Owing Taxes to the CRA: Real options to consider

The Canadian Tax Filing deadlines for regular filers and for filers with self-employment income are rapidly approaching.

Due to the COVID-19 pandemic, the Canada Revenue Agency (CRA) has pushed out the tax filing deadline for regular tax filers from April 30th, 2020, to June 1st, 2020.  Canadians with self-employment income were due to file by June 15th, 2020, and that date has remained the same.

Any payments for the current tax year are due by September 1^st, 2020, which applies to balances and instalments under Part 1 of the Income Tax Act due on or after March 18^th and before September 1^st, 2020.

If you earned significant self-employment income, for the first time, you might be in for an unexpected surprise when you file your tax return, because there will likely be a balance owing to the CRA. This balance owing is a result of having to pay the amounts that an employer would have normally deducted from your pay, including both portions of the Canada Pension Plan (CPP).

If you haven’t made other provisions to cover your tax debt at the end of the year, you could have a problem.

If this were not a pandemic year and the CRA was fully operational, I would warn that tax debt is serious and should be dealt with immediately.

As we are all aware, the collections staff at the CRA have considerable “power” to find and collect money that are owing to the Crown.

With the amount of government benefits being offered up this year, Canadians have been providing their banking information to the CRA in record numbers, and it is that banking information which the CRA can, and will, use to recover the taxes owing to them, likely in record time.

In effort to deter Canadians from not paying the CRA, they charge penalties and interest (which compounds daily) on your overdue taxes.

They can withhold payment of your Child Tax Credit and GST rebate. They can take money from your bank account or garnishee your wages.

If those methods do not result in full payment of taxes, the CRA will then check to see if you own real estate, as they can register a lien against your property.

When a lien is registered against your property it can prohibit you from refinancing or selling your property until the outstanding debt is paid in full.

You may also find that if you are non-compliant (not filed up to date with the CRA), you may not be able to secure mortgage financing to purchase a home, buy a cottage, get a loan, or access equity in your property.

Many Canadian banks and credit unions will not provide an unsecured loan for the payment of income tax debt and they generally cannot refinance an existing mortgage to cover the debt either. When they learn of a lien, they deem you a credit risk and are more comfortable walking away from you as a customer then take a risk lending you funds that you either cannot pay or that the CRA will end up taking.

 

What Can You Do

Normally, you would contact the CRA immediately – but these are COVID times – and the CRAès collections division is presently not taking collection actions or weighing in on payment arrangements.

Pay what you can, as much as you can.  Because paying anything less than the balance owing is going to result in interest accumulating.

There is no need to pay more to the CRA, unless you absolutely have to.

If these were normal times, you might be able to negotiate a re-payment arrangement covering 3-6 months, but the interest continues to accrue.

 

What NOT to do

This is important to note – filing for bankruptcy, or filing a consumer proposal, does not discharge a lien against your property. If you go bankrupt on your CRA debt, the lien remains and – even worse – accrues interest over time. Even after your discharge from bankruptcy, the lien remains in force, until you eventually sell your home. Transferring a tax problem for a credit problem is not always the best option.

Do not transfer any assets, or your property, to another person. That will not solve your problems, but rather cause other ones.

Removing assets from the reach of the CRA will result in the raising of a Section 160 (325), non-armsè length assessment, which takes your tax debt and makes it jointly and severally liable with the person who now owns your property.

Do not ignore it. Far too often, Canadians ignore the requirement to file and pay their taxes. This means a balance owing to the CRA continues to grow and grow. When the balance gets to be too high, people feel they have very few options, and consider bankruptcy or insolvency to be one of them. Worse that this scenario, is when one of the parties with a large tax debt falls ill, passes away, or becomes separated from the other, and now the ability to resolve the tax matter becomes that much more difficult.

 

A Better Solution

If you are a homeowner then having an experienced mortgage broker working for you can save you both time and money when seeking a solution to your CRA problem. If you simply can’t pay the full amount of your back taxes, consider refinancing your mortgage and using the equity in your home to consolidate all of your debts, including credit card debts, at a rate which might even be better than the rate you are currently paying.

