7 Ways the Tax Man is Watching You: MoneySense.ca

When I saw this headline in Money Sense.ca I immediately felt upset that this article was going to be a bunch of made-up, fear-mongering, scare tactics along the lines of something that would come from an advertising campaign from a certain tax law / brokerage firm.

They popularized the calling of the CRA the “tax man” and since we all know the CRA hates that, its worth noting that it a confrontational relationship with the CRA is what they are all about.

Some people need that.

Most don’t.

Then, upon reading the list, I noticed that each and every one of the 7 items has a quote from… Dioguardi, and once the shock and surprise wore off, I shook my head and wanted to set the record straight, as far as I see it.

Not really...
The CRA is watching you!

The link to the original article is here;
http://www.moneysense.ca/save/taxes/cra-watching/

So let’s look at these items in a bit more depth;

1. Social media. Sure. If you make it public, and you have a unique name, the CRA can see what you’re posting. It doesn’t mean that if you have $40K in reported income and buy a $100K boat that they are going to assess you. If you are in collections and the CRA’s collections officers are trying to get you to pay, and all of a sudden a boat shows up on their radar, they will do their research and determine who owns it, how it was purchased and if it belongs to someone who owes the CRA taxes, then you have better have a good explanation as to why you didn’t disclose it.

2. Kijiji, eBay, etc. Yes, if you are selling items online as a way to earn an income it is income that you should declare and pay taxes on. The CRA have in the past requested and received information from eBay related to their top sellers. If, however, you are doing this as a business, it would have made sense to have engaged an accountant or tax professional to ensure that you are not only reporting correctly, but that you are claiming all eligible deductions and expenses – like a home office – to offset the income earned. A business is a business.

3. Credit card slips – yes, however only if it’s through an audit and the auditor has requested it directly from you. I suppose if you were under criminal investigation, or were in collections for a long time, the advanced collection techniques might include requesting this information, but the collections staff are not able to do anything with it. Auditors can assess with it. Collections cannot. Very misleading point here!

4. Bank accounts and investments – All financial institutions are required to provide year-end tax slips to taxpayers indicating their position during the year and in each and every case, a copy is sent to the CRA. They already have this information. They’re not watching anyone. The slips the bank sends is matched to the slips the taxpayer files. No slip, then the CRA asks for it (maybe you lost or forgot it) and then if it’s not accounted for, the CRA will raise an assessment.

If a taxpayer is in collections and the CRA wanted to know information about a bank or investment they have the ability to use a Request for Information, to ask for information and a Requirement for Information to ensure they get the information. Both processes are complicated and the CRA must prove that they were denied the information or that they need it urgently in order to raise an assessment.

5. This section is a bit vague and underwhelming. First, the CRA checks the sales records much faster than they did years ago – but they take that information then send out a questionnaire to the taxpayer to complete which is the supporting document they use to assess. They see you sold, but you let them know if there is cause for digging deeper.

On the rent side,, what catches the most number of people is when a renter pays rent in cash and the landlord and the landlord does not provide receipts and neither reports in… until there is an issue, and the renter declares rent paid. The CRA checks the landlord to see if they declared the rental income and when they have not… Assessment. The CRA is, again, not watching people in this case. They come across these assessments because of breakdowns in rental agreements.

6. Income and pensions. This list should have stopped at 5. This is not a case where CRA watches anyone. It’s about reporting and discrepancies.

7. Mystery diners – I’m not even going to comment on this than to say that it’s so over the top it’s unbelievable.

I will add, that while working at the CRA, I did attend restaurants as a representative of the Crown, however I disclosed my reason for being there and it was only in situations where restaurant owners had payroll debts over $300,000, and suddenly reduced their payroll from 15 full-time employees to 2 full-time employees. I just needed to check and see if they really did cut staff, or if they just started paying the other 13 cash under the table, to avoid having to deduct and remit the CPP, EI and tax. In each and every case, upon entering the restaurant, I would count the number of employees – when I saw more than 10, I would take the owner aside, explain this was not legal, then request a payroll audit and be done, until the audit assessment came into collections.

