The Canada Revenue Agency Informant Leads aka “Snitch” Line

You have come to this blog for more information on the Canada Revenue Agency’s (CRA) Informant Leads or Snitch Line.  Yes, the line does exist and if you are looking for the number in order to use it, that number is 1.866.809.6841.

You may have heard me speak on CFAX1070 about the CRA Snitch line, or possibly you heard my interview on CBC.ca regarding the existence and use of this line.  If you have not, then let me take a moment to clear the air on this line.  The Informant Leads line does exist.  In fact, it has become such a popular tool for finding new collection sources that it’s increased volume of calls can be directly attributed to a reduction in the need for collections staff / auditors and investigators who were responsible for digging up new leads.

It is absolutely not possible for someone to call the line, make up a story and have someone investigated.  Anyone who states that does not know the purpose of this line and obviously has no experience working in the CRA.  To say that is irresponsible and fear mongering.   The CRA will act on leads but there must be some proof provided.  Simply asking for your neighbour to be audited because they drive a nicer car than you is not going to begin years or investigations-hell for them.  If, however, you purchase an item from a retail establishment, and are charged taxes, but you notice that the teller never ran the purchase through the till, then you can be assured that they are pocketing the taxes instead of remitting it to the CRA.  Or, if you notice on the receipt that they have charged you the wrong rate of tax, then you need to notify the CRA.

In one case, while I was working at the CRA, I purchased a large ticket item from a local store only to find out later that the taxes on the bill totaled 28%.  I went back to the store to ask for it to be corrected, only to have them advise me that it was a “US cash register” and that the rate was incorrect.  I took the receipt into the office hoping to launch an internal investigation but was told it would be 6-weeks before they were able to look at it.

So I walked over to a phone beside my desk, called the snitch line, explained the issue and after providing the receipt as proof, found that an investigation was launched the next day and heard through the grapevine that over $200,000.00 was recovered from the company.

That is where the snitch line can be put to good use.

If, however, you hear your neighbour bragging about how much money he makes under the table and he lives way better than you do?  You can call the snitch line.   Or if your ex-spouse is unwilling to file their outstanding tax returns because it would mean they would have to increase child support payments, then you can call the snitch line.  The CRA will take the information, begin with an internal investigation to see if there is merit, then possibly drop by the home or business to get a feel for whether an audit is required or if a net worth assessment is needed.

At the end of the day, the intention of the snitch line is to provide a direct link to the CRA’s Audit department and it assists the CRA as they use these “tips” to recover funds from professional tax avoiders.

Key words the CRA likes to hear includes;

Their names, their address, an amount of unreported income greater than, say $50K, maybe a second set of books, or 2nd property in the name of their cat…

It never hurts to call.

It always hurts to not call.

This line is anonymous and believe it or not, the majority of “tips” come from exes who are left holding the bag while their ex-spouses are living it up.

I figured I would post this since it is the most frequently asked question I get.  Yes a line exists and yes it gets acted on… and fast if the dollar amount to be recovered is high.

I have actual experience seeing this line work and I know for certain of instances where people have called this line in effort to discredit or attack someone and at the end of the day, the CRA  has investigated that person or party and punished them for making a false claim.  Those in glass houses should never throw stones.

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Thursday Thirteen – IRS Style. 13 Facts about W9’s.

This Thursday Thirteen covers 13 facts about the IRS W9 Form you may, or may not have known about:

13. Which payees are exempt from backup withholding?
* An organization exempt from tax under section 501(a), any IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2),
* The United States or any of its agencies or instrumentalities,
* A state, the District of Columbia, a possession of the US or any of their political subdivisions or instrumentalities,
* A foreign government or any of its political subdivisions, agencies, or instrumentalities, or
* An international organization or any of its agencies or instrumentalities.

