Blog of www.intaxicating.ca. Canadian Tax Consultant and former Canada Revenue Agency (CRA) Employee of the Year who worked in the CRA for almost 11-years in their Collections Department. We can help with Collections, Enforcement, Audits, Liens, Back-Filing, Assessments, Director's Liability, s160 assessments, Taxpayer Relief and so much more (RST, IRS, MRQ) We are Experienced, Honest and On Your Side.
The Canada Revenue Agency (CRA) has announced on their website that there are changes coming to the RC59 Business Consent form. This form is completed by a taxpayer who has business accounts or by businesses who wish to have a representative contact the CRA on their behalf.
Without having this form signed and dated, the CRA will not speak to the representative.
These changes are expected to be law in May of 2017.
These laws apply to representatives who use the RC59, Business Consent, to get online access to their business clients’ information in Represent a Client.
After May 15, to request online access to tax information for a business, you will need to complete the authorization request in Represent a Client. Form RC59 will no longer be used to authorize online access.
From the Welcome page, select “Review and update.”
Select “Authorization request” at the bottom of the “Manage clients” tab and follow the instructions.
Print the signature page for your client to sign.
Scan and send the signed copy of the signature page to the CRA using Submit documents.
When you use Represent a Client, you’ll have access to your business clients’ information in five days or less instead of the 15 days it takes today with form RC59.
You can also see which business clients have authorized you and if the authorizations expire by selecting “Businesses that have authorized this business (or RepID)” under the “Manage clients” tab.
What if I don’t use Represent a Client?
If you still prefer your current process, you can still use form RC59 to request access to your business clients’ information by telephone or mail.
Just wanted to drop a quick note to all of you who called, emailed and hit me up on the blog or on social media that we’re back to work and trying to get to everyone as soon as possible.
If anyone has an urgent matter, please send an email to email@example.com, in the subject line, please write “urgent” and that will be the top priority.
For new readers of this blog or who are seeing this blog through our website, here is what you need to know!
inTAXicating is a Canadian tax consulting business which provides solutions to Canadian Tax problems predominantly related to the Canada Revenue Agency (CRA), but not limited to the CRA.
With over 20-years experience in Canadian Tax (throw in some IRS tax, FATCA, Revenu Quebec, Cross-border matters and WSIB) combined with over 10-years working in the CRA in their collections division, you have the experience and expertise that no-one else can boast to have.
Our model is simple! Give you the truth based on the facts.
You get a free consultation and if it is determined that you can handle it best, or if your questions are quickly answered, then you are on your way.
If there are more complex matters which may eventually require greater expertise, then you have the option to handle you tax matters up to that point and then hand it over, or you may wish to hand it over right away…
It’s your taxes and you need to know what is being done and how to properly handle them going forward.
There are no magical cures for tax problems which took years and years to grow, so if anyone promises you a magic bullet, proceed with caution.
inTAXicating also believes that everyone who earns money needs to pay their taxes, however, they should pay what they owe, and in circumstances where there is no ability to pay, the government should understand that and give you a break.
No questions are bad questions.
I do not believe in the “natural person” being exempt from taxes because the CRA does not believe it, but I have spoken to many, many “de-taxers” and enjoy the conversations and helping them through the CRA’s prosecutions.
We specialize in all matters relating to CRA collections, specifically Directors Liability, Taxpayers Relief, s160 assessments, liens, and garnishments, RTP’s.
We provide audit representation, accounting (through a CA), as well as presenting the options to solve all tax matters including the ugliest and most complex tax matters. The messier the better!
In short, we want to help.
15 minute Consultation / responding to questions via email – free
Meeting – $250 plus HST (one hour meeting – detailed summary and recommended plan of action included)
Engagement – either hourly @ $250/hour or a fixed fee depending on the complexity and amount of work involved.
Accounting – best rates possible also related to the amount of work involved.
We try to stick to this model as best as humanly possible because it’s your money and you work hard for it, so you should not have to throw it away.
I received a surprising message from WordPress on Sunday, September 21st that this blog, inTAXicating,has celebrated it’s 6th anniversary!
Happy Anniversary inTAXicating.
That means it has been 6-years since I have been posting suggestions, tips, and recommendations surrounding the ins and outs of the Canada Revenue Agency (CRA), the IRS, Revenu Quebec and the WSIB. I have written about these government organizations based on my practical work experience at the CRA and in private industry working closely with all of them.
I have posted some great stories and have so many more to come!
Compliance, Collections, Cross-Border issues, FATCA, Assessments, Liens, Director’s Liability, Audits, Negotiations, Accounting… I’ve done it all, and I’ve shared a lot of inside information that no one else hears about, or knows about. Having all of this knowledge and wanting to share it is the driving reason behind maintaining this blog, and opening up a tax solutions business at www.intaxicating.ca.