So to conclude, the most accurate part of this article is, “always give full and complete disclosure”.

The “tax man” is not watching you, unless you are in collections, under investigation, or trying to “game” the system.

If you have questions, concerns or comments, and want the truth about your situation, send us an email to info@intaxicating.,ca and we can have that discussion.

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CRA Taxpayer Relief Information Moved from cra.gc.ca to canada.ca

Looking for information related to the Canada Revenue Agency (CRA) Taxpayer Relief Program?

It’s moved!

Here is the information that matters! Link is at the bottom.

Taxpayer Relief.

Important note: A request for relief from penalty and / or interest amounts does not stop or suspend collection activity on an account or the accrual of interest.

Information you must include with your request

It is important that you provide the Canada Revenue Agency (CRA) with a complete and accurate description of the circumstances to explain why your situation merits relief.

In order to support a request, you should provide all relevant information including the following, where applicable:
• your name, address, and telephone number;
• your social insurance number (SIN), account number, partnership number, trust account number, business number (BN), or any other identification number assigned to you by the CRA;
• the tax year(s) or fiscal period(s) involved;
• the facts and reasons supporting that the interest or penalty were either mainly caused by factors beyond your control, or were the result of actions by the CRA;
• an explanation of how the circumstances affected your ability to meet your tax obligations;
• the facts and reasons supporting your inability to pay the penalties or interest assessed or charged, or to be assessed or charged;
• any relevant supporting documentation such as death certificates, doctor’s statements, or insurance statements;
• in cases involving an inability to pay or financial hardship, full financial disclosure including a statement of income, expenses, assets, and liabilities (to help individuals provide full financial disclosure);
• supporting details of incorrect information given by the CRA in the form of written answers, published information, other evidence; or when the incorrect information given by the CRA is of a verbal nature, you should give all possible details such as date, time, name of CRA official spoken to, and details of the conversation; or
• a complete history of events including any measures that have been taken, e.g., payments and payment arrangements, and when they were taken to resolve the non-compliance.

Note: You may submit photocopies of supporting documents. During the course of our review, the CRA may contact you if they need additional information or documentation, however that is not common.

Other considerations
• Indicate with your request if this is the first or second review request. A second review request is when you ask the CRA to reconsider its original decision.
You must include Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties or Interest to make a request to cancel penalties or interest.

You can also write a letter marked “Taxpayer Relief”.

Submitting the Application

You can submit your request to cancel penalties and / or interest and all supporting documents:
• online at My Account, My Business Account, or Represent a Client, by selecting the “Submit documents” service; or
• by mail at one of the designated offices below.
For more information on the Submit Documents online service, go to Submit documents online.

Designated offices:
• British Columbia and Yukon
Vancouver Tax Services Office
9755 King George Boulevard
Surrey BC V3T 5E1
• Alberta, Saskatchewan, Manitoba, Northwest Territories, and Nunavut
Winnipeg Tax Centre
66 Stapon Road
Winnipeg MB R3C 3M2
• Ontario, New Brunswick, Nova Scotia, PEI, Newfoundland and Labrador
Prince Edward Island Tax Centre
275 Pope Road
Summerside PE C1N 6A2
• Quebec
Shawinigan-Sud Tax Centre
4695 Shawinigan-Sud Boulevard
Shawinigan QC G9P 5H9
• Non-resident or international taxpayers (individual, corporation, trust, and part XIII and non-resident withholding accounts)
International and Ottawa Tax Services Office
P.O. Box 9769, Station T
Ottawa ON K1G 3Y4
CANADA

 

Link to CRA website: 
https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/rc4288-request-taxpayer-relief-cancel-waive-penalties-interest.html

 

inTAXicating – Your Canadian Taxpayer Relief experts!  Don’t believe us?  Contact us and find out why!  info@inTAXicating.ca

 

What Do Lionel Messi, Cristiano Ronaldo and Floyd Mayweather Have in Common?

What Do Lionel Messi, Cristiano Ronaldo and Floyd Mayweather have in common aside from being top atheletes in their respective sports, and extreme wealth?

Tax Troubles!

