Statute of Limitations for Tax Debt: Canada

Statute of Limitations for CRA Debts – Truth vs Myth

There is a common belief that there is a statute of limitations on tax debts and that taxpayers can ride out these periods and ultimately pay no taxes.  Google it, and you will see all kinds of information out there, but it’s the Canada Revenue Agencies information which matters the most.

A Collections Limitation Period (CLP) is the time in which the Canada Revenue Agency (CRA) can begin actions to collect a tax debt.

Myth: After the CRA issues a notice of assessment, it has either 6 years or 10 years to collect the debt. If you don’t pay what you owe within that time, the CRA can no longer collect the debt.

Fact: Each tax debt has a 6 or 10 year collections limitation period (depending on the tax) and the limitation period can be restarted or extended by the CRA when certain events occur.  At that point, the total amount of time that the CRA has to collect the debt will be longer than 6 or 10 years.

Even after the collections limitation period ends, you can still have a tax debt and interest will continue to accrue until the tax debt is paid in full.

 

Start of the collections limitation period

The limitation period starts on the date that a notice of assessment or reassessment is sent, or 90 days after that date, depending on the type of tax debt.

 

Types of tax debt

The collections limitation period start date and duration will be different depending on the type of tax debt. Some tax debts are subject to collections restrictions, while others are not.

The following are some of the most common types of tax debt:

 

Individual (T1)

The Collections Limitation Period (CLP) starts on the 91st day after the CRA issues the notice of assessment – unless there is an objection filed.  There is a 10-year CLP on T1 debts which can be re-started and extended by the CRA.

 

Corporate (T2)

The CLP starts on the 91st day after a notice of assessment or reassessment is sent unless a NOA or appeal has been filed.  The 10-year CLP applies, however the CLP can be restarted and extended.

 

Large Corporations (as defined by the Income Tax Act)

The CLP starts on the 91st day after a NOA or reassessment is sent.   The 10-year CLP applies, however, the CLP can be restarted and extended.

This type of tax debt is subject to a 90-day collection restriction for the period after a notice of assessment or reassessment is sent, however, the CRA can act to collect 50% of the amount owing by a large corporation as soon as a notice of assessment or reassessment is sent.  The CRA can start collection action on the 91st day for the remaining 50% of the amounts owed by a large corporation, unless a notice of objection or appeal is filed.

 

Payroll (T4) Deductions

The CLP starts the day after the Notice of Assessment is sent.  There is a 6-year collections limitation period, however this CLP can be restarted and extended at any time.

NOTE: There is no collections restriction on Trust funds, so the CRA can begin collections actions the day after a Notice of Assessment has been sent.

NOTE: If a Notice of Objection or an appeal has been filed, the CRA can continue to collect the debt(s)

 

GST/HST

The Collections Limitation Period starts the day after the Notice of Assessment is sent and while the 10-year CLP applies, it can be re-started and extended at any time.

NOTE: Additionally, since GST/HST are also Trust Funds (funds held in trust for the Crown), there is no collection restriction once the Notice of Assessment has been sent.

NOTE: If a Notice of Objection or appeal is filed, the CRA can continue to collect the debt(s).

 

Collection Restriction Period

For tax debts subject to collection restrictions, the CRA cannot start collection action:

  • during the 90 days after a notice of assessment or reassessment is sent
  • during the time that you dispute your debt by filing a notice of objection or appeal

However, if the CRA determines that it might not be able to collect a tax debt because of collection restrictions, it can apply to the Federal Court (Canada) for a jeopardy order.  If granted, this order will let the CRA take collection action immediately.

 

Restart of the collections limitation period

The limitation period is restarted when either you or the CRA takes certain actions. Tax debts subject to the 6-year limitation period are restarted for another 6 years and tax debts subject to the 10-year limitation are restarted for another 10 years.

The following are examples of actions that will restart the collections limitation period. This is not a complete list.

 

Actions you initiate

The collections limitation period will restart when you:

  • Make a voluntary payment
  • Write a letter to the CRA proposing a payment arrangement
  • Offer to provide security instead of paying the amount owed
  • Make a written request for a reassessment of an amount assessed
  • File a notice of objection with the CRA
  • File an appeal with the Tax Court of Canada
  • Ask the CRA if you can make pre-authorized debt payments

 

Actions the CRA initiates

The CRA takes various actions to collect tax debts when taxpayers don’t make voluntary payments.

