Filed your 2019 Personal Income Tax Return: Now what?

What an absolute crazy year 2020 has been thus far!

The tax filing deadline for individuals to file their 2019 personal income tax returns (T1) in Canada was June 1st, by 11:59pm. For Canadians who have earned self-employment income, their returns are due by June 15th, 2020. Payments for balances owing are due to the CRA by September 1st, 2020, and the CRA is currently not charging interest on exsting balances owing the them, nor interest or penalties for any late payments or filings for the time being.

New and enhanced services

Check CRA processing times – Want to find out quickly how long it will take for the CRA to process your return, or your refund? Use the Check CRA Processing Times tool on canada.ca to get a targeted completion date. The new tool uses published service standards and information you select from drop-down menus to calculate targeted completion times for various programs.

Dedicated telephone service for tax service providers – If you are still working on a tax return(s), the CRA have been offering this service to small and medium income tax service providers across Canada for the 2020 tax filing season. By using this service, income tax service providers can connect with experienced CRA officers who assist with complex tax questions.

Representative authorizations – Thank goodness, the CRA has created a new e-authorization process for online access to individual tax accounts which permits representatives to request access to individual tax accounts using a web form through Represent a Client. As a result, the existing T1013 form will be discontinued for access to individual tax accounts.

The T1013, RC59, and NR95 will be combined into one form called the AUT-01 Authorize a Representative for Access by Phone and Mail. This form will only be used to request offline access to individual and business tax accounts.

Owing Money to CRA

If you have filed, or are about to file and you owe money to the CRA, there are a couple of critically important facts you should keep in mind.

  1. If you have applied for any of the COVID-prompted benefit programs, and have done so through Direct Deposit, you may, unfortunately, be at risk.
  2. The CRA is delaying the payment of balances owing until September 1st, while not charging interest on all accounts except payroll accounts. This shouldn’t mean its okay to forget it until the fall, but rather, with no interest being charged on existing balances, its the best time to figure out ways to catch up, set aside funds, or find / earn funds to pay off the CRA
  3. Before we all know it, it will be September, and a few things will be certainties. Our year-end will be fast approaching for the 2020 tax filing season, any balances owing to the CRA will be due, and the Canadian debt and deficit will be through the roof. The Federal government will need those funds ASAP, and aside from raising taxes, they will likely begin aggressive collections of taxes owing. The quickest way the CRA can recover funds, is by issuing a Notice of Assessment (which has legal warning in it) and then taking those funds from your bank account.
  4. You have options outside of bankruptcy, consumer proposals, high-interest loans, or high-rate mortgages. Preparing in advance for this situation and working with the CRA can prevent unwanted or unexpected surprises.

 

The CRA’s collections staff have already been advised where to locate direct deposit information and how ensure it is accessible when full collections are permitted.

Don’t wait until it’s too late.

inTAXicating can assist with anything CRA-related. With over 10-years experience working in the CRA’s Collections department, we know things the CRA will never tell you.

 

2018 Federal Budget Highlights: 12 Changes Related to Taxation, the CRA, and you, the Canadian Taxpayer

The Federal Liberal government has just unveiled their 3rd budget, and in doing so will be increasing spending by roughly $20 billion dollars, bringing the federal deficit to roughly $670 billion dollars.

Looking at the tax issues, here are the main items which come from the budget this afternoon;

  1. 5-Week “Take-it-or-leave-it” Paternity Leave.

The government implemented a 5-week “take it or leave it” parental leave, pretty much like what Quebec has, in order to entice more dads to take paternity leave.  This would begin June 2019 (not sure why it takes this long to implement) and the Liberals expect it to cost taxpayers $1.2 billion dollars.

What this does not do is change the corporate culture which deters dads from taking time off, nor does it entice more moms to join the workforce.

What might have helped, would be more available daycare spaces, or fixing the Live-in Caregiver program which worked very well until it didn’t.

2.  Throwing bad money after bad money – Phoenix Pay system

If you have been following the Phoenix payroll fiasco that has been going on in the CRA, you would know that the CRA has already spent a lot of money on a payroll system which didn’t work, and then a ton of money to try and fix it.