I am also always looking for great Canadian tax content to read and discuss, so if you are a tax blogger, or if you have a different go-to site for Canadian tax information, please either post a comment on this post, or send me an email at firstname.lastname@example.org and I will add the site to my blogroll.
The more Canadian tax information we can get together as a community, means we can help Canadian taxpayers that much better!
I had a nice long conversation with a client the other day regarding the potential that either the Canada Revenue Agency (CRA) or the Provincial government (in Ontario) were going to pursue a Director’s Liability assessment against him for the debts of his now-deceased corporation. Part of the discussion surrounded how the Canada Revenue Agency and the former Ontario Retail Sales Tax (RST) group handled assessments, and the criteria they used when reviewing whether or not to pierce the corporate shield, plus the importance of a due diligence defense.
During my employment at the Canada Revenue Agency (CRA), I felt I needed to gain a more thorough understanding of Director’s Liability and figure out why there were so few assessments raised in our office compared to other offices. I personally had not raised any Director’s Liability assessments mainly because I was effective on the phone and combined with meetings, was able to resolve many debts prior to the assessment stage. Still, Senior Management encourage the Collections staff to utilize this collection tool more, so as the Resource and Complex Case Officer, I asked for, and was given, the Director’s Liability inventory to control.
By controlling the Director’s Liability inventory, that meant I needed to know the ins and outs of Director’s Liability – section 227.1 of the Income Tax Act and section 323 of the Excise Tax Act, because if anyone in our office wanted to raise an assessment, I would have to review their account, ensure all of the much-needed grunt work had been completed, then ensure they had spoken to the Director(s), given them sufficient notice, provided them time for a Due Diligence Defense, at which point I could sign off and begin to track the file.
After organizing that inventory and rolling out the new procedures, I began to scour the accounts in our office for potential Director’s Liability assessments, then, in addition to my other inventories, provide recommendations and suggestions to the staff on how to proceed if I felt there was a possibility for an assessment. Management decided instead of burdening the staff, I should just take those accounts I felt were ready for Director’s Liability assessments and work them, plus all of the other accounts I was tracking where assessments were raised too.
It was a fair amount of work, but more importantly, it was very enlightening, to review the government’s policies on Director’s Liabilities plus review the procedures in place, compare that to how other office’s handled their files and really tighten up the process. If an account was a sure-fire Director’s Liability assessment, it was raised, and if there was no chance, or not the right time, the file was returned to active collections.
I found the first common misconception around Director’s Liability was that the issuance of the Director’s Liability Pre-Assessment Proposal Letter (which notifies director’s that we are reviewing them for Director’s Liability) was being used as just another letter by the Collections staff to remind directors of their obligations, when in fact the CRA intended on using this letter to notify Directors’ that an assessment was beginning. Internally, the Canada Revenue Agency was actually starting to investigate the personal ability to pay of the director(s) at the time this letter was issued.
Going forward, that letter was not to be used lightly, and it was not to be sent to the Director(s) numerous times. A Director would then have the assessment raised against them and wonder why it was raised this time, and not earlier when one of those letters went out, so in order to prevent a possible loss in Tax Court, the decision was made to send it once, and then follow-up with the Due Diligence defense letter before raising the assessment.
Ignoring the Due Diligence defense letter (which happens often) meant the one opportunity a Director had to start their case on the record was lost, and with the CRA building their case in the permanent diary, the Director(s) stood little chance of preventing the Canada Revenue Agency from raising the Director’s Liability.
Once that waiting period passes, the file usually gets very quiet…
From the Director’s point of view, either the assessment is raised and they receive a letter from the CRA stating that, or the assessment is raised and the letter gets lost in the mail (tossed out), or the assessment is raised and before the Director is notified, their personal assets come under fire. There is of course, the possibility that nothing happens and the Director(s) are left in limbo, but without having a dialogue with the CRA, or experience around the policies and procedures, there is no way that the Director(s) will know when and if the CRA is coming – if at all.
Once raised, the Director(s) have quite limited options.
A recent court case, which I will highlight below demonstrates a situation where an assessment was raised, and in Tax Court, the decision was turned over and the assessment cancelled. I guarantee it won’t happen again, as the CRA will ensure their processes are tightened even more to close this loophole.
The case was Bekesinski V The Queen.
The link to the case on the website for the Tax Court of Canada, is here.
