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.

inTAXicating is a part of Goldhar Tax Solutions, and you can find us at http://www.goldhartaxsolutions.ca

You can also find us on twitter @GoldharTAX, or call us at 647.812.0181, or Toll Free @ 1.877.TAX.AID1 (1.877.829.2431)

Or email us: Tax@Goldhar.ca

 

What are you waiting for?

Common GST / HST Questions asked this past week

Below are some common GST/HST questions ask by readers of this blog through either email, Facebook comments, Tweets, or search queries.  I wanted to share the question, and provide the answer to save readers some time.

Q: Can you charge HST without an HST number?

A: No.

Q: Collecting GST when not registered?

A: Don’t.

Q: When do I have to start charging GST?

A: When you register or when you earn more than $30.000.00, or $2500 in HST.

Q: Do I have to charge HST under $30 000?

A: Yes, if you’re registered.

Q: Can you charge HST without a HST number?

A: No.

Q: What is the GST $30000 threshold?

A: It is the threshold that the Canada Revenue Agency (CRA) states determines when you must register for the GST/HST.  Under $30,000 in taxable sales, registration for GST/HST is voluntary.  Once you hit $30,001, then it is required.

Q: Do I charge HST if I make less than 30000?

A: Earn, not make, and you don’t have to, but I strongly recommend it.

Q: What are the CRA invoice requirements?

Better worded as what are the invoice requirements if I am registered for the GST / HST?

A: To have your GST / HST number clearly displayed on the bottom of your invoices so people who pay you GST / HST know you are actually registered.

Q: How does GST or HST work?

A: Basically, if you sell or provide goods and services in Canada, you must charge customers the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST) unless your business qualifies as an exception.

If your Canadian business fits one of the exceptions, it won’t have to charge, collect and remit GST/HST.
The two possible exceptions are:
1. You sell or provide a good or service that the CRA has classified at being “zero-rated” or “exempt”
2. You are a small supplier

Zero-rated goods and services, such as exports, medical devices or basic groceries, are charged 0% HST. Exempt goods and services, such as golf or music lessons, child care, etc., are exempted from GST/HST, so they are not subjected to the tax.

A small supplier is one who has total taxable revenues before expenses from all your businesses of less than $30,000 or less in the last four consecutive calendar quarters and in any single calendar quarter.

Q: Any industries or professions have to apply for GST / HST right away?

A: Yes. Taxi and limousine operators and non-resident performers have to charge GST/HST even if they are small suppliers.

Q: Do I want to register for GST / HST even though I’m considered a small supplier?

A: Yes

Q: How do I register for GST/HST?
CRA makes registration easy for Canadian’s. You can register by phone (call the Canada Revenue Agency at 1-800-959-5525), online, by mail or even in person at a tax office.
(Note that if your business is in Quebec, you need to contact Revenu Quebec instead at 1-800-567-4692 as they deal with GST/HST in that province.)

If your small business starts out as a small supplier and you make more than the small supplier limit ($30,000) you’ll want to register for GST/HST right away; in the eyes of the Canada Revenue Agency, you are now a GST registrant and you:
1) have to collect GST/HST on the supply that made your revenue go over $30,000;

2) have to register within 29 days of the day that you made the supply that made your revenue go over $30,000.

What causes problems for small businesses is they don’t realize they’ve gone over the limit until some time later when they’re doing the books and then discover they didn’t charge the GST/HST when they should have.  Small suppliers must watch their revenue carefully.

Q: What is a BN?

A: When you register, your business will be assigned a business number (BN); this is the number that you and the CRA will use to identify your business. (You’ll be using it on all your invoices, in your accounting system, and in all your tax-related correspondence with the CRA.)

Q: Do I need to charge the GST/HST?

(Answers the question whether or not you need to charge GST/HST on your sales of goods or services.)

A: Sales of zero-rated or exempt goods and the small supplier exception are discussed later.

Q: Shipping Out of Province: Should You Charge GST/HST?