Now, the Liberals have announced that it intends to eventually move away from Phoenix and explore the “next generation of the federal government’s pay system, but before doing so, the Liberals provided $16 million over the next 2 years to “research” a new pay system.

I’ll do that on my own, for half that amount.!

While “researching,” the CRA will now have $431.4 million over 6 years to try to fix the existing Phoenix system.

When you add the hundreds of millions of dollars that the Liberal government has already invested in fixing the Phoenix pay system, and the researching costs, and the budgeted costs, you will come to a figure of roughly $900 million on a system that this government will move away from.

This system was supposed to save the government roughly $70 million per year, starting in the 2016-17 fiscal year, and the Auditor General even said that scrapping the pay system would be the worst thing the government could do because if they start from scratch, they could have the same issues with another system!

3.  Help for the CRA to answer their phones!

The Liberal government is providing $206 million over 5-years to the CRA to help the Agency answer their phones.  This issue came up in November when the Auditor General noted that the CRA’s call centre only picked up the phone about one-third of the time.

The money will be used to improve the CRA’s telephone service, improve their online services and increase the number of community-based programs which help low-income people prepare their tax forms.  Ideally the call centre hours will also be expanded, and more training will be provided to ensure that more correct answers are provided.

4.  Private Company Passive Investment Income

Beginning taxation year 2019, there will be a phasing out of access to the small business deduction for Canadian Controlled Private Corporations (CCPC’s) which earn more than $50,000 of investment income.  The current rules for the refundable tax on dividends paid by CCPCs will also be amended.

CCPC’s are entitled to a preferential tax rate on up to $500,000 of qualifying active business income – the “small business deduction.”

Going forward, CCPC’s who earn income or net capital gains from property (not properties used in an active business) will be treated as follows; For each $1 of investment income earned over $50,000, the small business deduction limit will be reduced by $5, so once a CCPC has investment income greater than $150,000, they will lose their small business deduction entirely.

The government has decided that Canadians who earn income passively, ie/ rental income, deserve to pay more tax because either;

a. It’s not fair to Canadians who have to “work” to earn income

b. The Liberals got elected taxing the “rich” and by earning money this way – damn you – you are on their list, or,

c. The Liberals would tax a tax if they could because they need tax revenue to pay for all their promises.

5. New Tax Rules for Trusts to begin in 2021.

The government needs more taxes, hence the new tax reporting requirements for trusts which were unveiled in the budget.  The intention of these new rules is to provide the CRA with information related to beneficial owners, or potential beneficial owners of trusts.

Currently, trusts which do not earn income or make distributions in a taxation year are generally not currently required to file a T3 trust return.  (Trusts are required to file T3 returns if there is tax payable in the year or if the trust distributes income or capital to its beneficiaries.)

These new rules apply to express trusts which are resident in Canada as well as to non-resident trusts currently required to file T3 returns.  Each trust will have to provide the CRA with the identity of all of its trustees, beneficiaries and settlors, as well as each person who has the ability – through the trust terms or related agreements – to exercise control over trustee decisions regarding the appointment of income or capital of the trust, such as a protector.

The budget currently grants an exemption to mutual fund trusts, segregated funds, trusts governed by registered plans, graduated rate estates and qualified disability trusts, non-profit organizations and registered charities, and certain trusts that have been in existence for less than three months or that hold less than $50,000 in specified passive assets.

6. Tiered Partnerships Losses and At-Risk Rules

Essentially, partnerships wanted to use losses from one partner to lower the income of another partner, but the CRA disagreed.  The matter went to court and the CRA lost.  This budget reverses the CRA’s loss, making it a win, and worse than that, it is effective the date of the budget, which was February 27, 2018.  Losses are now lost.

7. Increased Assessment Period for CRA on Foreign Interests

Effective February 27, 2018, the CRA will have an extended reassessment period of taxpayers in respect of income arising in connection with foreign corporations in which they have at least a 10% interest in because it’s a long, often difficult process for the CRA to audit these foreign affiliates.

