Recently saw a news headline relating to the Canada Revenue Agency (CRA) and collecting taxes, that caught my eye. The headline screamed something to the effect of; “Contractors buying from Home Depot beware — the CRA is coming after you.”
I immediately began to shake my head and wonder if what the purpose of this article was. Was it written in response to an action taken by the CRA, or was the headline intended to scare Canadians who are dealing in cash and not paying their tax, into using their services.
Afterall, this really is not news.
For as long as Canadians have found ways to evade paying taxes, the CRA has had to find ways to verify that taxpayers are reporting their accurate income – and reporting at all.
The latest instance came to light recently as the CRA sought information from The Home Depot, in July, using a provision in the Income Tax Act (ITA), known as the Unnamed Person Requirement (UPR).
The CRA obtained a Federal Court order (which they are required to do) which legally required the Home Depot to disclose the identities of their commercial customers as well as the total annual amount spent by each of these customers between January 1, 2013 and December 31, 2016, Canada-wide.
Certainly, there are some Canadian Contractors who work solely for cash, and the CRA will use this information with the information that has been filed by these individuals, to determine if an audit is necessary.
The CRA will likely move quickly in cases where there are clear discrepancies, such as contractors who claimed $1 in income, who appeared at the top of the Home Depot list, and who live in, or own, millions of dollars of assets. In these cases, the CRA would send a letter, followed 30-days later by an assessment, and the taxpayer has 90-days to appeal that assessment with facts. Facts, being supporting documentation such as proof, receipts, explanations, and bank statements to prove that nothing untoward had occurred.
I’m not going to lie when I say that in the almost 11-year working in the CRA and the almost 11-years since I left the CRA, I have seen pretty much everything. Some good, some really good, but some bad, and some really bad.
The fact that the CRA found this tax evasion is part of the bigger problem around tax advice being given to people from people who have no idea what they’re saying. As a result, the CRA has to jump in, assume everyone is lying, cheating and stealing, and paint everyone with the same brush.
It gets worse, if these tax evaders filed tax returns and lied about having no income and received benefits based on earning no income, when in fact they earned considerable amounts of income and then took benefits they were not entitled to received from hard-working Canadians who pay their taxes. In those cases, these tax cheats can expect the CRA and the courts to come down much harder on them.
When taxpayers are convicted of tax evasion, they must still repay the full amount of taxes owing, plus interest and any civil penalties assessed by the CRA. In addition, the courts may fine them up to 200% of the taxes evaded and impose a jail term of up to five years.
Didn’t shop at Home Depot? You’re not out of the woods yet. In addition to this list from Home Depot, the CRA also compiled lists of municipal building permits by way of seeking out unregistered building subcontractors. The review of 8,396 building permits yielded 2,751 unregistered building contractors.
According to a CRA report released in late 2018, underground activity in Canada totalled $51.6 billion in 2016, which could have gone into the tax coffers.
When seeking permission from the court to have the Home Depot hand over their records, the CRA stated that 7% of an unidentified company’s customers had were not filed up-to-date on their personal tax returns, meaning a greater chance of tax evasion (which people think, but again, is totally not true).
Many audit and collection projects within the CRA make use of unnamed persons requirements (UPRs), tips from the CRA’s Informant Leads Line (Snitch line) and from Canadians themselves who fail to file tax returns on time.
If you, or someone you know falls into this category, you are best to contact us at inTAXicating, to help answer questions truthfully about how much exposure you might have to the CRA and what solutions are available to help.
We can be reached at: email@example.com
The Canada Revenue Agency have announced that they have charged a member of Nova Scotia’s Millbrook First Nation with evading $2.2 million in GST/HST.
The CRA charged Lisa L. Marshall who was the operator of the Traditional Trading Post, a convenience store, located on the Cole Harbour reserve of the Millbrook First Nation using the Excise Tax Act with wilfully evading or attempting to evade compliance with that Act.
The CRA alleges that between July 1, 2010, and June 30, 2015, the store failed to collect or remit $2,284,144.72 in Goods and Services Tax (GST) and Harmonized Sales Tax (HST) related to the sale of tobacco products to non-Aboriginals.
The agency says people who fail to remit tax owing are liable not only for the full amount, but also to penalties and interest, and if convicted, the court can levy a fine of up to 200% of the tax evaded and also impose a prison term of up to 5 years.