The collections limitation period will restart when the CRA:

  • Issues a garnishment or statutory set-off to collect an outstanding tax debt when you don’t make voluntary payments
  • Applies a refundable credit to your tax debt and notifies you by sending a letter or Statement Of Account
  • Issues a NOA or reassessment against a third party for amounts you owe
  • Certifies your tax debt in the Federal Court of Canada
  • Initiates seizure and sale action to collect your outstanding tax debt

 

Extension of the collections limitation period

The events listed below can extend the collections limitation period. When this happens, the clock stops running on the date that an event begins and it will not run during the event.

This has the effect of stalling the collections limitation period.

When the event is completed, the collections limitation period resumes where it left off.

Other events can then restart the limitation period.  It will end when the 6‑year or 10-year limit has been reached, even if it took more years than that to reach that limit if you include the stalled time.

The following events can extend the collections limitation period:

  • You file an assignment (bankruptcy or proposal) under the BIA, CCAA or FDMA.
  • The CRA accepts security instead of payment of a tax debt.
  • You become a non-resident of Canada after the CRA issues a NOA or reassessment.
  • The CRA postpones collection action without accepting security for an objected or appealed GST/HST debt. This applies only to GST/HST tax debts assessed under the Excise Tax Act.
  • You file a Notice of Objection with the CRA. This will extend the limitation period only for tax debts subject to collection restrictions.
  • You file an appeal with the Tax Court of Canada. This will extend the limitation period only for tax debts subject to collection restrictions.

 

NOTE: Filing a Notice of Objection with the CRA or an appeal with the Tax Court of Canada will restart the collections limitation period for all types of tax debts because both of these actions are considered acknowledgments of debt.

Similarly, if your tax debt is subject to collection restrictions, filing an objection or appeal will extend the collections limitation period.

 

End of the collections limitation period

Once the period ends, the CRA cannot take any further action to collect the debt, however, the tax debt still exists and you can make voluntary payments.  Voluntary payments you make after the limitation period ends will not restart it.

Full Disclosure Alert: Know Who You Are Dealing With!!

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.

What makes inTAXicating so successful is that Taxpayers, business owners and other professionals read my words, Google me, check out my LinkedIn profile and determine that I know my stuff.

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.

Email: info@intaxicating.ca

Why inTAXicating Tax Posts Rank Higher than the CRA?

Anyone else get a lot of SEO Spam?

SEO, in case you were not aware is the acronym for Search Engine Optimization, and is a marketing technique which focuses on growing the visibility of your web-site through non-paid search engine results.

To get a higher ranking website, you need a combination of good content and your site has to hit the right keywords.  Doing this will drive traffic to the website, and all of this helps the search engines know that your site needs to be shown to people searching for whatever you have written about.

It stands to reason then, that just because you created a web-site (or blog) it doesn’t mean that anyone will see it or read it.  The site has to be “indexed”, meaning that it needs to show up in search engines, and it gets indexed by having people show up and visit the site.

The more visitors, the higher the ranking.

What does SEO spam have to do with inTAXicating and the CRA?

Quite a lot, actually.

In and amongst the spam we get on our website, the majority of pitches are from SEO companies who promise to help me get this website on the “first page of Google”.

Now, I know that a lot of these inquiries are spam because they are fraudulent – trying to steal identities and money – however there are some real companies who reach out to help me improve my site’s ranking, and to those companies – and to ANY company who is going to take the time to make a pitch any company, I offer this advice.

At the very least, before you reach out, you really need to check to see that you are offering a service which they actually need?

You see, there are many inTAXicating blog posts which already come up on the first page of Google.  Some, in fact, come up first or second.  Many even come up before the Canada Revenue Agency!

So thank you for the offer to get me on the first page of Google searches.  If I was even going to consider using your services at any point in time, and you have not taken the time to see that, what less obvious things have you missed?

Business fail because they do not take the time to check their prospective client(s) out and they end up making a pitch which shows there is no attention to detail being paid.

In the meantime, if our blog posts are ranking higher on Google – and we do not promote, or pay for any ads – then you know where a large number of Canadians are going to find answers for their tax problems and to find resources to help them in their dealings with the CRA.

Even the CRA sometimes contacts us for feedback regarding the way they have written something to see if our understanding represents the message that the CRA is trying to get across.

If you, or anyone you know has a tax issue with the Canada Revenue Agency, then they need to contact us, at inTAXicating Tax Services.  We rank higher than the CRA on CRA tax matters for a reason.

Email us here: info@intaxicating.ca

 

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.