In this case, Bekesinski was the Director of a corporation who was personally assessed by the Minister of National Revenue (CRA) in the amount $477,546.08 for the corporation’s unremitted income tax (T2) and employer contributions of CPP and EI for payroll (source deductions) plus penalties and interest for the 2001, 2002 and 2003 fiscal years.
Under Director’s Liability, the CRA can assess directors for payroll and for GST/HST, but not Corporate Tax liabilities.
The Tax Court of Canada held that since the taxpayer had resigned as a director of the corporation more than two years after the CRA’s assessment, the CRA was statue barred from raising the Director’s Liability assessment.
This was something the CRA should have known before raising the assessment and something that the director (or his representatives) should have mentioned at any point during the pre-assessment proposal period, especially at the due diligence defense stage, but was never mentioned.
Brief Overview of the Facts
In 1992 the taxpayer purchased D.W. Stewart Cartage Ltd., a general cartage, trucking and warehousing company where he served as a Director of the corporation.
When the corporation fell behind on filing obligations and as the balance owing to the CRA began to grow, the Director began to receive numerous letters from the CRA warning him that he could be held personally liable for the corporation’s tax debts as a Director of the corporation. He did not notify the CRA at any time that he had resigned as a Director of the corporation.
On October 15, 2010 the CRA raised Director’s Liability and issued a Notice of Assessment (NOA) to the taxpayer for unremitted income tax, employer contributions plus penalties and interest in the amount of $477,546.08.
The Director then argued that he should not have been assessed as a Director because he resigned as Director of the corporation on July 20, 2006 by way of a Notice of Resignation which would have made the raising of the assessment statute barred.
The CRA argued that the taxpayer was in fact a director and that the taxpayer had backdated the resignation to qualify for the exception, which happens more than you could imagine, and to counter this trick, the CRA often requests an “ink date test” to determine the authenticity of the Notice of Resignation.
Unfortunately for the CRA, the results from the ink date test was excluded by the Tax Court because the CRA did not advise the Court that they felt the Notice of Resignation was back-dated. Even the judge felt the Notice of Resignation was backdated, however since the CRA failed to mention it, it was not open for review in the Court.
In summation, Bekesinski avoided Director’s Liability for the corporate tax debts due to a litigation misstep on the part of the CRA, a mistake they are unlikely to be repeat.
It is highly advisable for corporate directors to carefully document their resignations so as to avoid potential future Director’s Liability assessments, because I guarantee, the CRA will challenges to the authenticity of backdated resignations on each and every case going forward.
Pretty much everyone wants it at some point in their life.
Most of the people who have it do not know how to use it properly.
To be honest, few will ever get it.
The most important thing to know about power is that it is most successful when used in two ways; either by declaring yourself King and having your cronies keep everyone else at bay by whatever means possible, or secondly by taking the time to get key players on your side and using your network to help you maintain power but all along helping those around you learn and grow, and they help everyone else under them do the same.
Which model do you think is most often associated with government tax collections agencies?
Having spent a lot of time working at the Canada Revenue Agency (CRA) in the collections and enforcement division and being responsible for training collections, enforcement and audit staff there I can honestly say not as many staff there who feel you have to do what they say no matter the consequences as you would think.
It is true that there are employees of the CRA who feel that being in a position of power allows them to do things, say things and act in a manner which is improper or unjustified. There are also staff there who take their positions of power to a whole new level and they let their egos control their decision-making process which means they wield power in order to realize an outcome in their best interest, not yours.
I have seen how power corrupts and the result is never easy to correct.
The CRA has a lot of power.
Throughout my decade of employment at the Canada Revenue Agency I was surprised with how much power the Agency has and how many taxpayers feared this power. I could hear collection officers tell taxpayers that they could clean out their bank accounts like “this!” (Insert snapping of fingers sound here), which is true, but also not true. I learned to be subtle in my use of my apparent super-powers and the way I used my power was to visit my clients and by always making sure that when sitting with a taxpayer / representative that my chair was at its highest so that I would be looking down at them. It was all I needed when dealing with the career tax evaders because it worked, but it was a tactic not necessary when dealing with 99% of the people I met with.
However, we already know that the CRA has a lot of power and in most cases before they use it, they are going to let you know first by phone, letter or a visit to your home or place of employment. Once the CRA has decided they need to use their powers they are bound by the guidelines set out in the Income Tax Act and Excise Tax Act and by policies and procedures set out in their tax office. The extent to which they use their powers is either their decision or it is influenced by their team leader or manager.
Once the CRA starts using their powers, your ability to control the outcome diminishes greatly. What you can control, is how much power you will ALLOW the CRA to use against you.