Ronaldo and Messi with the Spanish Tax Authroity, and Mayweather with the IRS, which just goes to show you that no matter how much money you have, or don’t have, you still have to report income, file on time and pay your taxes!

In Ronaldo’s case, the Spanish Hacienda tax authority believes Ronaldo failed to pay €14.7 million in taxes pertaining to income earned on his “image rights” between 2011 and 2014.  The belief is that he used (and still uses) a shell company in the British Virgin Islands and Ireland, to hide at least €78m in image rights.

Ronaldo’s camp claim that he has fulfilled all his tax obligations, maintaining that the majority of his image-rights income is earned abroad and therefore not liable for Spanish tax.

How does Ronaldo’s situation differ from Lionel Messi’s tax case?
Barcelona star Lionel Messi and his father Jorge were found guilty of tax fraud in July 2016 after it was found they had hidden image-rights income from the Spanish authorities. Messi was fined €3.6m and sentenced to 21 months in prison (which was suspended) for defrauding €4.1m between 2007-09.

The Messi family had previously paid over at least €10m in back taxes and charges, long before their case made it to court.

In Messi’s case, the court determined there was a total failure to fill his tax obligations on image rights income.

A huge concern stemming from the The Supreme Court’s judgement in the Messi surrounded the role that Messi’s tax and financial advisors played and how both parties were not indicted as part of the prosecution since they there was evidence that they advised the player on how to evade taxes.

In Spain, a  guilty verdict for an aggravated tax crime means a mandatory jail time of two to six years, while conviction of the lesser offence brings a suspended sentence.  If Ronaldo admits to the details in front of the judge within two months after being accused, and pays over the amounts allegedly defrauded, his punishment could be reduced.

Messi’s 21-month prison sentence for tax fraud was reduced to a €252,000 fine, while his father’s 15-month prison sentence was reduced to a €180,000 fine.

These fines are in addition to the re-payment of the taxes originally owing plus any penalties and interest accrued to the balance.

Floyd Mayweather, and his estimated net worth of $340 million is in trouble with the IRS and has apparently filed a petition asking for a temporary reprieve from unpaid taxes from 2015 until after his fight with Conor McGregor in August.

Apparently, while he has substantial assets, those assets are restricted and primarily illiquid. The upcoming fight against McGregor, however, would provide Mayweather with enough liquid cash to pay the IRS debt from 2015 in full.

Mayweather, made $220 million alone from his 2015 fight against Manny Pacquiao. It is unclear how much he owes the IRS in taxes.  Given a 15-month lapse since the 2015 tax due date, Mayweather would owe 7.5% in penalties plus accruing interest on top of what he was already scheduled to pay.

Forbes estimated Mayweather’s net worth at $340 million in January.

 

So the moral of the story is this;

Not everyone wants to pay their taxes, and some will go to great lengths to reduce or avoid paying taxes. If that is something that you feel you must do, you have to be prepared for the consequences of your actions when and if the government comes back to you.

File on time.

Pay on time.

Don’t pay the government more than you should.

If you need help because you’re carrying a balance with the CRA and you want to discuss options, contact us today!

http://www.intaxicating.ca

@inTAXicating

info@intaxicating.ca

416.833.1581

 

Lack of tax knowledge could be costing Quebecers: C.D. Howe Institute reports

I came across this article from the Montreal Gazette;

I strongly recommend that you take the time to read it.  It is brief, but very informative as it tells the story that I have been trying to tell for the past 20-plus years!  There is that there is a significant percentage of, not just Quebecers, but Canadians who leaving money on the table because they don’t understand the tax system, according to a report released by the C.D. Howe Institute last week.

The report — which bases many of its conclusions on a survey of 1,000 Quebecers — suggests that lack of knowledge is one of the reasons many people don’t take advantage of credits and savings vehicles, like RRSPs, which could reduce their tax burden.

“People might be missing out on benefits that they’re entitled to,” said Antoine Genest-Grégoire, a tax policy researcher at the Université de Sherbrooke and one of the authors of the report.

“It can take various forms, people can simply not know about the existence of the credit … sometimes, they know it exists but they don’t know how to use it or they find it too complicated.”