A: Yes.  Depends on the province you are shipping to.  They pay the applicable rate in their province.

Q: What’s the difference between zero-rated and exempt goods and services?

A: These are two special classes of goods and services that the customer does not pay GST/HST on but in the case of zero-rated goods you, the provider of goods or services, can still claim input tax credits.

Hope this helps!

If anyone has any questions, concerns or comments about the GST/HST and need additional assistance, please contact us at tax@goldhar.ca.

 

 

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

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 tax problem because their firm was just too expensive for the couple.

I was told there was a balance owing to the CRA for GST/HST, and that the firm was essentially bankrupt, they feel they don’t owe the money and the CRA was threatening to raise a Deemed Trust followed by a s.160 assessment.

All over $30,000 owing to the CRA.

Sounds simple enough…

Confirm the amounts, then figure out if the balance is actually owing, tie up loose ends then make arrangements between the client and the CRA to resolve both matters.

I connected with the couple, got their side of the story, then met their wonderful 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.

With money owing to the CRA, they used their Deemed Trust provision and raised a s.160 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 because that would survive the bankruptcy and would result in the CRA getting paid on all fronts.

But logic sold me that a business which was struggling would not have significant amounts of GST/HST owing in its final years.

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.  They went through a desk audit quickly because of the notes indicating someone missed ITC’s, and upon posting knocked down the balance owing considerably.

The s.160 assessment was cancelled and the remaining, much smaller balance was paid in full.

I introduced them to one of the fantastic accountants in my network who quickly completed the T2’s for them.

Everyone left happy.

That’s how we help!  Knowing the ins and outs of the CRA’s collections department and even think that something might have posted incorrectly, 4-years ago.

inTAXicating by Goldhar!

 

 

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.”

Québec sales tax (QST) increased to 8.5% as of January 1, 2011

Did you know that there was an increase in the rate of the Québec sales tax (QST) as of January 1, 2011?

The QST rate increased from 7.5% to 8.5%.

The taxable supply of movable property or a service will be subject to the 8.5% QST rate if all or a portion of its consideration becomes due after December 31, 2010, and is not paid before January 1, 2011.

The taxable supply of an immovable by way of sale will be subject to the 8.5% QST rate if it is made pursuant to a written agreement entered into after December 31, 2010, under which the ownership and possession of the immovable will be transferred to the recipient after this date.

The taxable supply of the construction, renovation, alteration or repair of an immovable will also be subject to the 8.5% QST rate if it is made pursuant to a written agreement entered into after December 31, 2010.

However, the rules described above regarding the taxable supply of movable property or a service will also apply to the taxable supply of an immovable other than by way of sale.

Special rules apply to the following supplies: continuous supplies, budget payment arrangements with reconciliation, exchanges of movable property, primacy rules, the bringing of movable property to Québec, etc.

For further information, see page A.55 in Additional Information on the Budgetary Measures, published by the Ministère des Finances.

http://www.revenu.gouv.qc.ca/en/ministere/centre_information/nf/2009/hausse_taux_taxe.aspx

Consequential adjustments
Rounded-off mathematical factors. The QST is calculated on a consideration that includes the goods and services tax (GST) at a rate of 5%. With the increase in the QST to 8.5%, the effective rate of the QST (currently 7.875%) and the combined effective rate of the GST and the QST (12.875%) will be raised to 8.925% and 13.925% respectively as of January 1, 2011. The mathematical factors rounded to 7.87% and 12.87% will be replaced by factors rounded to 8.92% and 13.92% respectively, as of the same date.

Taxable benefit related to the cost of operating an automobile. The amount of QST to be included in the calculation of a registrant’s net tax related to the cost of operating an automobile corresponds to 4.7% of the value of the benefit. As of January 1, 2011, the rate of 4.7% will be raised to 5.4%.