This is done by being proactive – reading notices, asking questions and keeping all your paperwork in one spot where you can access it once it is asked for. But if you are past that point, or if it is just not possible, then you can take power back by enlisting the help of people who know the CRA policies, procedures and most importantly, their techniques and tactics.
If the CRA knew they were dealing with someone who knew more about their job, more about their techniques and more about how quickly they need to take an action which they claim is urgent, then the playing field is changed forever.
Having someone there to look after your best interests, who will tell you what the best plan of action for you, and you only, then taking that plan to the CRA and telling them the same is the best way to always level the playing field. Negotiating is always easier when you know more than your opponent.
So please, if you have a tax problem, old or new, and you have been spinning your wheels with the CRA, the IRS, the MRQ, WSIB or the CRTC, don’t let it continue any longer. Come visit inTAXicating.ca, or send us an email at email@example.com and take advantage of our free consultation to leave how to put these issues behind you once and for all.
Have you ever been put in a position where you accepted something which was not in your best interests because the other side had all the power?
When the Canada Revenue Agency (CRA) registers a lien against your home, they are securing their interest by attaching the repayment of their debt to your property. The CRA considers a lien to be enforcement action and this tool is commonly applied where there are properties in the name of a taxpayer who has a tax debt. Collection officers at the CRA should be registering liens, or securing the Crown’s interest, much more frequently then they currently are, and it should be done whenever there is a tax debt of a considerable amount owing.
Below are some answers to common questions about CRA property liens to help you understand what to do, and where to turn for help.
1. How to tell if there is a lien registered against your property
A title search on your property will reveal the existence of a lien.
It is CRA policy that they advise you by letter when a Certificate has been registered in Federal Court which identifies the property in question and the balance owing for which they are preparing to register a lien. This does not mean that a lien has been registered, but this is essentially a warning of impending action.
If, however, the CRA does not have your correct address you will not receive any notices and thus may only discover there’s a lien when you try to sell or refinance your property. A title search reveals the existence of liens.
2. When the CRA registers a Certificate do they always then register a lien?
Not necessarily. The CRA could be using the Certificate in several ways, including; to secure their interest in the property to make sure that before the tax debtors interest in the property is liquidated, the tax debt is paid in full, or in order to get the attention of the property owner so they will begin negotiations with the CRA, or they may have the intention of proceeding with the seizure and sale of the property in order to pay off all or part of a tax liability.
3. Will the CRA take my house and leave me homeless?
It is CRA policy to not seize and sell a property when it would result in the property owner having nowhere to live. If this property is an income property or cottage or secondary place to live, then the CRA will likely proceed to realize on the property and pay off their debts.
4. Have I lost title to my home?
No.A lien is a registration on the title of that property which prevents you from selling or refinancing that property until either the tax debt owing is paid in full, or there is a written arrangement to have the proceeds from a sale or refinancing directed to the CRA for full payment of the debt.
5. What is a Writ of Fi Fa / Writ of Seizure and Sale?
If a Certificate has been registered in the Federal Court and the tax balance still exists, the Canada Revenue Agency (CRA) will register a Writ of Fi Fa (abbreviation of “fieri facias” which is Latin and means “that you cause to be made”). It is a writ of execution obtained in legal action which is addressed to the sheriff and commands him to, in this case, seize and sell, the property of the person against whom the judgement has been obtained.
This is a very serious enforcement action and after your property is sold, you are entitled to any proceeds left over after the tax arrears have been paid in full.
6. What are my options now that a Certificate has been registered and a lien applied to the property?
Even though the CRA has an interest in the property, you can still access the equity and use that equity to make arrangements with the CRA – or the Department of Justice – to refinance the property or even sell it with the understanding that this can only be done in conjunction with the CRA receiving full payment of their tax debt.
7. What is the CRA’s priority regarding my property should I decide to sell it?
Assuming your mortgage is a traditional mortgage through a recognized financial institution, the proceeds from a sale should fall in this order (depending on the type of tax(es) owing);
1. Financial institution holding the mortgage
2. Secured lenders
3. Canada Revenue Agency
4. Other creditors who have registrations against the property
5. Property owner.
So if you have other debts including a tax liability (and the two tend to go hand-in-hand), then it is possible in this scenario to have nothing left over by the time the property is sold and all debtors are paid off.
8. What if I owe CRA more than there they get from the sale of my property?
If, after the sale of your property there are still taxes owing to the CRA, them your tax balance is reduced by the amount the CRA is paid and the remainder is still owing to the CRA.
9. What if I am not the only one on title – ie/ jointly with a spouse?
In the case where there are more than one person on title in addition to you, it’s important to keep in mind that the CRA can only realize proceeds from your share of the equity in the property. So if you sell, re-finance or are forced to sell, only your share of the equity can be paid out the CRA. The CRA cannot seize your spouses’, or anyone else’s equity.