Survey participants were asked a series of questions about how the tax system works and the average score was just 55%.

It wasn’t just tax credits that left participants stumped. Respondents scored poorly on questions about progressivity — the idea that people with higher incomes pay a higher tax rate, a core principle of the Canadian income tax system.

While almost 90% of respondents knew that income tax rates differ based on how much people make, many struggled with the concept of bracketing — when different segments of an individual’s income are taxed at different rates.

“We hear a lot of people thinking that once you reach the top income brackets, you essentially pay close to 50% of your income in taxes,” Genest-Grégoire says, when in reality, it’s only the income above the cut-off for the highest tax bracket that’s taxed at the highest tax rate.

Only 26% of survey respondents were able to answer a question about that correctly.

While survey respondents generally had a good sense of whether they pay sales tax on everyday purchases, like groceries, prepared food and clothing, there were some exceptions.

For example, Quebec provincial sales tax doesn’t apply to books, a decision made to encourage literacy and support book publishers in the province. Only 21% of survey respondents knew that.

The result, Genest-Grégoire said, is that the public policy objectives of the tax exemption are unlikely to be realized.

The lack of tax literacy doesn’t just affect individuals pocketbooks, Genest-Grégoire said.
“People who don’t understand taxes tend to have lower trust in the tax system.  The Canadian tax system, even though you’re obligated by law to produce a tax return, works on trust.  The government doesn’t audit everyone,” he said. This lack of trust “makes tax avoidance, tax evasion more probable.”

Genest-Grégoire said the provincial and federal revenue agencies have taken steps to put more information online, but the system itself remains complex. One solution would be to make benefits that are currently provided through the tax system more accessible and for government to automatically enrol people, as is already the case with many benefits for children.

Warren Orlans, a former CRA Collections Employee turned Taxpayer Advocate has been saying for over a decade that the CRA needs to continue putting out information on the Internet, however it needs to be available in many different formats in order to be most effectively accessed by Canadians everywhere.  “Not everyone learns the same way, so having a concept explained in text, showing steps, and possibly with an example and even with little videos would expose the greatest number of Canadians to the message at once.”

“Every day, I deal with Canadian taxpayers and corporations of all sizes as they try to understand and interpret the CRA.  My 11-year’s experience at the CRA and 10-years outside the CRA have afforded me the ability to diagnose and resolve even the most complex of tax matters”, Orlans said.

If you need help understanding the CRA, or interpreting their letters or actions, contact the best, at inTAXicating.  Email: info@inTAXicating.ca. Or call us at 416.833.1581.

Toronto-based, Coast-to-coast tax liability expertise.

 

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?

Proposed Changes to CRA VDP Should Go Further – Union.

The changes proposed by the Canada Revenue Agency (CRA) to the Voluntary Disclosures Program (VDP) have been described as an improvement, but no where close to what is needed to reduce tax evasion, according to The National Union of Public and General Employees (NUPGE) – one of Canada’s largest labour organizations.

VDP, as we all know, gives Canadian taxpayers who made mistakes or hid income on their taxes the opportunity to voluntarily come forward to the CRA and declare or correct the mistakes without fear of prosecution, and gross negligence penalties.

Some, however, feel the VDP has been overly generous in cases such as the deal offered to clients of the KPMG Isle of Man tax scheme.  The same people also believe that the CRA’s VDP has failed to differentiate between those who simply made errors in their tax return and “wealthy individuals” who wilfully evaded taxes using offshore tax havens.

While it can be very difficult to distinguish between someone who willfully evades taxes from someone who tried to but got caught, it is quite clear regarding the use of tax havens because either you report your offshore income (legal) or you don’t (illegal).

The union strongly believes that those caught “using a tax haven should be treated more severely than innocent mistakes.”

The Minister suggested that releasing the names of the participants and their advisors should be required although the CRA has always kept track of both scenarios once the disclosure has been approved.  Where a taxpayer received assistance from an advisor in respect of a VDP application, the name of that advisor should generally be included in the application.

