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.

Employee or self-employed worker? Federal Court of Appeal’s 2-Step Process.

[109/365] Taxation.
Taxation. (Photo credit: kardboard604)
It is important to determine whether a worker is an employee or a self-employed individual.  Employment status directly affects a person’s entitlement to employment insurance (EI) benefits under the Employment Insurance Act.  It can also have an impact on how a worker is treated under other legislation such as the Canada Pension Plan and the Income Tax Act (ITA).

The facts of the working relationship as a whole determine the employment status.  If the worker is an employee (employer-employee relationship), the payer is considered an employer.  Employers are responsible for deducting Canada Pension Plan (CPP) contributions, EI premiums, and income tax from remuneration or other amounts they pay to their employees. They have to remit these deductions along with their share of CPP contributions and EI premiums to the Canada Revenue Agency (CRA).

An employer who fails to deduct the required CPP contributions or EI premiums has to pay both the employer’s share and the  employee’s share of any contributions and premiums owing, plus penalties and interest.

If the worker is a self-employed individual and in a business relationship, he or she is considered to have a business.

The best way to be sure if there is any doubt is to request a ruling from the CRA.  A ruling determines whether a worker is an employee or is self-employed, and whether that worker’s employment is pensionable or insurable. If you have a payroll account and are registered on My Business Account, you can use the “Request a CPP/EI ruling” service in My Business Account.

As well, an authorized representative for the payer can also request a ruling electronically through the Authorized Representatives Section of the CRA website, here.

A payer or a worker can request a ruling by sending a letter or a completed Form CPT1, Request for a Ruling as to the Status of a Worker Under the Canada Pension Plan and/or the Employment Insurance Act, to their tax services office (TSO).

Recently, the Federal Court of Appeal (FCA), in the case of 1392644 Ontario Inc. (Connor Homes) v. Canada (National Revenue), 2013 FCA 85 (CanLII) weighed in to reconcile competing tests on the proper way to determine whether an individual is a contractor or truly an employee through a 2-step process.

This appeal in this case  involved 3 women who worked for Connor Homes, a licensed operator of foster homes and group homes for children with serious behavioural and developmental disorders, as area supervisors and/or child and youth workers.  Each worked under a contract that stipulated she was an independent contractor “responsible for payment of all necessary remittances, including CPP, EI and Taxes”.  Each was paid at a specified hourly rate or flat rate that depended on the service provided and provided those services in accordance with the homes’ policies and procedures manual.

The CRA ruled that each of these workers were engaged in employment for purposes of the Canada Pension Plan and the Employment Insurance Act., which Connor Homes disagreed with.

In hearing the appeal, the FCA commented that the question of an individual’s working status has become increasingly important with the trend towards outsourcing and short-term contracts and the consequent effect on entitlements to Employment Insurance and Canada Pension Plan benefits. The Court also acknowledged that although the question is simple in theory, it is difficult to apply with any degree of certainty given its fact specific nature and the ever-changing workplace.

Many employers also tend to categorize employees as independent contractors so they are not responsible for withholding and remitting CPP, EI and Tax to the CRA on behalf of the employee and to avoid being responsible for benefits.  If the CRA determines  otherwise, the employer is responsible for both the employer and the employee portions of CPP, EI and tax (plus P&I) until they are current.

The FCA refined a number of lower court decisions into a two-part test;

1st step: Is there a mutual understanding or common intention between the parties regarding their relationship? This step generally will be determined by the written contractual arrangements and behaviour of the parties and is quite subjective.  For example, is there a written agreement, were invoices issued for services rendered, was the service provider registered for GST/HST, were the income tax filings consistent with that of an independent contractor?

If so, then;

2nd step:  Do the pertinent facts support that the worker is providing services as a business on her own account?  The factors to consider include the level of control exercised over the worker’s activities, and whether the worker provides her own equipment, hires helpers, manages and assumes financial risk, and has an opportunity of profit in the performance of her tasks.  This step is very objective.

In this appeal, the FCA found that, although the parties intended their relationship to be that of independent contractors, they were, in fact, employees.  The degree of control exercised over their work was the same as that exercised over employees, they were limited in what they could earn and they took on no financial risks.  Although the individuals were expected to use their own motor vehicles, this factor was insufficient to outweigh all others.

So if after this ruling and after a review of the CRA website, you are still unsure if you, or your worker is an employee or an independent contractor, then it’s best to get a ruling to be sure.

Canadian Live-in Caregiver Program Services: Why using Service Canada’s Contract makes sense

With Canada’s Temporary Foreign Worker Program under attack again as a result of RBC’s announced plan to lay off Canadian employees and hire employees overseas, it’s important to understand that this program also has the Canadian Live-in Caregiver Program (LICP) as a part of it, and that program is essential to working Canadian parents who need to hire a Live-in Caregiver (nanny) from overseas for cost efficient reasons.  The LICP provides opportunity for parents to sponsor and bring trained, educated nannies from overseas, who live in their homes and work for them at a wage very close to the minimum wage.

