Former Canada Revenue Agency (CRA) Auditor Not Guilty of Fraud

A former Canada Revenue Agency (CRA) auditor and his wife were found not guilty of fraud when a judge rules that the CRA failed to prove that the fraud was intentional.

This is significant, folks!

The original article can be found here;

https://www.surreynowleader.com/news/former-canada-revenue-agency-auditing-employee-and-wife-found-not-guilty-of-tax-evasion/

What I truly hope is that this ruling provides the CRA with a much clearer understanding that there are actually some Taxpayers and businesses (and even former employees) who might not fully understand the CRA’s rules and regulations and their application, and that there exists a chance that people make mistakes.

I’m not saying in this case that there was a mistake – and I don;t believe that the judge was saying that either, but what was very clear from this ruling is that the for the CRA to win a case they need proof and facts.

The CRA obviously will be appealing this decision.

My experience in the CRA has afforded me this insight which I happily pass along to each of you who read this…  It’s okay to make mistakes.  We all do.  The CRA does not expect each and every Canadian Taxpayer to be tax experts, but where the CRA has zero tolerance is where Taxpayers try to circumvent the rules and do so knowingly.  At that point, you can’t claim you didn’t know the rules.  You’ll be no mercy from the Crown at that point in time.

As well, there are many, many, many opportunities to resolve the tax issues before having to bear the expenses of going to tax court!  This ruling was the first of it’s kind, and considering how many people want to sue the CRA or take the CRA to court, it makes you wonder who is advising them, and who is paying their bills!

To understand where you stand and what your options are, you can start by contacting inTAXicating Tax Services, at http://www.intaxicating.ca, and start dealing with you tax issues with the facts.

info@intaxicating.ca

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Fired CRA Employee Denied Access to Tax Records… Duh!

A Superior Court judge has dismissed the application of a former Canada Revenue Agency (CRA) employee requesting the CRA produce various third-party records for use in his defence.

Christopher Casola of Sudbury faces charges including breach of trust by accessing taxpayer information other than for the public good, fraudulently accessing a CRA computer, as well as two counts that allege that the breach of trust and unauthorized use of a computer were done for the benefit of The Bacchus Motorcycle Club, and he faces eight counts involving several weapons offences, including possession of an SKS assault rifle, alleged to have occurred in 2016.

The CRA will fire, and prosecute those who access information which they are not entitled to, and because the CRA’s computer system tracks all accesses (including date, time, and how long they were there) it can be a very easy case to make.

Oddly, in his defense, the accused requested access to various CRA records, including the mainframe computer that contains the records of all individuals who have filed a tax return; the CRA Matching Action Review System (MARS) database accessible on servers between March 26, 2014, and Jan. 7, 2015; a data dump of the entire Notepad option in the MARS database; as well as what is referred to as the “entire CRA workload audit trail” in connection with the review of the accused’s work that was undertaken by the CRA after security concerns became known.

In a decision delivered July 11, Justice Dan Cornell wrote that the applicant had stated the records were necessary to duplicate the CRA’s internal review, which allegedly indicated Casola, a former assessment processing clerk in the electronic processing and records division at the Sudbury Tax Centre, had accessed the files of several individuals with alleged connections to another motorcycle club, thereby contravening the agency’s code of ethics and conduct.

Justice Cornell accepted the Crown’s argument, however, that the applicant did not articulate why they required entries for dates other that those when the alleged unauthorized access occurred.

“Despite being asked on more than one occasion to provide a reason for the requests that have been made, the only answer that was given is that the accused ‘wants to recreate the CRA process to double check the results to see if the results are accurate’,” the justice wrote. “This is not sufficient to establish that the information that is being sought is likely relevant to an issue that may arise at trial.

“The applicant did not provide an expert report, or for that matter, outline any possible concerns about the accuracy of the information that was provided or to raise questions about the process that was followed by the CRA during the review of the CRA records. In the end, all that was put forward in support of the request for the production of third party records were vague assertions that there was a problem with the results of the searches that had been undertaken.”