Mortgage brokers have access to lenders that will allow a refinance of your existing mortgage or second mortgage options to pay off outstanding CRA debt.

If you have tax debt, or are going to be facing some tax arrears, do not worry. Contact inTAXicating and let us provide you with the truth around your tax options and help you find the best solution for you.

info@intaxicating.ca

intaxicatingtaxservices@gmail.com

 

Member of Nova Scotia First Nation charged with evading $2.2 million in taxes

The Canada Revenue Agency have announced that they have charged a member of Nova Scotia’s Millbrook First Nation with evading $2.2 million in GST/HST.

The CRA charged Lisa L. Marshall who was the operator of the Traditional Trading Post, a convenience store, located on the Cole Harbour reserve of the Millbrook First Nation using the Excise Tax Act with wilfully evading or attempting to evade compliance with that Act.

The CRA alleges that between July 1, 2010, and June 30, 2015, the store failed to collect or remit $2,284,144.72 in Goods and Services Tax (GST) and Harmonized Sales Tax (HST) related to the sale of tobacco products to non-Aboriginals.

The agency says people who fail to remit tax owing are liable not only for the full amount, but also to penalties and interest, and if convicted, the court can levy a fine of up to 200% of the tax evaded and also impose a prison term of up to 5 years.

The moral of the story here, is that if you are required to charge, collect and remit GST or HST, you should.  The CRA treats Trust Funds – money taken by registrants and held in trust until they are remitted to the Crown – very seriously, and those who misuse Trust Funds are dealt with swiftly and to the full extent of the law allowed to be used by the CRA.

 

Former Calgary man sentenced to 11 years in jail and fined $550,892 for tax evasion and fraud

The Canada Revenue Agency (CRA) announced that James Harvey Cameron, a former resident of Calgary, has been sentenced to 11 years in jail and fined $550,892 after defrauding investors of over $2.5 million through a deceptive investment scheme. The judge also ordered Cameron, 66, to pay restitution of $1,831,700 to his victims.

If Mr. Cameron fails to pay his fine in six months he will have to serve an additional four years in jail for default.

From 2002-2006, Cameron operated a fraudulent RRSP scheme which promised a 2% monthly return to individual investors. The scheme raised just under $8 million, but only paid out a total of $882,000 to investors.  Cameron misappropriated the funds to support his luxurious lifestyle, including buying property, cars, a horse, and a $75,000 cruise in the Bahamas. He also transferred funds offshore to Barbados.

A Canada Revenue Agency (CRA) investigation proved that Cameron diverted $3.9 million of the investors’ funds for his own use and failed to report this as income on his tax returns, evading $1,132,882 in taxes.

“I have no doubt whatsoever that [Cameron] executed a deceptive investment scheme with subjective knowledge of the prohibited act and consequences,” said presiding judge, Justice P.R. Jeffrey, in his written reasons for convicting Cameron. “The CRA acted towards him with considerable patience, forbearance and fairness.  He was given ample opportunity to provide to CRA any plausible alternate explanation for what occurred, yet did not.”

Justice Jeffrey commented in his sentencing report: “The $1,831,700 I have ordered payable in restitution should be subtracted from his [Cameron] total taxable income… therefore I find his taxable income to have been $2,118,817.”

Cameron was convicted of tax evasion under the Income Tax Act and fraud under the Criminal Code.

Sentencing took place today at the Court of Queen’s Bench in Calgary.

You can report suspected tax evasion to the CRA by visiting https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/informant-leads-program.html or by calling the National Leads Centre at 1-866-809-6841.

All case-specific information in this news release was obtained from the court records.

Did you know that between April 1, 2012, and March 31, 2017, total domestic and offshore related criminal investigations have resulted in 408 convictions involving $122 million in federal tax evaded and court sentences totaling approximately $44 million in court fines and 3,103 months in jail?

Canada Turns 150, the Income Tax Act turns 100

Bob Hamilton, the Commissioner and Nancy Chabwan, the Deputy Commissioner of the Canada Revenue Agency (CRA) Celebrates 100 Years of Taxes with #Canada150

2017 marks not only Canada’s 150^th Birthday, but also the 100^th Anniversary of the Income Tax Act (ITA).