The moral of the story here, is that if you are required to charge, collect and remit GST or HST, you should. The CRA treats Trust Funds – money taken by registrants and held in trust until they are remitted to the Crown – very seriously, and those who misuse Trust Funds are dealt with swiftly and to the full extent of the law allowed to be used by the CRA.
A former Canada Revenue Agency (CRA) auditor and his wife were found not guilty of fraud when a judge rules that the CRA failed to prove that the fraud was intentional.
This is significant, folks!
The original article can be found here;
What I truly hope is that this ruling provides the CRA with a much clearer understanding that there are actually some Taxpayers and businesses (and even former employees) who might not fully understand the CRA’s rules and regulations and their application, and that there exists a chance that people make mistakes.
I’m not saying in this case that there was a mistake – and I don;t believe that the judge was saying that either, but what was very clear from this ruling is that the for the CRA to win a case they need proof and facts.
The CRA obviously will be appealing this decision.
My experience in the CRA has afforded me this insight which I happily pass along to each of you who read this… It’s okay to make mistakes. We all do. The CRA does not expect each and every Canadian Taxpayer to be tax experts, but where the CRA has zero tolerance is where Taxpayers try to circumvent the rules and do so knowingly. At that point, you can’t claim you didn’t know the rules. You’ll be no mercy from the Crown at that point in time.
As well, there are many, many, many opportunities to resolve the tax issues before having to bear the expenses of going to tax court! This ruling was the first of it’s kind, and considering how many people want to sue the CRA or take the CRA to court, it makes you wonder who is advising them, and who is paying their bills!
To understand where you stand and what your options are, you can start by contacting inTAXicating Tax Services, at http://www.intaxicating.ca, and start dealing with you tax issues with the facts.
You have filed you Canadian personal tax return by the April 30th deadline and you owe the CRA money. Now what? You have heard horror stories about how the Canada Revenue Agency goes about collecting taxes dollars.
You need to act fast, right?
Well that is exactly what is wrong with tax-filing season in Canada.
What about if you owe more to the CRA because you already have a balance, or if you happen to be self-employed and you plan on having your tax returns prepared after the April 30th deadline, but before the June 15th deadline for self-employed Canadians, and you find out that you owe money to the CRA?
Or, what if you carry a balance year-over-year because between taxes owing and installment payments, you just can’t keep up?
What do you do?
What are your options?
If you listen to the radio, you are likely to have noticed that about every 3rd ad is a commercials talking about debt. In these commercials, very calm voices talk about how it feels to be in debt and how they a simple solution for debt. They even refer to “programs” which are supported or endorsed by the Canadian government. and in 10 minutes / 15 minutes / 20 minutes, you too can be debt free.
It’s convenient. Too convenient…
Their solution is bankruptcy or a consumer proposal, and their solution is a great way for you to no longer have debt owing to the Canada Revenue Agency, or your credit card provider, etc.
What they fail to mention, is that you are paying them money to trade your debt problem for a credit problem.
Sure, you won’t owe the CRA any more, but now that the euphoria of that “win” has worn off, you now have to face reality that you have no credit for 3-7 years at best. During that 3-7 years, you won’t have a credit card unless it’s a prepaid one, and you won’t be able to get a loan, and you cannot be the director of a corporation.
During that period where you are under a proposal or in bankruptcy, the CRA can, and still will raise assessment where they are allowed by law to, such as raising s160/s325 assessments for assets transferred to avoid paying the CRA, or if you act as a director even though the director is someone else’s name.
Forget about it if the CRA has already placed a lien on an asset. That survives a bankruptcy.
But the commercials make it sound SO appealing, so quick, and so good.
I’ve always felt that bankruptcy and Consumer Proposals are great options for people with no options. If your debt is tax-related then you really should know what your options are before jumping at the first thing you hear and making these Trustee / Insolvency firms rich, so they can advertise even more, but up bigger billboards and open their own “tax solution” businesses to “help” you with your tax problems.
Don’t fall for the easy way out, because you get way more than you bargained for!
Instead, contact us, inTAXicating, and let us diagnose your debt, and tell you the best options for you, and not what works best you the trustee or the CRA.
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.
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.
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?)
Well 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;
- If you happen to have partaken in a criminal activity, you might not want to disclose that to the CRA collector.
- Make sure to stay compliant! File up to date and don’t give the CRA reasons for looking for stuff.
- 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.
- If you’re not sure… Ask. Then use your judgement.