Those “vague assertions” amount to nothing more than “sheer speculation,” Cornell wrote, and “fall far short of satisfying the onus that lies upon the applicant to establish that such third party records should be produced in order to permit the accused to make full answer and defence.”

“In view of the fact that I have determined that the information sought is not likely relevant to an issue at trial or the competence of a witness to testify, I need not attempt to balance competing privacy interests of those who would be affected by disclosure against the accused’s right to be able to make full answer and defence.”

The accused could have requested a trail of his accesses through the Access to Information program available to all CRA employees and every Canadian Citizen.

 

If you would like, you can read the full decision, here; www.canlii.ca/t/hszmv.

 

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

 

 

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.

Lien on Me: Canada Revenue Agency (CRA) Policy and Procedures around Property Liens

You are here looking for answers relating to the Canada Revenue Agency (CRA) and liens.

Below is the link to my original article on CRA liens, and for the longest time, it was the number 1 searched item on Google relating to that topic.

As a result, I have decided to re-post it.

Lien on Me: CRA Policy and Procedures around Property Liens.

Not All Tax Information Found on the Internet is true! Are you shocked?!?

Did you know that not all the tax information and suggestions you find on the Internet are true?

Of course you knew that!

I’ve joked with everyone from my children, to family, friends, employers, employees and even director’s and CEO’s of huge organizations that tax information “must be true!  It’s on the Internet”, no matter how absurd it might appear to be.

We all know, or should know to take everything we read with a grain of salt… and that fact-checking is critical when trying to decide if information is legitimate, completely made up, or aimed to scare you.

Sources

As we scroll through pages and pages of information, reading about situations and stories about how the Canada Revenue Agency (CRA) administers tax law here in Canada it is easy to lose sight of goal, which is to get a better understanding of what is acceptable and what is not regarding so many aspects of taxation.  The best indicator of how close to the truth an article is can be determined by the sources cited in that piece.

An article about the CRA with a link to the CRA website (which backs up the facts) is the best indicator that the author knows their stuff.

If, however, you come across an article which has no references, no supporting links to the originating source, or links from a website titled something like “I_want_to_stop_the_CRA.org” then you can be assured the information is not going to be accurate, it is not going to help you, and more likely it was written to scare you, or present a horror story to get you to contact them to help you.

Don’t waste your time on those… Ever!

When a prominent tax lawyer wanted everyone to stop looking for solutions on the Internet it was presented that the CRA could find out you have a tax problem by sneaking into your house, taking your computer, breaking in to it, and seeing that you have been looking for tax help online.

GASP.

Well, guess what?

If the CRA has to come and seize your computer, they already know you have a tax problem!  They cannot seize your computer unless it’s part of a criminal investigation.

The true intention of these ads is not to warn you about a new power that the CRA has secretly acquired, but rather this firm doesn’t want you seeing that there are options available for you online to fix the problem yourself.  So they scare you away from the Internet so you won’t find helpful tips and solutions at firms like this one, inTAXicating.

Better to hire them then get advice from a real former CRA Collection employee to help get you back on track.

In a capitalistic marketplace I don’t blame them, but I am concerned.  Tax is confusing, especially when a tax problem suddenly arises and the CRA is pressuring you to fix it quickly in one of their 3 ways:

1) Pay it

2) File up-to-date and watch the balance go away, or,

3) Go bankrupt.

How can you be expected to make that sudden choice which has significant short and long-term implications on you, your business, your family and your life, without having the facts, all the facts, and not just the facts the CRA wants you to have, or that you believe they are telling you.

That’s where I come in, specifically, this blog, this business and this business model.

I want you to know the truth.

I want you to be able to make an informed decision whether that decision is made via information found on this blog, or on my website, or through an email to me.  I want you to be able to understand the CRA and their collection, enforcement, audit, filing process and administrative process as well as I do.