8. Reduced Filing Deadline to 6 Months for T1134.

Effective 2020, Taxpayers who currently had 15-months to file Form T1134, now have 6-months to do so.

9. Fighting Aggressive International Tax Avoidance

The Liberal government committed to fight international tax avoidance by strengthening rules related to controlled foreign corporations, addressing issues of treaty abuse, adopting the OECD revised Transfer Pricing Guidelines, and of greatest significance is the pledge to abide by tax reporting requirements of countries which Canada bilateral exchange agreements – and providing information to the tax authorities of these countries.

The acceptance of the OECD multilateral competent authority agreement now increases the countries which Canada can provide information to, and get information from.

Additionally, the CRA will be able to participate in what was called a “spontaneous exchange of information” on certain tax rulings with other tax administrations as part of a coordinated international effort to counter harmful tax practices.

The CRA also gets $38.7 million to expand its offshore compliance activities through the use of improved risk assessment systems and business intelligence, and to facilitate the hiring of additional auditors.

The anticipation is that the CRA will need these auditors to act on the new information they will be receiving as a part of the OECD/G20 Common Reporting Standard participation.

Another key tax issue relates to reassessment periods and non-residents of Canada to address a scenario where the CRA reassesses a taxpayer in order to reduce or eliminate a loss in a taxation year which results from a non-arm’s length transaction with a non-resident.  Currently, the CRA cannot reassess the taxation year to which that loss was carried back because the reassessment period has elapsed, but going forward, the CRA will have 6 years after the normal reassessment period to reassess the year to which the loss was carried back in such circumstances.

Another change impacts a scenario where a taxpayer contests a requirement for information (RFI) or an application for a compliance order – as this period will not be included when computing the time limit for the CRA to reassess.

This “stop-the-clock” rule is similar to the existing rule that applies for purposes of requirements for foreign-based information.

10. GST/HST

GST/HST is applicable on the fair market value of the management and administrative services provided by the general partner to an investment limited partnership where consideration becomes due or is paid before September 8, 2017.

GST/HST now applies to management and administrative services rendered by the general partner on or after September 8, 2017, unless GST/HST was charged by the general partner before that date.

The GST/HST is generally payable on the fair market value of management and administrative services in the tax year in which these services are rendered (however rules to calculate FMV, and what constitutes FMV were not provided at this time).

11. Excise – Cannabis Tax

A new excise duty framework for cannabis products under the Excise Act, 2001 applies to all products available for legal purchase, including fresh and dried cannabis, cannabis oils, and seeds and seedlings for home cultivation.

The cannabis taxation program will be administered by the federal government on behalf of most provincial and territorial governments on a coordinated basis. 75% of the taxation revenues from a combined $1 per gram / 10% of the price of the product, whichever is higher, excise duty rate will flow to participating provinces and territories, with the federal government receiving the remaining 25%.

12. Increased Funding to CRA and Tax Court of Canada

The budget provided money to the CRA and the Tax Court of Canada to:

  • $79 million over 5 years and then $15 million per year going forward in order to develop an electronic platform for processing trust returns;
  • $90.6 million over 5-years to help the CRA pursue domestic and international cases which have been identified as high-risk potential danger of loss through enhanced risk assessment systems;
  • $30 million over 5-years to enhance security measures aimed at better protecting the confidentiality of taxpayer information; and
  • $41.9 million over 5-year, and $9.3 million annually going forward to provide support for new front-line registry and judicial staff, most of whom are expected to support the Tax Court of Canada.

And so much more…

 

Don’t Forget The T3’s!

Are you a Canadian resident who also has an obligation to file in the US?  Before you send in your US taxes to meet the April 15th filing deadline, make sure to remember there is still one more tax slip on its way.

If you are set to receive a T3 for a Canadian trust, you have a little more time that your dual-filing counterparts.

T3 slips, otherwise known as the Statement of Trust Allocation and Designations (RL16 for Quebec residents), are being prepared and mailed – copies to the CRA – by the end of March.

A T3 slip reports how much income you received from investment in mutual funds in non-registered accounts, from business income trusts or income from an estate for a given tax year.

