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!)

Common GST / HST Questions asked this past week

Below are some common GST/HST questions ask by readers of this blog through either email, Facebook comments, Tweets, or search queries.  I wanted to share the question, and provide the answer to save readers some time.

Q: Can you charge HST without an HST number?

A: No.

Q: Collecting GST when not registered?

A: Don’t.

Q: When do I have to start charging GST?

A: When you register or when you earn more than $30.000.00, or $2500 in HST.

Q: Do I have to charge HST under $30 000?

A: Yes, if you’re registered.

Q: Can you charge HST without a HST number?

A: No.

Q: What is the GST $30000 threshold?

A: It is the threshold that the Canada Revenue Agency (CRA) states determines when you must register for the GST/HST.  Under $30,000 in taxable sales, registration for GST/HST is voluntary.  Once you hit $30,001, then it is required.

Q: Do I charge HST if I make less than 30000?

A: Earn, not make, and you don’t have to, but I strongly recommend it.

Q: What are the CRA invoice requirements?

Better worded as what are the invoice requirements if I am registered for the GST / HST?

A: To have your GST / HST number clearly displayed on the bottom of your invoices so people who pay you GST / HST know you are actually registered.

Q: How does GST or HST work?

A: Basically, if you sell or provide goods and services in Canada, you must charge customers the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST) unless your business qualifies as an exception.

If your Canadian business fits one of the exceptions, it won’t have to charge, collect and remit GST/HST.
The two possible exceptions are:
1. You sell or provide a good or service that the CRA has classified at being “zero-rated” or “exempt”
2. You are a small supplier

Zero-rated goods and services, such as exports, medical devices or basic groceries, are charged 0% HST. Exempt goods and services, such as golf or music lessons, child care, etc., are exempted from GST/HST, so they are not subjected to the tax.

A small supplier is one who has total taxable revenues before expenses from all your businesses of less than $30,000 or less in the last four consecutive calendar quarters and in any single calendar quarter.

Q: Any industries or professions have to apply for GST / HST right away?

A: Yes. Taxi and limousine operators and non-resident performers have to charge GST/HST even if they are small suppliers.

Q: Do I want to register for GST / HST even though I’m considered a small supplier?

A: Yes

Q: How do I register for GST/HST?
CRA makes registration easy for Canadian’s. You can register by phone (call the Canada Revenue Agency at 1-800-959-5525), online, by mail or even in person at a tax office.
(Note that if your business is in Quebec, you need to contact Revenu Quebec instead at 1-800-567-4692 as they deal with GST/HST in that province.)

If your small business starts out as a small supplier and you make more than the small supplier limit ($30,000) you’ll want to register for GST/HST right away; in the eyes of the Canada Revenue Agency, you are now a GST registrant and you:
1) have to collect GST/HST on the supply that made your revenue go over $30,000;

2) have to register within 29 days of the day that you made the supply that made your revenue go over $30,000.

What causes problems for small businesses is they don’t realize they’ve gone over the limit until some time later when they’re doing the books and then discover they didn’t charge the GST/HST when they should have.  Small suppliers must watch their revenue carefully.

Q: What is a BN?

A: When you register, your business will be assigned a business number (BN); this is the number that you and the CRA will use to identify your business. (You’ll be using it on all your invoices, in your accounting system, and in all your tax-related correspondence with the CRA.)

Q: Do I need to charge the GST/HST?

(Answers the question whether or not you need to charge GST/HST on your sales of goods or services.)

A: Sales of zero-rated or exempt goods and the small supplier exception are discussed later.

Q: Shipping Out of Province: Should You Charge GST/HST?

A: Yes.  Depends on the province you are shipping to.  They pay the applicable rate in their province.

Q: What’s the difference between zero-rated and exempt goods and services?

A: These are two special classes of goods and services that the customer does not pay GST/HST on but in the case of zero-rated goods you, the provider of goods or services, can still claim input tax credits.

Hope this helps!

If anyone has any questions, concerns or comments about the GST/HST and need additional assistance, please contact us at tax@goldhar.ca.

 

 

Canada Turns 150, the Income Tax Act turns 100

Bob Hamilton, the Commissioner and Nancy Chabwan, the Deputy Commissioner of the Canada Revenue Agency (CRA) Celebrates 100 Years of Taxes with #Canada150

2017 marks not only Canada’s 150th Birthday, but also the 100th Anniversary of the Income Tax Act (ITA).

To mark this anniversary, the CRA has put together a video that highlights the history of income Taxes in Canada and the role they play in building the country and lifestyle of Canadians – as well as how the CRA has evolved to meet the needs of Canadians over the years.

The 150th birthday of Canada is July 1st.