At the outset, many feel that these nannies are being taken advantage of, however, I see it differently.  Yes, there are employers who ask their employees to work long hours, and do tasks which are outside of the normal requrements of the program, but there are also opportunities for these nannies to speak up and have this addressed, and the outcome is that the employer is banned from using the program.  Times have changed and thankfully this government has also changed the program to make it harder for employers to scam the system and also more difficult for employees to scam their employers.  Of course, there are exceptions…

One big way that employers and employees can start this relationship on the right foot is by following the rules of the LICP, and making sure that the employer and the employee know exactly what they are required to be doing during their time in the program and also to make sure that the employee and employer are also moving forward with plan for once the program ends so that the employee is making smart decisions about their future and the employer is able to assist and know where they stand regarding their caregiver.

At Intaxicating Tax Solutions, we are on the leading edge around requirements and changes to this program as we offer assistance at every stage of the process – from deciding whether to sponsor a nanny through this program, or hiring a live-out caregiver already in Canada, to the setting up and payroll account with the Canada Revenue Agency (CRA), networking, course suggestions for caregivers and dispute resolution surrounding tasks, requirements and working hours.  Our website is www.intaxicating.ca and you can find plenty of materials written by us around the program on the web.

With all that being said, I thought it might be useful to post the link to Service Canada‘s Live-In Caregiver contract.

The best way to get a working arrangement off on the right foot is by making sure that the employer and employee are both clear around requirements and what happens if these requirements need to be adjusted.  As a contract is a requiremt of the program for sponsoring a live-in caregiver, those hiring live-out caregivers and those nannies who are living in, but not through a formal program like the LICP, also benefit from having a formal contract in place to keep requirements clear.

The contact forms the basis of a legal agreement between employer and employee as to what is expected and agreed upon by both sides and is used in case of disagreement to support the previously agreed upon terms.  Before employment begins both parties have to agree to all the work arrangements in the contract which should outline every detail from hours worked, to amounts renumerated to specific tasks and vacation pay.  It’s like going to get a job anywhere else in the world, where you sign the contact before your employer agrees to hire you and having a formalized contract as part of this program helps prevent employers from taking advantage of nannies and allows nannies to understand what they are getting into to before they agree to start work.

Too often I hear and read about employers who think their live-in nannies are on call 24/7 at their disposal to take care of them and their kids, and their house and their pets…  I also hear and read in parenting groups about employers placing curfews on their nannies, or making them address you as Mr. or Mrs. like they are a servant. Most of it is not allowed and some of it is just not right. If you accepted a job working at a top law firm, or in the warehouse of WalMart would you allow for them to treat you like that?  I suspect that answer is no.

Now that the contract is part of the application process – prospective nannies who come to apply to the program here, http://www.cic.gc.ca/english/work/caregiver/apply-how.asp, now understand that there are tight guidelines governing their requirements and rights, as well as the employers.  Nannies MUST sign a written contract with their future employer, and the employer must also sign the contact which is them submitted together with the positive Labour Market Opinion (LMO).

The positive LMO is issued to the employer by the government after a lengthy review of the submitted documents where the information is verified, a phone interview is conducted, and if everything checks out, the employer is deemed to be a suitable employer who has followed all the government requirements and regulations for the LICP.  Employers must also provide to the government their payroll BN number with the CRA, and have available suitable space in their home for a nanny to live, and prove that they have children in need of caring for and the financial capabilities to support a nanny.

The contract must be the same employment contract submitted to HRSDC/SC by your employer, unless you provide an explanation of any changes (for example, a new start date).

The written employment contract will ensure there is a fair working arrangement between you and your employer. The employment contract must demonstrate that the Live-in Caregiver Program requirements are met by including a description of:

•mandatory employer-paid benefits, including:

◦transportation to Canada from your country of permanent residence or the country of habitual residence to the location of work in Canada

◦medical insurance coverage provided from the date of your arrival until you are eligible for provincial health insurance

◦workplace safety insurance coverage for the duration of the employment

◦all recruitment fees, including any amount payable to a third-party recruiter or agents hired by the employer that would otherwise have been charged to you

•job duties

•hours of work

•wages

•accommodation arrangements (including room and board)

•holiday and sick leave entitlements

•termination and resignation terms

The contract the government is expecting to see does not have to look exactly like the one provided for in the link – that one is merely a template – but it must contain all the information and clauses indicated as mandatory and the use of an alternate contract format may cause delays to the processing of the LMO application as HRSDC and Service Canada officers will need to determine if the contract complies with LCP requirements.  A copy of that contract can be found here.

Before you jump into hiring an employee through the Canadian Live-in Caregiver program, or someone already in Canada, make sure that you have all the requirements covered and that you and your employer are on the same page.  If you would like further information or have questions, please feel free to post them in the comment section, or contact us at info@intaxicatingtaxservices.ca.  You can find details around our T4/T4 summary services, our payroll services or our consultation services on our website or by contacting us.