If you have not received your T3 tax slip – get in touch with the relevant financial administrator or trustee but make sure to file your income tax return by the deadline anyway to avoid late filing penalties.

You can find more information from the CRA website, here.

Happy New Year (2016) from the Internal Revenue Service (IRS)

CRA Reminder! This Monday, June 15th 2015, is the Deadline for Self-Employed Individuals to File their 2014 Income Tax and Benefit Return!

inTAXicating and The Canada Revenue Agency (CRA) would like to remind those taxpayers who are self-employed individuals (and their spouses or common-law partners) that the 2015 personal tax (T1) tax filing deadline is midnight on Monday, June 15, 2015.

If you had an outstanding balance for 2014, it would have had to be paid to the CRA on or before May 5th 2015, which is different from the normal April 30th deadline as a result of that extension granted by the CRA this year.

If you miss the deadline, you might be liable for a late-filing penalty (cumulative if you have been filing late in multiple consecutive years), and / or a late-filing penalty on amounts owing which applies to returns received after the June 15, 2015 deadline.

The CRA suggests you file electronically, using NETFILE , which allows you to file your individual income tax and benefit return over the Internet quickly and easily.  For a list of software and web service options, including those that are free for everyone, go to http://www.netfile.gc.ca/software.

If you have a balance owing, you can make your payment using your financial institution’s telephone or Internet banking service. For more information about online payments, go to http://www.cra.gc.ca/payments or contact your financial institution, or search through the blog posts at inTAXicating.wordpress.com for a post on how to make payments to the CRA.

You can also pay using the pre-authorized debit online service offered through the CRA’s “My Account” feature. The pre-authorized debit allows you to:

  • Set up a payment to be made from your bank account to the CRA on a pre-set date
  • pay an overdue amount
  • make instalment payment

You can also make your payment using the CRA’s “My Payment” service. My Payment lets you make one or more payments in one simple online transaction.  You can use this service if you have access to online banking at a participating financial institution.

You can also sign up for direct deposit to receive your refund in your account at your Canadian financial institution-no more waiting for a cheque to arrive in the mail, however as I have mentioned in many previous posts, signing up for this service provides the CRA with your banking information which is the first place they will try to seize if you ever have a balance owing to them.

Save time – go online!

The CRA’s online services make it faster and easier to handle your business’s tax matters. You, your employee, or your representative can file, pay, and access detailed information about your tax accounts-all online, all at your fingertips. To learn more about the CRA’s electronic services for businesses, go to http://www.cra.gc.ca/businessonline.

If you have questions or concerns regarding your taxes or a letter / notice you have received from the CRA, drop us an email at info@intaxicating.ca or intaxicatingtaxservices@gmail.com.  Take advantage of our free consultation.

Key Deductions and Tax Credits for Persons Older Than 65-Years of Age

With the 2014 Tax Filing season rapidly approaching, I think it is important to keep track of key deductions and credits that Canadians older than 65-years-old should be thinking about when they file their Canadian tax returns this year and all years going forward.

The Canada Revenue Agency set up their own webpage dedicated just to this very topic: http://www.cra-arc.gc.ca/seniors/ which I recommend bookmarking, but I have summarized their points below for ease of access.

Common credits which may be claimed by seniors

  • Age amount
  • Pension income amount
  • Disability amount (for themselves)
  • Amounts transferred from a spouse or common-law partner
  • Medical expenses

Age amount

You can claim this amount if you were 65 years of age or older on December 31, 2013, and your net income (line 236 of your return) is less than $80,256. If your net income was:

It is important to remember to enter your date of birth in the “Information about you” area on page 1 of your tax return.

Remember to claim the corresponding provincial or territorial non-refundable tax credit to which you are entitled, on line 5808 of your provincial or territorial Form 428.

Tip: You may be able to transfer all or part of your age amount to your spouse or common-law partner or to claim all or part of his or her age amount. See line 326 – Amounts transferred from your spouse or common-law partner, for more information.