The union expressed concern that the proposed changes fail to restrict access to voluntary disclosure in cases where leaks about tax havens are likely to provide the government with lists of Canadian account holders.  They feel that at that point, “it should be too late for wealthy individuals to take advantage of the VDP if they are already likely to be exposed.”

While I do agree the government should look at how they treat those who have not filed differently than those who store money offshore in hopes of evading the paying of taxes, I do not agree that in each and every case it is the “rich” or “wealthy” who are doing it.

In fact, I have encountered many Canadians of all races, religions and levels of income who have stuffed away money overseas and they range from being super-wealthy, to single parents on OAS or pension income who can barely make their rent.  It’s not just a “wealthy” issue.

Sure, it doesn’t read as well if its not an attack on the “rich” and yes, there are some who have complained that nowadays it is the unionized worker who is the “rich” in Canada, which is why I prefer to not paint everyone with the same brush, and group by filers and non-filers.

Under the program, any use of a tax haven scheme should mean less relief than for other forms of non-compliance, which makes a lot of sense.

For the union, they believe that; “the majority of Canadians feel that there are two tax systems, one for the rich and one for the rest of us.  It is very important for the government to get this right.”

NUPGE: Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good.

Link to original article:

https://www.nupge.ca/content/proposed-changes-canada-revenue-agency%E2%80%99s-voluntary-disclosures-program-should-go-further

 

 

How We Help: GST/HST, Deemed Trust, s.160 Assessment and T2’s

A couple of months ago, I received a call from a senior law partner at one of Toronto’s top law firms asking me if I could help out a client of theirs with a messy tax problem because their firm was just too expensive for the couple.

I was told there was a balance owing to the CRA for GST/HST, and that the firm was essentially bankrupt, they feel they don’t owe the money and the CRA was threatening to raise a Deemed Trust followed by a s.160 assessment.

All over $30,000 owing to the CRA.

Sounds simple enough…

Confirm the amounts, then figure out if the balance is actually owing, tie up loose ends then make arrangements between the client and the CRA to resolve both matters.

I connected with the couple, got their side of the story, then met their wonderful accountant and got her side of the story.  I took all of that information, and had a nice long chat with the Collector at the CRA.

Here is the CRA’s side;

The couple owned a business, which accumulated debt through the filing of GST/HST but never paying it.  They also failed to file T2 returns.

The company had at one point in time sought financing and ended up pledging their inventory in return.  When the business began to slow down, the lender took the assets, and sold them to pay back the money they had lent to the business.

There was a shortfall.

The CRA did not like this at all.

With money owing to the CRA, they used their Deemed Trust provision and raised a s.160 non-arms length assessment against the lender for taking the inventory and disposing of it without paying the CRA.

The CRA were just waiting for the corporations director to file for bankruptcy before they actioned the s.160 because that would survive the bankruptcy and would result in the CRA getting paid on all fronts.

But logic sold me that a business which was struggling would not have significant amounts of GST/HST owing in its final years.

Something did not seem right.

I called back the CRA Collections office who, quite frankly, was extremely unhappy about having to answer additional questions about the origin of the debts… Again.

I had asked her to go through the last 3-years worth of filed GST/HST returns and give me verbal figures for Total Sales, GST Collected, and Input Tax Credits.

She started.  The first year was fine.

The second year was fine.

The third year, she started, “Total Sales were $25,000”, “GST Collected was $1,500” and ITC’s were …

… she paused…

“No ITC’s, eh?” was my response.

“No.  No ITC’s”, she said, completely puzzled.

“So I don’t expect there to be any ITC’s on any of the returns going forward, is that accurate?” I asked.

“No ITC’s on any of the returns going forward… That’s so unusual”, was her response.

We re-filed the last 6 GST/HST returns to include the ITC’s.  They went through a desk audit quickly because of the notes indicating someone missed ITC’s, and upon posting knocked down the balance owing considerably.

The s.160 assessment was cancelled and the remaining, much smaller balance was paid in full.

I introduced them to one of the fantastic accountants in my network who quickly completed the T2’s for them.

Everyone left happy.

That’s how we help!  Knowing the ins and outs of the CRA’s collections department and even think that something might have posted incorrectly, 4-years ago.

inTAXicating!