The 100th anniversary of the ITA is September 20th

Watch the video, and share with a de-taxer near you.

inTAXicating is now a Certified Profitable Giving Specialist! What That Means For You…

Warren Orlans, the Director of inTAXicating Tax Services has completed his Profitable Giving Specialist accreditation which certifies that he is able to demonstrate understanding and proficiency in each of the following 4 areas;

  • The Tax Shelter Industry in Canada
  • The Regulations: Promoter Liability and Penalties, Third Party, and Civil Liability
  • Registered Profitable Gifting Arrangements and the Law
  • The Role of the Canada Revenue Agency in Regulating RPGAs

In addition to assisting Canadian Taxpayers who have fallen victim to Tax Shelter scams like the Global Learning and Gifting Initiative (GLGI), the Canadian Organization for International Philanthropy (COIP), the Relief Lending Group (RLG), Mission Life Financial Inc (MLF), Pharma Gifts International (PGI) and Integrated Receivables Management Inc / Integrated RM Inc (IRM).

inTAXicating provides Canada’s only full tax solution to assist Canadians solve all of their tax problems, including ones brought on by participating in tax shelters.
Below is only a snapshot of how to view a CRA debt related to a Tax Shelter / Gifting Arrangement and some of the options to start resolving the issue(s).
In order to reach a solution for Canadian Taxpayers the following things must be considered;
  1. Ability to Pay according to you and,
  2. Ability to Pay according to the CRA.

From there, you have only a few options;

  1. Do nothing
  2. Resolve the balance outstanding
  3. Fight the CRA

Should you choose to resolve the balance outstanding, you again have only a few options;

  1. Pay the balance in full
  2. Ask the CRA for a payment arrangement, and prove you need one
  3. Wait for the CRA to take it from you.
  4. File a Consumer Proposal
  5. File for Bankruptcy.

Keep in mind that the CRA does not “settle” debts like the IRS does.  The only way to “settle” or pay less than the full amount of tax, penalties and interest, is through bankruptcy or a proposal.

While all of the Collections matters are in process, you are entitled to file for Taxpayer Relief and ask the CRA to return some or all of the penalties and / or interest which it has charged you.  This application should be devoted time and effort to complete.  It should never be a cookie-cutter application written by someone else because the CRA sees those and mass-denies them.  Anyone trying to sell you a cookie-cutter application knows this and is “helping” you for the money and not because it’s the right thing to do.

Taxpayer Relief does not hold back Collections for doing what Collections does – trying to collect a balance owing – nor do CRA Collections care that a Taxpayer Relief application has been submitted.

A CRA review of a Taxpayer Relief Application can take upwards of a year.  Be prepared for that delay and the interest that accumulates on your tax account should you wait to pay it later.

Having a trained set of eyes look over and edit a Taxpayer Relief application is a great idea because if you’re taking the time to submit an application, you want to make sure that you are putting your best work forward.

But ultimately, when looking at your options… All of your options, you want to make sure that your interests are being looked after first.  You need an expert in CRA Collections, in Tax Shelters, and who can assist you with accounting, refinancing, insolvency and proposals and who can give you the best advice, the most cost effective advice and the advice that they would take if they were in your shoes.

inTAXicating Tax Services is that organization and we’re here to help you with all of that, and so much more.  We associate ourselves with like-minded professionals who also understand that you are the client and that you need assistance and service.

If you have any questions about any tax shelter that you may have been involved in, and you need to know your specific options, contact us at info@intaxicating.ca

 

Tips To Keep the CRA Collections Group Happy!

The following are tips to keep the CRA’s collections department happy.

This list in not fully inclusive of everything that you can do because you cannot send them gifts, they have to reject or toss them, and if you do their work for them – they might like that for a bit – until there are no more accounts, and then they will have no more work to do, and then no job.

 

So here are a few tips to keep CRA happy…

  1. Communicate, communicate, communicate.  If they have to contact you, they’re already angry.
  2. Don’t be a jerk on the phone to them.  Everything you say goes into a permanent diary and that diary is summarized semi-annually.  You don’t want anyone who accesses your account to think you’re a jerk
  3. Don’t accuse them of being out to get you…  They likely have 400-500 accounts and their goal is to collect some, write some off and let the others pay or go bankrupt.  Just show them some progress on any of those fronts and you’ll be in much better standing.
  4. Ask for the best and lowest settlement offer.  The CRA does NOT do that unless it is through insolvency or a formal proposal in bankruptcy.  The IRS settles debts, but this is not the IRS… The CRA is WAY better!
  5. If you enter into a payment arrangement, ensure there are sufficient funds in the account to pay the cheques. If a cheque is returned NSF (not sufficient funds), then the CRA collections officer will take immediate collection actions and getting those Requirements to Pay removed can be next to impossible.
  6. Keep current!!!  Whether during the period of a payment arrangement, or just through discussions with the CRA make sure you are up-to-date on all filings and payments (including GST/HST, income tax, payroll taxes, etc).   If you fail to remain current, the CRA can – and likely will – end the payment arrangement and pressure you for more.
  7. Understand that the CRA is not your bank, and treat them that way.  At a bank, you are earning credit, but at the CRA, in collections, you are paying 10% interest compounding daily… It’s not in your best interest to take your time re-paying them.
  8. If you have nothing to hide (and even if you do have something to hide), be honest with the CRA collections officer. Things you say may cause the CRA collections officer to become concerned.
  9. Provide the information that is requested by the CRA collections officer. If the CRA collections officer trusts you, he/she will be more likely to exercise discretion before pressing confirm on that Requirement To Pay.