 

Changes to the CRA’s RC59 Business Authorization Form

The Canada Revenue Agency has announced to tax preparers and representatives that if they wish to have online access to a business client’s tax information after May 15, 2017 they will have to complete the authorization request in the Represent a Client section on the CRA web site.

In order to do this, tax representatives have to log into Represent a Client and select “Review and update” from the Welcome page.  They then select “Authorization request” at the bottom of the “Manage clients” tab and follow the instructions.

Once the request is complete, tax representatives will need to print the signature page for their client to sign. Once it is signed, a scanned copy of the document may be sent to the CRA using its submit documents feature.

Using this method will allow tax professionals to gain access to their business clients’ information in five days or less instead of the 15 days it currently takes with form RC59.

If, however, you still prefer your current process, you can still use form RC59 to request access to your business clients’ information by telephone or mail.

And if you need to have authorization in less that 5 days, you should reach out to us here at inTAXicating, because with almost 11-years’ experience working in the CRA’s Collections department, we know how to get that authorization in the hands of someone in minutes!

Follow us on Twitter @inTAXicating.

Follow us on Facebook at http://www.facebook.com/intaxicating

Follow us at our website; http://www.intaxicating.ca

Send us an email: info@intaxicating.ca

Or leave us a comment anywhere else!

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?

“New” CRA Powers are Not so New after all! Unless…

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?)

spyingWell 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;

  1. If you happen to have partaken in a criminal activity, you might not want to disclose that to the CRA collector.
  2. Make sure to stay compliant!  File up to date and don’t give the CRA reasons for looking for stuff.
  3. 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.
  4. If you’re not sure… Ask.  Then use your judgement.

 

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

How inTAXicating solved a complex CRA tax issue relating to GST/HST, Deemed Trust, s.160/325 Assessments, CRA Collections where the incorporated director was advised to go bankrupt.

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 Canada Revenue Agency (CRA) tax problem because their firm was just too expensive for the couple.

Upon accepting the offer, I was told there was a balance owing to the CRA for GST/HST, and that the firm was essentially bankrupt, with no ability to pay.  The business directors felt that they did not owe the CRA anything, and because they were essentially insolvent, they had stalled and delayed the CRA As much as they could.

Until the CRA advised them that they were going to proceed with the raising of a S.160, Non-Arms Length Deemed Trust assessment for a payroll debt and a S.325 Non-Arms Length Deemed Trust assessment for GST/HST.

This, however, was a huge problem because when raising a s.160/325 assessment, the CRA essentially takes the debt that the corporation has not paid, and transfers it to another corporations or person who benefitted through dealings with that corporations to the detriment of the CRA.

That 3rd party eventually turned out to be family…

It was all over $45,000 owing to the CRA.

While a solution sounds simple enough – confirm the balances owing to the CRA, then confirm the legitimacy of those debts, tie up some loose ends on the compliance side, and then make arrangements between the client and the CRA to resolve both matters.

One huge issue is that the client spoke to the CRA and the collector knows that the s.160/325 is a problem (but the collector doesn’t know why).  In the collector’s eyes, she has the upper hand because the assessment touches a nerve with the client, but on the other hand, without knowing the nature of these concerns, the CRA are taught to think the worst, and thus are more eager to raise the assessment because they suspect the client is hiding something.

So I connected with the couple, got their side of the story, then met their 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 because they didn’t get paid.

With money owing to the CRA, the collector was prepared to use their Deemed Trust provision and raised a s.160/325 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.160/325 because that would survive the bankruptcy and would result in the CRA getting paid on all fronts.

Having worked in the CRA’s collections department for almost 11-years, logic told me that a business which was legitimately struggling would not have significant amounts of GST/HST owing in its final years.  They would not have had the financial resources to buy inventory to sell if the business was failing, rather, they would be selling off their inventory at a deep discount to recover the maximum amount possible.

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.  The CRA quickly arranged for a desk audit of the refunds, and the client quickly provided the supporting documentation to support the majority of the ITC’s, and within 2-weeks, the audit was done, the returns accepted and sent for posting.

Upon posting, the revised returns knocked down the balance owing considerably.  All of it.  The payroll debt too.

As a result, the CRA cancelled the s.160/325 assessments turned their attention to the T2’s which we had completed and filed in the interim.  The credit from the GST/HST is sitting on the CRA’s systems waiting for the T2’s to post in full.

That’s how inTAXicating Tax Services helps!

Knowing the ins and outs of the CRA’s collections department is a skill which very few possess.  Thinking to ask the CRA for information related to the GST/HST filings and to ask the CRA to amend them even though they fell beyond the 4-year limitation period for allowing Input Tax Credits (ITC’s) is a request that many accountants will not make.