Pension income amount

You may be able to claim up to $2,000 if you reported eligible pension, superannuation, or annuity payments on line 115, line 116, and/or line 129 of your return.

Eligible pension income does not include the following income amounts:

  • any foreign source pension income that is tax-free in Canada because of a tax treaty that entitles you to claim a deduction at line 256;
  • income from a United States individual retirement account (IRA); or
  • amounts from a RRIF included on line 115 and transferred to an RRSP, another RRIF or an annuity.

Canada Pension Plan (CPP) income does not count as eligible income here.

Pension income splitting

If you qualify to claim the pension income amount, discussed above, then you are often able to report up to one-half of that pension income on your spouse or common law partner’s tax return, which will save you tax as a couple if your spouse is in a lower tax bracket.

Amounts transferred from your spouse or common-law partner

If your spouse or common-law partner does not need to claim some or all of certain non-refundable tax credits to reduce his or her federal tax to zero, you may be able to transfer those unused amounts to your return.

Split CPP income

If you and your spouse are at least 60 years of age, and one or both of you receive CPP benefits, each spouse may be able to apply to split their benefits with the other (i.e., report half on each other’s tax returns), which can save tax if one of you is in a lower tax bracket.

CPP contributions

If you are 60 to 70 years of age and employed or self-employed, you have to make CPP or Quebec Pension Plan (QPP) contributions, even if you’re receiving CPP or QPP benefits.

You can claim a tax credit for these contributions. However, if you’re at least 65 but under 70 years of age, you can elect to stop making contributions (use Form CPT30, the applicable part of Schedule 8 to your tax return, or Form RC381, whichever applies), but don’t just stop making the contributions without that election!

Medical expenses (for self, spouse or common-law partner, and your dependent children born in 1996 or later)

On line 330 of your personal tax return you can claim the total eligible medical expenses you or your spouse or common-law partner paid for:

  • yourself;
  • your spouse or common-law partner; and
  • your or your spouse’s or common-law partner’s children born in 1996 or later.

Medical expenses for other dependents must be claimed on line 331.

Tip:

You may be eligible to claim a variety of medical expenses, perhaps even previously unclaimed amounts, as long as the expenses were incurred in any 12-month period that ended in 2013. The list of eligible expenses has continued to expand slowly over the past few years.

It is wise tax-strategy to claim medical expenses on the lower-income spouse’s return to maximize your tax relief.

Disability amount (for self)

You can claim the disability amount of $7,697 on line 316 once you are eligible for the disability tax credit (DTC).

Tip:

If you were eligible for the DTC for previous years but did not claim the DTC when you filed your return, you can request adjustments for up to 10 years under the CRA’s Taxpayer Relief Provisions. To claim the disability amount for prior years, you will need to file Form T1-ADJ, T1 Adjustment Request, for each year you need to amend.

If you or anyone else paid for attendant care, or for care in an establishment, special rules may apply. For more information, see Attendant care or care in an establishment.

If you have a severe and prolonged physical or mental impairment, you may be eligible to claim $7,697 if a qualified practitioner certifies, on Form T2201 – Disability Tax Credit Certificate, that you meet certain conditions.

Public transit amount

You can claim the cost of monthly (or longer duration) public transit passes for travel on public transit within Canada for 2014. The cost of electronic payment cards can also be claimed when conditions are met.

Work force credits

If you’re still working, even part time, you may be eligible to claim the Canada employment amount (maximum $1,117) and the Working income tax benefit (see Schedule 6 of your return).

Registered plans

You’re entitled to make contributions to a registered retirement savings plan (RRSP) until the end of the year in which you turn 71-years-old.  Don’t forget to claim a deduction if you have made a contribution for 2014.

And if you’re eligible for the disability tax credit it is possible to make contributions to a registered disability savings plan (RDSP) to shelter income on those contributions from tax.

OAS clawbacks

Some seniors must pay back all or a portion of their Old Age Security (OAS) benefits if their income exceeds $70,954 (for 2013). If you’re in this boat, examine the types of income you’re earning to see if you can change the type of income earned to reduce the impact of these clawbacks going forward.

