank accounts, without disclosing personal financial data.

As a result of the initiative, starting October 5th 2009, taxpayers and businesses will be able to pay online for various types of taxes, including income taxes, corporate taxes, payroll taxes, and GST, as well as make one-time payments and instalments.  Interac Online works with existing online banking services of participating Canadian financial institutions.

Public Works and Government Services Canada, which establishes banking services for the Government of Canada, has made it possible for the CRA to implement this new service.

Finally!

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CRA employees steal $300,000 in refunds from Canadian Taxpayers

The Canada Revenue Agency’s (CRA) credibility is reeling after an Access to Information (ATIP) Probe revealed that 2 senior employees in the Debt Management division were found to have been stealing from Canadian Taxpayers.

This massive fraud was detected in 2008 and had been going on for almost 8 years in both cases, which shows that it was very detailed and well thought out because no one knew about it for such a significant period of time.

At the time this fraud was brought to light, there was a belief that it further implicated the lack of quality management inside the CRA – that it’s just not up to par with the responsibilities they are required to perform.  With access to people SIN numbers, and the ability to move billions of dollars annually, the current crop of team leaders, managers and all of senior management are shown yet again to lack the competency to properly manage staff and protect the interests of Canadian taxpayers.

What makes this fraud even more appalling is that while uncovered in 2008, the CRA kept news of it from going public for more than a year, until the facts were released through a request under access-to-information law.

In the one case, a veteran male CRA employee routed approximately $300,000 generated from illegitimate returns into his bank accounts. In the other case, a veteran female employee defrauded the Canadian public of approximately $100,000 through manipulating their systems into issuing refunds and payments to accounts she had set up and controlled for this purpose.

On September 16th, 2009, the CRA refused to name the fraudsters or reveal whether they were fired or charged and convicted, saying that to identify them would violate “privacy laws”.  The CRA also refuse to confirm or deny that any or all of the stolen monies were recovered after the fraud was discovered in 2008.  CRA spokeswoman Caitlin Workman did, however, reveal that “They no longer work here,” she said.  She also dismissed the notion that this fraud would erode the publics’ credibility in the CRA and that these two individuals actions an anomaly, “We have close to 45,000 employees here, and they deal with millions of tax and benefit files on a daily basis. And here we are talking about two individuals.  Yes, we take it very seriously, but it should also be put in perspective.”  Ms. Workman said internal fraud of this magnitude is very infrequent, “I don’t have any numbers for you but they are very rare.”

The Crime

The male employee took more than $300,000 by routing bogus refunds and related Canada Child Tax Benefit and GST credit payments to his personal accounts, the ATIP documents revealed.  “For the last eight years, at least, he had filed tax returns and claimed [benefits and credits] for individuals he did not know,” the Internal Audit investigation revealed.  “Based on the information gained and the list of social insurance numbers found at his workstation, it is reasonable to believe that [he] may have had a role to play in the issuance of illegitimate refunds on more than 50 accounts.”

The female CRA employee, prepared and filed hundreds of illegitimate returns, ensuring the tax refunds and goods and services tax credits were routed to her own bank accounts.

This was made public through access-to-information requests made by researcher Ken Rubin.

An important note is that anyone is entitled to make an ATIP request into their own personal tax information at any time.

Internally, this fraud was brought to light after other CRA employees became suspicious when they tried to verify some of the claims and could not reach the taxpayers in question.  The ATIP request found internal documents stating; “After reviewing the motor vehicle records and conducting credit bureau checks … [a staffer] was unable to determine the whereabouts of the taxpayers involved and could not establish whether or not they actually existed.”

Where it appears that CRA management failed the Canadian public the most is that the internal investigation turned up that both employees had made thousands of unauthorized searches into taxpayers’ accounts, including gaining access to their own files, and members of their family.

Unauthorized access is the most severe offense at the CRA, a current employee who did not want to be named stated that, “We are required every year to sign a document stating that we will not access information that does not directly relate to our work-load and for every account we enter, we are required to fully diarize the reasons for accessing it.  We are told that if we access information that we should not be accessing, we will have our access suspended immediately pending investigation and if found guilty, suspended or fired”.  There is no way that “thousands” of an authorized accesses should have been allowed.  It just goes to show that management let down the Canadian public by not knowing what employees are doing on a daily basis, or for allowing these accesses to occur without punishment.

It might come down to the fact that these (now former) employees were part of the “old boys network” and that their transgression were tolerated until it was brought to the attention of someone senior at the CRA who would not let it occur anymore.  The contact at the CRA stated that there are others who have been suspected of carrying out similar frauds who still are employed by the CRA including putting themselves on the payroll of companies they are auditing, or by accessing information of friends, colleagues or even staff their manage.

The bottom line here is this… Your information is safe at the CRA, and the CRA employees take privacy and security extremely seriously. There are significant consequences relating to access to information which can result in suspension or termination.  Every time there is a breach, the CRA immediately steps up and puts plans and procedures in place to make sure it never happens again.

So before you start bitching about the CRA, and about taxes – which is your right – make sure you take care of your own backyard and file your taxes on time, pay your taxes, and don’t carry a balance owing at the CRA.