The CRA Wants You To Make Your Installments! You Do Too!!

Did you know?

You can see your installment amount in the CRA’s My Account and make your installment payments online.

Even better, you can see your installment amount online!

To see your installment amount online, you need to login to My Account, select “View mail,” and click “Instalment.” If you don’t have My Account, you can register now, I’ve hyperlinked it for you, but understand that the registration process can take weeks.

Also, I do not recommend providing the CRA with Direct Deposit information if you have a tax liability or intend on having one any time soon as they will use that bank source to clean out your bank account… I’m just saying…  If I still worked there, I would too.

Back to installments…

Don’t forget: If you signed up for online mail, you may receive an email notification for your instalment reminder from the CRA!

If you fail to make your installment payments you will be penalized by the CRA, as laid out here;  http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/pymnts/nstlmnts/ntrst-eng.html.

Instalment interest

You will be charged interest if all of the following conditions apply:

  • The CRA sends you an instalment reminder in 2016 that shows an amount to pay
  • you must pay by instalment in 2016
  • you did not make instalment payments, or you made payments that were late or you paid less than what you had to pay

The CRA charges instalment interest on all late or insufficient instalment payments.

Instalment interest is compounded daily at the prescribed interest rate.

How the CRA determines the interest?

  1. The CRA calculates interest on each instalment payment that you should have paid from the day it was due to your balance due date based on the payment option that results in the least amount of interest.
  2. The CRA calculates the interest on each instalment you paid for the year starting from the later of the date the payment was made or January 1 up to the balance due date.

Then, they determine the interest you owe by charging the difference between a. and b., if the difference is more than $25.

Instalment penalty

You may have to pay a penalty if your instalment payments are late or less than the required amount.

The CRA apply this penalty only if your instalment interest charges for 2016 are more than $1,000.

To calculate the penalty, the CRA will determine which of the following amounts is higher:

  • $1,000, or
  • 25% of the instalment interest that you would have had to pay if you had not made instalment payments for 2016

Then, they subtract the higher amount from your actual instalment interest charges for 2016.  Finally, they divide the difference by two and the result is your penalty.  Clear as mud, eh?

Example

For 2016, John made instalment payments that were less than he should have paid. As a result, he has $2,500 of actual instalment interest charges for 2016. If John had not made any instalment payments in 2016, his instalment interest charges would have been $3,200. Since 25% of $3,200 is $800, we subtract $1,000 (the higher amount) from $2,500. The difference is $1,500. Then, we divide $1,500 by two. John’s penalty is $750.

Now the good part!

How can you reduce your instalment interest and penalties?

You can reduce or eliminate the interest charges and penalties by overpaying your next instalment payment or by paying it early. By paying early or overpaying, you will earn instalment credit interest. This credit interest is not refundable and can only be used against any interest charges on late payments for the same tax year.

 

How to Pay:

Choose the electronic payment method that’s right for you:

Online banking – Through your financial institution’s online banking, add the Canada Revenue Agency (CRA) as a payee and look for the “tax instalments” payment option.

Debit card – The CRA’s My Payment service lets you pay with your Visa® Debit or Interac® online debit card through participating financial institutions.

Pre-authorized debit – You can set up a tax payment in advance. You choose the bank account, the amount, and the date or dates of the transaction.

Credit card – You can use a third-party service provider that offers additional payment methods, including credit cards.

Carefully enter your social insurance number as your account number so the CRA can apply your payment to the intended account.

For more information, watch our video Change it up: Pay your taxes online and, go to make a payment to the Canada Revenue Agency.

Stay connected with the CRA:

On Twitter – @CanRevAgency.

Subscribe to a CRA electronic mailing list.

Add their RSS feeds to your feed reader.

You can also watch their tax-related videos on YouTube.

 

How do I correct or dispute inaccuracies on my credit file?


I get lots of questions related to Credit Bureaus and items which show up well after they have been paid or which do not belong on there at all.

Having worked for Equifax many, many years ago right after I started working for the CRA and they release all the temporary staff for an 11-month period due to budget cuts, I can proudly say that Equifax makes it very easy to communicate with them regarding any such issues.

It’s all laid out on their website, but I provided a summary here:

Complete and submit a Consumer Credit Report Update Form to Equifax.

It is necessary to specify what information is incorrect or what information does not belong to you.

Equifax will verify that information afterwards as part of their investigation.

You will need to include photocopies of all necessary documents and identification to update your personal Credit Report (Ex: receipts, legal documents, 2 photocopies of pieces of valid identification, including proof of current address)

Fax the request to them at:

Fax: (514) 355-8502

Your request will be processed within 10 to 15 business days. After this period has elapsed, a confirmation letter will be sent to your mailing address.

OR

By Mail:

Equifax Canada Co.
Consumer Relations Department
P.O. Box 190, Station Jean-Talon,
Montreal, Quebec H1S 2Z2

Your request will be processed within 15 to 20 business days . After this period has elapsed, a confirmation letter will be sent to your mailing address.

Equifax will verify the necessary information and mail you a confirmation.

 

Could it be any easier than that?!?