The Canada Revenue Agency (CRA) also administers the Ontario Trillium Benefit (OTB) which is the combined payment of the Ontario energy and property tax credit, the Northern Ontario energy credit, and the Ontario sales tax credit. The annual OTB entitlement is usually divided by 12 and the payments issued monthly. Your 2015 OTB payments, which are based on your 2014 income tax and benefit return, will be issued on the 10th of each month, starting on in July 2015.

Exceptions:

Starting with your 2014 income tax and benefit return, you can elect to receive your 2015 OTB in one payment at the end of the benefit year. If your annual 2015 OTB entitlement is over $360 and you make this election, you will get it in one payment in June 2016 instead of receiving monthly payments from July 2015 to June 2016.

If your 2014 OTB annual entitlement is $360 or less, it will be issued in one lump-sum payment in the first payment month (usually July).

 

These items often changes and some situations may be applicable to you, while other’s may not.  Please speak to your accountant or tax professional to be sure they apply.  If you claim a credit you are not entitled to, the CRA will disallow the credit and charge you interest from the date the returns were due.

 

#inTAXicating

Here is What is NEW for the 2014 Canadian Tax Filing Season

  • Children’s fitness amount – Under proposed changes, the maximum amount of eligible fees for each child has increased to $1,000.
  • Search and rescue volunteer amount – As a search and rescue volunteer, you may be able to claim an amount of $3,000.
  • Family Tax Cut – A proposed non-refundable tax credit of up to $2,000 is available to eligible couples with children under the age of 18, and is effective starting with the 2014 tax year.
  • Universal Child Care Benefit (UCCB) – Under proposed changes, this benefit is being increased for children under age six. Effective January 1, 2015, parents will be eligible for a benefit of $160 per month for each eligible child under the age of six – up from $100 per month. Under proposed changes to expand the UCCB, parents may also receive a benefit of $60 per month for eligible children ages six through 17. Payments of the additional amount and expanded amount will start in July of 2015.
  • Emergency services volunteers – Rules for the $1,000 exemption for emergency services have changed.
  • Adoption expenses – The maximum amount of eligible expenses for each child has been increased to $15,000.
  • Medical expenses – Amounts paid as salary for designing of personalized therapy plans for persons eligible to claim the disability tax credit and costs for service animals used to help manage severe diabetes, are now eligible as medical expenses.
  • Investment tax credit – Eligibility for the mineral exploration tax credit has been extended to flow-through share agreements entered into before April 2015.
  • GST/HST credit – You no longer have to apply for the goods and services tax/harmonized sales tax (GST/HST) credit. When you file your return, the Canada Revenue Agency (CRA) will determine your eligibility and will advise those who are eligible to receive the credit.  If you have a spouse or common-law partner, only one of you can receive the credit. The credit will be paid to the person whose return is assessed first. The amount will be the same, regardless of who (in the couple) receives it.
  • Online mail – When you register for online mail, you’ll have instant access to your tax records anytime, anywhere. Choose to receive an email notification that your notice of assessment or reassessment is available online. You can register for this service, which begins February 2015 by either adding your email address on your T1 return, or by registering directly at www.cra.gc.ca/myaccount.
  • Mobile application: In February 2015, the CRA will be launching a mobile app for individual taxpayers.

CRA online services make filing easier and getting your refund faster

The CRA’s online services are fast, easy, and secure. You can use them to file your income tax and benefit return, make a payment, track your refund, receive your notice of assessment, and more, which is great for keeping on top of your taxes and especially should there be an issue.

The only concern I have, surrounds the notice that the Government of Canada is switching to direct deposit for all payments that it issues? This includes your tax refund and benefit payments. They would like you to sign up for direct deposit.  More information is available here: www.cra.gc.ca/getready.  However, by providing the CRA with a bank source for direct deposit, also means that they have a source for collection purposes should you run into tax trouble and have a balance with the CRA.

Stay connected by subscribing to this blog, or to any of the CRA’s social media sites, below:

You can also visit our YouTube Channel for tax-related videos.