CRA Filing changes coming down the pipe… Potentially…

A couple items are coming down the pipeline at the CRA – so say my sources in Headquarters in Ottawa.  Since They are a couple years off at best, here are the main 2 which will have a significant impact on the general public, especially in industries where there is a lot of filing of slips and returns to be done. 

These items were announced in the 2009 budget on January 27, 2009.

1) Mandatory Electronic Filing for Information Returns – The CRA is tired of getting paper, loads and loads of paper which they then haev to key into their systems which is why they began converting systems about 10 years ago, so they could accomodate the vast amounts of informatin tehy expect to be receiving electronically.

Yes, a lot can be filed with the CRA electronically, on CD rom, or directly through the website, but going forward the CRA will charge a penalty to those filing in any way other than electronically through their website or via XML filing.  A smart move!

2) The CRA is in the process of developing a Canadian equivalent to the US W8 / W9 forms which require residents and non-residets of the US o complete valid forms and submit them to transfer agents in order to qualify for a reduced amount of tax withholding, if applicable. 

From what I’m told these forms will go hand in hand with the NR4 form and will be a Canadian version, so light on the requirements for now, but used by the CRA going forward.    Actually, my sources tell me that these forms will only need to be completed by people whose actual residential address is unknown since the CRA uses that address (domicile) for determining the treaty rate.

Sounds like good times are coming…  Tell you friends.

IRS Qualified Intermediary (QI) – Know Your Client Rules

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

List of Approved Know-Your-Client Rules

Revenue Procedure 2000-12 states that the IRS will not enter into a qualified intermediary (QI) withholding agreement that provides for the use of documentary evidence obtained under a country’s know-your-customer rules if it has not received the know-your-customer practices and procedures for opening accounts and responses to 18 specific questions listed in the revenue procedure.This document lists those countries that have submitted know-your-customer rules and those rules have been approved.The QI agreement contains an attachment that lists the specific types of know-your-customer documentary evidence for each country that is sufficient for purposes of the QI.  The IRS is working together with the organizations that have submitted acceptable know-your-customer rules to develop standardized attachments.  The attachments can be seen here as soon as they are available.

If a country is on the approved list, entities and branches located in that country may submit their QI applications. Once a specific attachment has been developed for a particular country, the IRS will associate the attachment with the QI agreement it sends for signature. A QI may suggest amendments to the attachment, but departures from the standardized attachment may delay processing of an application.

To determine whether the know-your-customer rules that have been submitted to the IRS cover a particular QI applicant, the applicant should look to the specific country attachment. For example, in some countries, different rules apply to banks and brokers. A QI applicant that is a bank or a broker should verify that the know-your-customer rules that have been submitted cover all the rules applicable to that applicant.

For a list of countries, follow this URL: http://www.irs.gov/businesses/international/article/0,,id=96618,00.html

In-TAX-icating

In-TAX-icating.

Definition:

a: To excite or stupefy by taxation to the point where physical and mental control is markedly diminished

b: to excite or elate to the point of enthusiasm or frenzy… about taxation.

Passionate about Taxation.  Passionate about helping you!

Could a Canadian FATCA be in the works?

Since this case broke in February, governments around the world have been investigating the possibility that their citizens have offshore accounts set up mainly to avoid paying taxes.  Germany, which as of late 2008, is leading the international crackdown on tax evaders, has reportedly collected up to 250 million euros from more than 200 tax evaders who have turned themselves in, and  from 330 citizens who wrongly believed they were on the list of accounts stolen from LGT Group (the largest family-owned private wealth and asset manager in Europe, owned by the Prince of Liechtenstein and thought by many to be the factor behind the US crackdown on tax evasion through their FATCA legislation.

When prompted for a comment regarding Canadians, the CRA refuses to comment.

The CRA would not even throw the press a bone by offering how many Canadians are involved, if the CRA is investigating, and if the CRA would accept voluntary disclosure from those involved in order to help them come clean without the fear of penalties and / or prosecution.

One can wonder if the silence is a result of a crack team of CRA staff who have known about and are working on resolving the Canadians attached to this list, or whether this whole situation came out of left field and the CRA is scrambling to get more information before they can respond publicly.

For those of you who are unaware, this came to light when in February when a former LGT computer technician name Heinrich Kieber stole and sold account information of about 1,400 wealthy clients to the German foreign intelligence service, the Bundesnachrichtendienst.  Germany then shared the data with other countries which triggered an international crackdown on tax evasion.

Kieber, for his part, has been given a new identity and placed in witness protection in an undisclosed country.  During a hearing in the US, surrounding US citizens’ use of banks in Liechtenstein and Switzerland, Kieber answered questions and outlined the extensive efforts and schemes enlisted by the bank to ensure secrecy.

Swiss banks will now refuse to hold offshore money from US citizens and the US plans on suing the bank.  This is just the beginning!

Should Canada follow the lead of other countries investigating their citizens who have accounts in Liechtenstein?   Those countries have made public the number of people who have stepped forward and declared their offshore income.  Is there is reason why Canada remains quiet?

Only time will tell.