Our prior CRA collections experience allows us to stand out.  inTAXicating Tax Services.  Contact us at info@intaxicating.ca

 

 

Your Canada Revenue Agency (CRA) Tax Collections Questions Answered

Here are the answers to the most frequently asked CRA Tax collections questions from the past weekend:IMG_7817

  1. Can you bribe a CRA officer in Canada?

Answer: NO.

First off, bribing a CRA officer is a criminal offense and you could quickly wind up with the RCMP at your door, or under investigation, but more realistically, the staff at the CRA tend to be lifelong civil servants and one of the great benefits of working in the civil service is the great pension.  Few civil servants are willing to even entertain the thought of giving up their pensions, let alone going to jail for someone when they have hundreds of other people to collect from.

2.   Is there GST/HST on a lien?

Answer: Let’s presume that the question is asking if there is additional GST / HST on a lien, and the lien has been registered by the Canada Revenue Agency (CRA).  In that scenario, the answer is no.

The CRA would register a lien for unpaid or unfiled (and assessed) GST / HST, and the amount used for the lien is the amount owing on the day it has been registered in Federal Court.  This fact is important because from that day forth, interest continues to accrue and accumulate on the tax account with the CRA, but the lien only reflects the amount owing at a point in time.

Often, a lien will get paid out and then the CRA’s computer system kicks out an update Notice of Assessment with an additional balance owing  and taxpayers are puzzled having just paid off a lien.

They did pay the lien.

Now they pay the rest of the balance owing.

3.   Where can I get the truth about Voluntary Disclosure?

Answer: From the CRA website, of course.  The link to the VDP section of their site is here;  http://www.cra-arc.gc.ca/voluntarydisclosures/

4.   Can I claim mileage drive to and from work at the CRA?

Answer: I hope you enjoy your career at the CRA and are not an auditor, because you should know this answer!  You cannot claim mileage driving to and from work.

From the CRA website; http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/229/slry/mtrvhcl-eng.html

“If you use a motor vehicle for both employment and personal use, you can deduct only the percentage of expenses related to earning income. To support the amount you can deduct, keep a record of both the total kilometres you drove and the kilometres you drove to earn employment income. We consider driving back and forth between home and work as personal use.”

13 Ways to Know You Need New Tax Representation for your CRA Tax Issues.

Here are 13 things that should NEVER be said to someone with a Canada Revenue Agency (CRA) tax problem – from someone who claims to want to help (or just your money).

Each quote below was an actual quote uttered by a tax solution representative or accountant to a prospective client in my presence.

Sit tight, and get ready to shake your head in disbelief…

13.  “GST, HST, PST… They’re all the same.”

12.  “CRA Collectors don’t care about you.  They treat their clients like a ‘whack-a-mole’ game.  You pop your head up and they smack you on the head with a hammer.  We provide you with a helmet or advise you to stay underground until the game is over.”

11.  “You’re an alcoholic? GREAT!  Substance abuse qualifies for relief!!”

10.   “I can tell you for a fact that the Auditor General requires the CRA to close files, NOT collect money.  The benchmark is 7-years.  We can close your file in 7-years!”

9.   “You’re just a little guy! Nobody cares about you.”

8.   “If you tell the CRA anything you are shooting yourself in the feet.  That’s dumb and it hurts.”

7.   “I know the CRA have won in Tax Court, but they are wrong, and this time we have everything we need to prove them wrong!”

6.   “Just ignore them and it will all go away.”

5.   “You don’t need to speak to a Tax lawyer, or an accountant.  They’re useless.  You should never talk to the tax preparer.  Just pay us $5,000 and we can make it all go away.”

4.   “The Taxman…”

3.   “I don’t care what the CRA wants, and how soon they want it.  They’re getting what I want to give them, when I’m ready to give it to them, AND they’re going to see that I’m right and they are wrong.”

2.   “We need to reduce the amount that you owe, so I’m going to create a T2200 for you, and claim a lot of expenses that your employer has not deducted like mileage, phone, and parking.  They’ll never know its not true and on the off-chance that they ask, I have hundreds of parking receipts in my car I can give them.  It’s perfectly fine…”

  1.   “Don’t even bother opening that envelope… Just throw it out.”

 

Just missing this list, but barely, is the commonly uttered line; “Quick, transfer the house out of your name before the CRA registers a lien against it!”

When you need new representation, contact us at info@inTAXicating.ca