I want you to understand the corporate culture there and that very infrequently is there an agent on the other side of the phone with your picture on a dart board in their cubicle.

I want you to know your options, your best next steps and that your long-term plan of action will not only help you resolve your tax situation but also keep you and the CRA happy.

I want you to know that in situations where I feel that you cannot do this alone, that I can help you, and will help you, make matters right, and I want you to know that a tax problem does not occur overnight and resolving them can take a long-time.

I have the knowledge and understanding that no-one else can claim to possess about the CRA collections policies and process and I don’t say that to boast, but rather to inform.  I don’t profess to have an “army” of “real” CRA staff with me, nor do I pretend that background is in any area other than where it shows on my web-site, blog, and on my LinkedIn profile.  Collections, collection, collections.

I’m also not going top pretend that a background in Appeals or Audit is going to help you better than a back ground in Collections.  To each their own.

I write my blog posts myself and where possible I cite everything I can to the CRA website so that you can be comfortable knowing that information you read on my social media platforms are sourced from the people who want you to pay your taxes and question your deductions and filing deadlines.

I don’t write my posts in order to scare anyone or to force them to use my services, because quite frankly, I want everyone to be able to navigate the Canadian tax system without ever having problems and running afoul of the CRA and in a perfect world, one day I’ll be able to provide a users guide to the CRA to allow people to file, re-file and pay without incurring penalties and / or interest and where the CRA understands why people can’t, won’t or are unable to do so and then have the CRA deal with them in an understanding manner.

But for now, we have to take it one day at a time, and one situation at a time.

The best day to start fixing tax problems is today.  There are always solutions and there are always options.  In deciding what you want to do, you need to make sure you are getting the right information and from the right sources.  Be wary of what you read on the Internet because it can make you want to close your blinds, change you name and hide from the CRA when all they want you to do is to close an account or file a nil return.

Get the facts!

inTAXicating Tax Services offers a free 15-minute consultation to determine how to best proceed with a tax situation.

From there if’s decided that a written plan of action is needed, I can produce one for you.

If from that, a decision is made to engage inTAXicating to represent you in your dealings with the CRA, then we determine if the hourly or fixed plan works best for you.

You don’t have to worry about opening those brown envelopes.  Help is here!

http://www.intaxicating.ca

http://www.intaxicating.wordpress.com

info@intaxicating.ca

Think the Canada Revenue Agency Treats Employees Differently? Think Again!

Former CRA employee fined and sentenced to 18-month conditional sentence for income tax evasion

Surrey, British Columbia.   The Canada Revenue Agency (CRA) announced today that Maria Victoria Banhaw of Burnaby, British Columbia, was sentenced on October 3, 2014 in Vancouver Provincial Court, after pleading guilty to one count of income tax evasion. Banhaw was fined $47,580, representing 75% of the total federal income tax evaded. She was also ordered to serve an 18-month conditional sentence, which includes 9 months of house arrest.

A CRA investigation determined that Banhaw, while employed at the CRA, prepared and filed personal income tax returns for herself, her husband and 34 family members and friends for the 2005 to 2009 tax years. On these 96 returns, Banhaw overstated the amount of Registered Retirement Savings Plan (RRSP) contributions in order to reduce taxable income and increase refund amounts payable. Banhaw’s family and friends were unaware that she made false claims on their returns. In total, Banhaw reported $389,417 in false RRSP contributions, resulting in $63,438 in taxes evaded.

The preceding information was obtained from the court records.

When taxpayers are convicted of income tax evasion, in addition to any fines, they must still repay the full amount of taxes owing, plus interest and any civil penalties that may be assessed by the CRA.  In addition, the court has the ability to fine them up to 200% of the taxes evaded and impose a jail term of up to five years.

If you have ever made a tax mistake or omission it is prudent to speak to us right away so that we can help you understand where you stand in the eyes of the CRA.  We will help you determine if you can handle it on your own – and set you up to do so, or recommend our services or the services of others to assist you through the process.