The Horse and Pony Protection Association (HAPPA) Sought Voluntary Revocation of Charitable Status From CRA

The voluntary revocation of the registered charitable status of The Horse and Pony Protection Association (HAPPA) as a result of a CBC investigation could leave Canadian Taxpayers who donated to this organization owing back monies to the Canada Revenue Agency (CRA).

Almost one year ago, the CBC Investigates reported on accountability issues at the Newfoundland charity after former members of the Board of Directors raised concerns about the operation of the group, which at the time continued to take donations from the public 18 months after closing its flagship horse sanctuary.

As a result of strict confidentiality guidelines, the Canada Revenue Agency (CRA) are unable to say who made the request to have HAPPA’s charitable status removed, however after the CBC investigation was published, the website was removed, and further investigation turned up a significant breach in reporting requirements on behalf of the charity as it would appear that they filed incorrect information with federal charity regulators, claiming that all board members are “arm’s length” from each other.

According to the CBC, the only current active members of the Horse and Pony Protection Association (HAPPA) board are what appear to be a mother and daughter and what appear to be a long-time couple.

Family members and common-law partners are considered “not at arm’s length” by the Canada Revenue Agency — something that can affect how the agency assesses a charity’s status.

Charities are required to file a form outlining those relationships and the CBC reported that on HAPPA’s website they found their filing for the year ending December 31st, 2011 in which there were 8 directors listed as being “at arm’s length” from each other.

The significance of the revocation of charitable status is that anyone who donated to the charity after that date, will not be allowed to claim the donation as a deduction from their income. If they do so anyway, the CRA will re-assess them plus penalties and interest. The Taxpayer Relief program will not granted penalty and or interest relief to those who donated to this charity, and in situations like these, as there are no categories to apply under.

Once the revoked, the charity should have transferred all of its remaining property — including cash — to an eligible donee, or be subjected to a revocation tax equal to the property’s full value.

If you have donated to this organization and are concerned that the CRA may disallow the charitable receipt, it is best to not submit it with your taxes. You have 4 years to claim charitable deductions.

Can You Describe What You Do To A Stranger? Tell People What You Do!

If you have been reading my posts on The Urban Daddy, or on inTAXicating, you will know that I sometimes put on my MBA-hat and question everything about the way we do business.

One of the questions I have had for a long time has to do with how businesses choose to identify themselves to the public. We all know that keeping customers is much easier and much cheaper than getting new ones – so they say – which makes the next example even that much more puzzling to me.storefront without sign

Storefronts, in particular, have very limited space to let potential customers / clients know a whole lot about what they do, so that you will use their goods and services, yet many businesses continue to put their brand name on the store, or use an unreadable font which limits their ability to get new customers who are not walking by the store and who have the time to look in the window and walk in.

As I question this, I think back to one of the more complex collections cases that I handled while working at Canada Revenue Agency (CRA) and how after years of being unable to get a cent out of this establishment, I had much different results.  This case had to do with a very large restaurant just North of Toronto which had fantastic food, very positive reviews, incredible decor, and $3,000,000.00 owing in taxes, without a single payment made to arrears in years.

The owners of this restaurant were perplexed at the spiralling debt and their bleak prospects for operating in the future because what started off as a very profitable business venture went south, quickly and at massive costs – both personal and professional.  When their debt grew, they started to cut costs, but it was the wrong costs – like having fresh food on the premises daily, reducing the variety and portion size on their menu and by running out of options at meal time.

Regular patrons became frustrated with the frozen additions or the cutting out of their favourite meal choices and as their clientele dwindled to handfuls of patrons during the day and at night, it only made matters worse.

With their personal assets fully leveraged to keep the business running, they were steps away from bankruptcy and losing everything.  They also were not paying their tax debts, but they were staying current on their filing obligations, and between the threats from previous collectors and their power being turned off all the time, they knew the end was near.  After hearing this, I thought I would need to see it myself, so I took my newly earned MBA and headed out to have a conversation with them about what they had intended to do with these debts.

But I could not find the restaurant.

