This is one of the most commonly asked questions of me: How do I know if what I read on the Internet regarding debt to the Canada Revenue Agency (CRA) is true or not?
The answer is quite clear, however, complicated at the same time.
If you owe money to the CRA and you are looking for options, suggestions, or tips on the Internet, you have to pay special attention to the “Solution” options which are advertised as if they are providing legitimate advice.
The most important thing to do is to take note of the terminology used in these ads – over and over again – because the intention of these ads and blog posts are not to help you but to achieve a high SEO (search engine optimization) ranking. These posts are written to capitalize on the number of eyes who will read that post because of the way it was written, not because it was intended to provide help to you.
Here is an example of a fear mongering ad, disguised as an article on taxes, meant to “help” you. I am paraphrasing the content, but the example should provide a clear clue as to the true intention of the poster.
Title: Understanding Canada Revenue Agency (CRA) Tax Assessment & Arbitrary Assessments
The sample post: CRA tax assessment is when the Canada Revenue Agency conducts a review of your income taxes. The most common form of CRA tax assessment is the Notice of Assessment that is sent once the CRA has conducted a preliminary review of your tax return. There is another CRA assessment known as “arbitrary assessments.” These assessments are also known as “notational assessments.” What this means is that, if you have not filed your taxes on time, the CRA could decide to complete and file your return for you.
Many people believe that, if you do not file your taxes, that the CRA will wait until you do file your taxes and then the CRA will penalize you by changing you penalties, fines, and interest.
This is not always true.
The CRA is able to choose to complete an arbitrary assessment in which the Canada Revenue Agency will estimate your income and the tax debt that you owe and then the CRA will charge interest on this debt as required.
The amount of tax debt that comes from a CRA arbitrary assessment will not be as favourable to you as it would be if you completed your return yourself.
The CRA will use previous income tax statements to complete your return and will not take steps to include expenses or deductions or attempt to give you any tax breaks.
In many cases, the amount owing listed by the CRA will be very high and additional charges, penalties and interest will be charged since the assessment was late.
You will then be subject to CRA collection efforts such as a wage garnishment of up to 100% of your income, or the CRA will empty your bank account and then freeze it so you cannot use it. They could also put a lien on your house and if you don’t pay them, sell it and keep the proceeds.
What do you do if you Receive a Notational Assessment?
If you receive an arbitrary CRA tax assessment, your options are;
- Pay the amount listed
- File an appeal of the assessment.
- You can also choose to file a return yourself at this point in an attempt to reduce your tax bill, but, this will trigger a CRA audit to ensure that your tax return is filed correctly.
In addition, if the CRA does not have the information it needs in order to complete an arbitrary assessment, it can take you to court where the court can order that you complete the return and pay a court fine.
If you ignore this court order, you could be subject to contempt of court charges and go to jail.
As you can see, your best option is to contact us, and we will help solve this problem. We have an army of former CRA staff at our disposal who deal with hundreds of these daily.
Let us help keep you out of jail and away from the prying eyes of the CRA.
WHEW.
After reading this, if you were not afraid of the CRA, you must be by now. This blog post started out trying to get people looking for CRA tax solutions and slowly wound its way through a series of lies and mis-truths and took the reader straight to audit and jail. It just stopped short of proclaiming that King Tax Man was going to descend from the clouds and throw tennis sized hail-balls at you.
This type of article is not good. It’s not accurate, heck, some of it is not even true. But how would you know?
What are the red flags that you should notice?
Let’s break down this article and address some of the “facts”.
First paragraph – mentions of CRA, or Canada Revenue Agency – 5 times. This is their SEO target, clearly.
I was also alarmed that the writer was unable (or unwilling) to state what a Notice of Assessment (NOA) is, and how the CRA actually issues them. To set the record straight, a Notice of Assessment is the computer generated form which is issued once a change occurs on someone’s tax account. This NOA carries with it a legal warning from which the CRA are able to take collections actions.
An additional lie occurred when the author stated that your tax return is looked over once it is filed. In truth, no one has reviewed your tax return. The data entry group take the paper-filed returns and just enter the information in the system. Electronically filed tax returns are run through a program aimed at identifying any obvious errors or inaccurate deductions taken.
There is the idd case where the CRA will flag and wait for your tax return, however try not filing for 20-years and being under audit regularly, and then you can get to that level.
Canada’s tax system is a self-reporting system so the information is accepted as filed, and the Audit, or Verification department are responsible for checking the information to make sure it is correct after the fact.
Another HUGE issue, is that there is a significant difference between an arbitrary assessment and a notional assessment.
Arbitrary assessments are issued for personal (T1) taxes and occur when the CRA’s non-filer group, or a CRA collector takes information on your personal tax account for that current year, plus previous years and prepare the unfiled tax return for you, less deductions.
In many cases, they are pretty accurate.
A notional assessment is specific to GST/HST and in these cases the non-filer unit or the collections unit will assess an amount owing for each period outstanding based on a suggested amount the system provides. That suggested amount is a combination of the previous filings, and the industry or SIC code that is associated to your file.
In both cases, returns can be filed and the assessments removed, however, Notices of Objection should be attached just to provide recourse should the filings not be accepted.
Filing the missing returns does not trigger an audit.
The whole piece about the CRA taking you to court, etc., makes absolutely no sense as it’s not even true. Arbs and Notionals are based on information in the CRA’s systems. If the CRA doesn’t have information, they can still raise an assessment.
I suspect the writer was just trying to close out the reasons for using them by tieing in the jail / court fine, for not complying. It’s not true at all, but it makes for a compelling story!
If the intention of the article was to really assist Taxpayers and let each and every Canadian decide if they want to pay for assistance / expertise, then all they had to do was discuss prosecution which is what the CRA can and will do if repeated attempts to file have been issued from the CRA (Demand to File) and have not produced the returns.
Maybe they didn’t know that existed…
Maybe they were not aware that failing to file is a criminal offense, if the CRA asks for the returns and they are not provided.
Certainly, they did not want you to know that failing to pay is not.
If someone looked at the above post, they would panic, contact this firm, and likely be convinced to pay a lot of money for something they could likely do themselves because they don’t want to make it worse, or go to jail.
It’s hard to get the truth out there when there are people and firms distorting the facts in order to make a profit off of taxpayers lack of understanding of how the CRA works.
Additionally, if they intentionally muddled the facts in this post to scare you into using their services, what other information have they creatively adjusted?
Or, if they believe this to be the truth, then they just don’t have the experience or expertise to know better, and do you really want to use them to represent you in dealings with the CRA?
Outcome:
I questioned the author in an online social media forum. I said, “I’ve always understood that an arbitrary assessment was specific to T1 returns and that they were actually quite accurate because most of the information used is already posted to your T1 account, whereas a notional assessment was specific to GST/HST and those figures were based on the industry or SIC code. Can you confirm this is your understanding as well?”
He never responded…
Surprised?
I’m not.
When you have CRA tax collections problems then you need the expertise of the firm with an actual former CRA tax collector. inTAXicating Tax Services.
Visit us at http://www.inTAXicating.ca
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