Keep in mind that in order to get the Certificate, the CRA has to reconcile the account, determine the share owned by the tax debtor and then use that figure when sending the Sheriff out to seize and sell the property.
10. The CRA has registered a lien against my property. Can I sell my interest to someone else and get removed off title?
If a tax debtor initiates a transaction which puts an asset out of reach of the Canada Revenue Agency not at Fair Market Value, the CRA has the ability to initiate a section 160 Non-Arms Length assessment and assess the person(s) who received the asset for your liability (minus consideration received).
11. Will bankruptcy free me of a lien?
Filing for bankruptcy, or filing a consumer proposal, does not discharge a lien against your property. If you go bankrupt on your CRA debt, the lien remains and – even worse – accrues interest over time. Even after your discharge from bankruptcy, the lien remains in force, until you eventually sell your home and the CRA’s priority is now second in line after the bank.
If after all that the tax debt is still remaining, then and only then because of the bankruptcy, will the tax debt no longer be owing.
The bottom line here is that tax liens can cause serious problems and it’s best to seek our help to resolve your tax issues before it gets that far. Even if a lien is in place in order to secure the Crown’s interest, it’s best not to ignore the CRA.
A large transfer agency with a Canadian client paying US sourced income enquired as to whether an IRS Form 1099-B, Proceeds from Broker and Barter Exchange Transactions – an information form used to report the proceeds received from the sale of securities during the current year – should be issued to non-residents of the US, or if this form is only required to be sent to Americans.
It was a good question and in a business where budgets are tight, it’s better to be safe than sorry.
I placed some calls to the IRS, spoke to people in the industry and checked through the IRS website and here was what my research turned up – and take notice of the wording used – as it is very similar to the wording used by the CRA regarding the T5008, Return of Securities Transactions.
“A broker or barter exchange must file Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, for each person:
For whom the broker has sold (including short sales) stocks, bonds, commodities, regulated futures contracts, foreign currency contracts (pursuant to a forward contract or regulated futures contract), forward contracts, debt instruments, etc., for cash,
Who received cash, stock, or other property from a corporation that the broker knows or has reason to know has had its stock acquired in an acquisition of control or had a substantial change in capital structure reportable on Form 8806, or
Who exchanged property or services through a barter exchange.”
A broker is any person who, in the ordinary course of a trade or business, stands ready to effect sales to be made by others. A broker may include a U.S. or foreign person or a governmental unit and any subsidiary agency.
You are considered a broker if:
You are an obligor that regularly issues and retires its own debt obligations or
You are a corporation that regularly redeems its own stock.
Then the IRS pulls back a little bit here;
“However, for a sale, redemption, or retirement at an office outside the United States, only a U.S. payer or U.S. middleman is a broker.”
You are not considered a broker if:
You are a corporation that purchases odd-lot shares from its stockholders on an irregular basis (unless facts indicate otherwise),
You manage a farm for someone else, or
You are an international organization that redeems or retires its own debt.
So a transfer agent, even through it is a Canadian Corporation, is paying out distributions in US dollars, which makes them an US payor for the purposes of the IRS legislation, must issue 1099’s to US persons no matter where in the world they reside.
W8 certified non-residents of the US instead receive a 1042S, which reports dividend income received on US stocks for foreign investors.
In additions, each transaction is reported (other than regulated futures or foreign currency contracts) on a separate Form 1099-B, so a US person could be receiving multiple 1099-B’s at year-end. Transactions involving regulated futures or foreign currency contracts are reported on an aggregate basis.
Note: Sales of each of the following types of securities are reported on a separate Form 1099-B, even if all three types were sold in a single transaction:
Covered securities (defined later) with short-term gain or loss,
Covered securities with long-term gain or loss, and
Noncovered securities (securities that are not covered securities) if you choose to check box 6a when reporting their sale.
The gross proceeds value on a 1099-B is reported minus commissions.
Other common 1099 forms used:
Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., is the US tax form used to report distributions made to taxpayers from their retirement accounts, including an IRA or Coverdell ESA
Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, is the federal information form used to report account information on accounts held by non-resident aliens, foreign corporations and other types of foreign entities. Information such as distributions of ordinary income dividends and short- and long-term capital gains, the tax withholding rate, and the amount of U.S. tax withheld and deposited is reported on Form 1042-S.
This form is used to report an over-contribution from an Educational Savings Account (ESA). Contributions to an ESA are not deductible, only the earnings are taxable. The IRS does not require the use of tax codes on Form 1099-Q.