It was supposed to be 15,000 square feet, and I knew the intersection quite well, but could not for the life of me find their establishment.  I called the owner and while I was circling the plaza on the corner he was frazzled about how I could not see their fantastic place, which I found to be very bizarre.

I ended up parking on the plaza on the corner and walked past a couple of stores before finally seeing what I had been circling for the better part of 20 minutes.  Their restaurant.

The outside of the building looked run-down and there was no name on the building.  I could not even tell where the front door was, and once I got to the door, I didn’t even know if it was open.  There was no sign that even said “Restaurant” or specified the type of food that was in there. There was some very hard to read script writing near the top of the building and near the door, but it looked more like graffiti than it did, a brand name.

Having been there a couple of years, locals knew about them, ate there but to an onlooker, there was no way of knowing there was a restaurant there.  I started to see a pattern emerge.

Upon sitting down with the owners I immediately suggested they perform a search on the business on the Internet (Alta Vista, I believe) and there right in front of their eyes, were people commenting about how they had made reservations but could not find the building, so did not go, or that they arrived but could not tell if the place was open, or where the front door was.  There was obvious frustration.

To me, it was common sense, that this building needed a sign that read “Italian Restaurant”, so at least people would know where they were going, or people who drove by or walked in the plaza would know there was something there.  On a more obvious scale a giant arrow pointing at the building would have been better but this was a very classy place, and that would cheapen the brand, they felt.

Needless to say, I spent 3-4 hours there, we talked about everything relating to their business, their debts – business and personal, and at the end of the day I decided to give them a couple of months to sort things out, reduce some costs, and try to attract more business which they knew they needed.

All of this effort was rewarded when they sent in a cheque for $250,000 at the end of the following month to the CRA.  By the end of the year, they had paid off $1.8 million dollars of their debt, and by the end of the next year, they were fully paid up (including penalties and interest) and business was booming.

Is it 100% a result of something I said? Probably not. Did I afford them the time to make money and pay off the debt, yes I did, but I also went through their options should they have chosen bankruptcy, a proposal, or to ignore the CRA completely and wait for their assets to seized and the directors assessed.

With all that information they were able to make an informed decision, the most obvious to me being that they improved their signage, cleaned up the outside, and put a neon sign which flashed “OPEN” on a very visible spot near the sign and near the door (with a classy arrow pointing towards the door).

But how does this apply to you and to me?

I recently took part in a challenge on LinkedIn to say what I do for a living in one sentence. I thought how hard could it be, and I wanted to check out what others had written before me. With over 300 respondents, I would have plenty of samples to review before taking the plunge, but I was shocked by what I saw.

I saw people – people I do not know – in businesses I did not know who wrote things like this;

“I solve all of your problems.”
“I get you want you need at the price you want.”
“I’m what you need.”
Even, “We’ve got you covered.”

I looked further at their business profile to see if I could tell what they did, however their business name, or description was equally as vague.

I read and read and read, almost 100 of them by now, and when I came to a comment by a lawyer, I was dumbfounded when I saw this; “I practice law.”

I immediately thought about what I would do if I came to this networking group for a professional to hire in a very specific area and I saw “I practice law” as someone’s description… Would I contact them to find out what kind of law? Or would I go to the next person.

I went to the next person.

Then the next and the next and the next.

Then I posted challenging people to go back and edit their posts. Be proud of who you are and the services you offer. Tell everyone what you do, be clear, but be brief, and if someone has more questions or wants information, they will reach out to you.

So what about my post?

Now I had a lot to live up to, because I called out the patrons of the group and if my post sucked, boy would I be the biggest hypocrite in the world.

So I posted this;

“My expertise is with the Canada Revenue Agency (CRA), and their Collections / Enforcement division and I use this knowledge to help people and business understand taxes and pay only what they owe, on their terms.

Then I said, “please read this and if you do not know what I do, or if there is feedback – positive and negative – please provide it. I too would love the perfect pitch and I appreciate any input from this fantastic group.

So next time you are looking for a restaurant to take your family and you drive by one which only has a name and not a type of food, think about how much business they could be losing by placing their focus on themselves and not on the service or product their offer.

#Tax