Quick accounting methods. The prescribed rate for small businesses set at 2.7% for vendors of corporeal movable property and at 5.3% for other businesses will be raised to 3% and 6%, respectively. The prescribed rate for municipalities set at 4.6% and for other bodies set at 5.9% will be raised to 5.2% and 6.6%, respectively. The new prescribed rates will apply to any reporting period that starts after December 31, 2010.

Simplified method for calculating rebates regarding an expense account. The changes to be made to the mathematical factors and to the simplified method for calculating rebates regarding an expense account will be clarified by Revenu Québec at a later date.

Corresponding increase in the tobacco tax.
To reflect the increase in the QST rate as of January 1, 2011, the rates of the tobacco tax will be changed as follows:

the rate of 10.3 cents per cigarette will be raised to 10.6 cents per cigarette;
the rate of 10.3 cents per gram of loose tobacco or leaf tobacco will be raised to 10.6 cents per gram;
the rate of 15.85 cents per gram of any tobacco other than cigarettes, loose tobacco, leaf tobacco and cigars will be raised to 16.31 cents per gram;
the minimum rate applicable to a tobacco stick will be raised from 10.3 to 10.6 cents per stick;
the rate of 80% of the taxable price of cigars will remain unchanged.
Persons not under an agreement with Revenu Québec who sell tobacco products regarding which the specific tax on tobacco was collected in advance (or should have been) must take an inventory of all such products they have in stock at midnight on December 31, 2010, and remit, before January 29, 2011, an amount corresponding to the difference between the tax applicable at the new rates and that applicable at the rates in effect before midnight on December 31, 2010.

The same applies to collection officers under an agreement with Revenu Québec who sell tobacco products regarding which the specific tax on tobacco is paid in advance or has not yet been paid.

IRS Indoor Tanning Excise Tax comes into effect July 1st, 2010.

IRS 10% excise tax on indoor tanning industry.

If you live in, or visit America, and love that fake, baked-on tan, it’s going to cost you 10% more to get that well-done feeling, as of July 1st.

The IRS issued regulations outlining the administration of a 10% excise tax on indoor tanning services that goes into effect on July 1st, 2010.
The regulations were published today in the Federal Register.
In general, providers of indoor tanning services will collect the tax at the time the purchaser pays for the tanning services. The provider then pays over these amounts to the government, quarterly, along with IRS Form 720, Quarterly Federal Excise Tax Return.
The tax does not apply to phototherapy services performed by a licensed medical professional on his or her premises. The regulations also provide an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee.

Hmmmm. Taxing the tanning industry?!? I guess that may push people out into the sunlight more often, which may not be such a bad idea considering all the debate about how dangerous tanning beds are and their suspected link to cancer. Then again, if the IRS could tax natural sunlight, trust me, you would be paying it too.

New Electronic Filing Requirements for GST Coming…

With the implementation of the Harmonized Sales Tax (HST), effective July 1, 2010, some registrants will be required to file their GST/HST returns electronically.

This will differ from the current paper filing system that most registrants use and will affect registrants currently filing their returns quarterly or monthly.

For reporting periods ending after June 30, 2010, GST/HST registrants will be required to file their returns electronically if they:

  • have annual taxable supplies (on an associated group basis) exceeding $1.5 million (charities excepted);
  • are referred to as “large businesses” and are required to recapture input tax credits (ITCs) for the provincial portion of the HST on certain expense categories; or
  • are builders that must report:

– transitional tax adjustments;

– transitional new housing rebates (provincial portion of HST);

– sales of grandparented housing (i.e., ownership and possession transferred to purchaser after June 30, 2010, under written agreements of purchase and sale entered into before June 19, 2009) if the purchaser is not entitled to claim GST/HST new housing or new residential rental property rebates; or

– housing sales that are subject to HST, if the builder purchased housing on a grandparented basis.
The recapture of ITCs and the transitional taxes applicable to builders will be reported in separate information fields on a schedule that accompanies the GST/HST return. For registrants affected by the ITC restrictions, the restricted or recaptured ITCs will be calculated as:

Failure to file GST/HST returns electronically may result in penalties being imposed by the Canada Revenue Agency.