To mark this anniversary, the CRA has put together a video that highlights the history of income Taxes in Canada and the role they play in building the country and lifestyle of Canadians – as well as how the CRA has evolved to meet the needs of Canadians over the years.

The 150^th birthday of Canada is July 1^st.

The 100^th anniversary of the ITA is September 20^th

Watch the video, and share with a de-taxer near you.

Learn How to Lodge a Service-Related Complaint with the CRA

Taxation. (Photo credit: kardboard604)

Have you ever had an issue with the Canada Revenue Agency which was so upsetting that you wanted to complain but did not know how?  Well, once you finish reading this post you will know how to do that, when you can do that and what you need to do that.

The first think you will want to do is to follow this link, to the CRA website and read their brief section on service-related complaints.  If everything looks good, then download this form, the RC159 fill it in, and send the completed form, together with supporting documentation and any authorization forms, separately from other tax forms to the CRA.

You can fax your form and supporting documentation to 1.866.388.7371 from Canada or the US or 1.819.536.0701 from outside Canada and the US, or you can mail them to the following address:

CRA – Service Complaints Supporting documentation
National Intake Centre
P.O. Box 8000
Shawinigan-Sud QC. G9N 0A6
CANADA

Make sure to include all relevant documentation that you feel may be helpful in reviewing your complaint or feedback.

This is a service complaint;

A service complaint is an expression of dissatisfaction with the service, quality, or timeliness of the work performed by the CRA which could include, but is not limited to, the following:

• undue delays;
• poor or misleading information;
• staff behaviour; or
• mistakes, which could potentially result to a misunderstanding or omission.

This is not a service complaint;

If your service complaint does not relate to a service matter, other options are available, for example:

• normal delays in the processing of your income tax returns – see Service Standards or for more information on what you can expect from the CRA.
• dispute an assessment, determination, or decision – see Complaints and disputes.
• disagreements related to the Income Tax Act – the CRA is responsible for administering tax legislation, not amending it. If you have a complaint about the Income Tax Act or other tax legislation matters, contact the Department of Finance Canada.

Additional information can be found by reading Booklet RC4420, Information on CRA – Service Complaints.

Related articles

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• Beware of Fraudulent Communications! The CRA Does NOT Randomly Request Personal Information. (intaxicating.wordpress.com)
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CRA Tax Question: T5008. Divorce. Court Order.

In the process of managing the processing of 2 million tax slips for my employer, the world’s largest transfer agent, the following question came across my desk:

A husband and wife divorced during the year and the husband did not make his child support payments as required by court order.  As a result, family court here in Canada passed a judgement stating that any stock he held be removed from his name and either cashed in so those funds could be given to his wife, or the stock be transferred to his wife so that she may cash them in as she needs them.

So here is the question:

Who gets the T5008?  Him or her?

Note:  Traders or dealers in securities have to file a T5008 information return to report purchases of securities as principal for their own account, and sales of securities they make as an agent or nominee, for any vendor.

Issuers of securities and their agents or nominees use this (T5008) information return to report redemptions, acquisitions, or cancellations of securities.

Might this be considered a deemed disposition?

Deemed dispositions

You do not have to report deemed dispositions on a T5008 slip, in certain circumstances, the Income Tax Act considers that a property has been disposed of, even though no real compensation in the form of money or other consideration has been received.

Some examples of when a deemed disposition may occur are:

• transfers of property to a trust;
• gifts of property (that is, the name of the beneficial owner of the property is changed);
• the owner dies; or
• the owner ceases to be a resident of Canada.

In this guide, “sale” generally refers to a transaction where the ownership of property is transferred from one person or entity to another for a sum of money or other consideration. In the case of a deemed disposition, ownership of the property is not transferred for money or other consideration. In addition, a deemed disposition is not a purchase, redemption or cancellation of a security. Consequently, a deemed disposition is not considered for the purposes of Income Tax Regulation 230 and a T5008 slip is not required.

Answer to follow…