12. Which payees may be exempt from backup withholding?
* A futures commission merchant registered with the Commodity Futures Trading Commission,
* A foreign central bank of issue,
* A dealer in securities or commodities required to register in the US, the District of Columbia, or a possession of the US,
* A real estate investment trust,
* An entity registered at all times during the tax year under the Investment Company Act of 1940,
* A common trust fund operated by a bank under section 584(a),
* A financial institution,
* A middleman known in the investment community as a nominee or custodian, or
* A trust exempt from tax under section 664 or described in section 4947.

11. The IRS recommends that even if you are exempt from backup withholding, you should still complete a W9 to avoid possible erroneous backup withholding.

10. What is the purpose of the W9?
A person who is required to file an information return with the IRS must obtain your correct taxpayer identification number (TIN) to report, for example, income paid to you, real estate transactions, mortgage interest you paid, acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA

9. Who needs to complete a W9?
A US person (including a resident alien), to provide your correct TIN to the person requesting it (the requester).

8. Why do “they” need a W9 completed?
* To certify that the TIN you are giving is correct (or you are waiting for a number to be issued),
* To certify that you are not subject to backup withholding, or
* To claim exemption from backup withholding if you are a US exempt payee.
(You are also certifying that as a US person, your allocable share of any partnership income from a US trade or business is not subject to the withholding tax on foreign partners’ share of effectively connected income)

7. If a requester gives you a form other than Form W-9 to request your TIN, you must use the requester’s form if it is substantially similar to this Form W-9. The IRS cares about the information on the form, not the form itself.

6. Penalties? Yup!!!
* Civil penalty for false information with respect to withholding. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty.
* Criminal penalty for falsifying information. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.
* Failure to furnish TIN. If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.
* Misuse of TINs. If the requester discloses or uses TINs in violation of federal law, the requester may be subject to civil and criminal penalties.

5. What is backup withholding? Persons making certain payments to you must under certain conditions withhold and pay to the IRS 28% of such payments. This is called “backup withholding.” Payments that may be subject to backup withholding include interest, tax-exempt interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay, and certain payments from fishing boat operators. Real estate transactions are not subject to backup withholding.
You will not be subject to backup withholding on payments you receive if you give the requester your correct TIN, make the proper certifications, and report all your taxable interest and dividends on your tax return.

4. You will not be subject to backup withholding on payments you receive if you give the requester your correct TIN, make the proper certifications, and report all your taxable interest and dividends on your tax return.

3. If you are a US resident alien who is relying on an exception contained in the saving clause of a tax treaty to claim an exemption from US tax on certain types of income, you must attach a statement to Form W-9 that specifies the following five items:
1. The treaty country. Generally, this must be the same treaty under which you claimed exemption from tax as a nonresident alien.
2. The treaty article addressing the income.
3. The article number (or location) in the tax treaty that contains the saving clause and its exceptions.
4. The type and amount of income that qualifies for the exemption from tax.
5. Sufficient facts to justify the exemption from tax under the terms of the treaty article

2. To sign or not to sign…
To establish to the withholding agent that you are a US person, or resident alien, sign Form W-9. You may be requested to sign by the withholding agent even if items below indicate otherwise.
* Interest, dividend, and barter exchange accounts opened before 1984 and broker accounts considered active during 1983. You must give your correct TIN, but you do not have to sign the certification.
* Interest, dividend, broker, and barter exchange accounts opened after 1983 and broker accounts considered inactive during 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form.
* Real estate transactions. You must sign the certification.
* Other payments. You must give your correct TIN, but you do not have to sign the certification unless you have been notified that you have previously given an incorrect TIN. “Other payments” include payments made in the course of the requester’s trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services (including payments to corporations), payments to a nonemployee for services, payments to certain fishing boat crew members and fishermen, and gross proceeds paid to attorneys (including payments to corporations).
* Mortgage interest paid by you, acquisition or abandonment of secured property, cancellation of debt, qualified tuition program payments (under section 529), IRA, Coverdell ESA, Archer MSA or HSA contributions or distributions, and pension distributions. You must give your correct TIN, but you do not have to sign the certification.

Bottom line… Sign it.

1. You will be subject to backup withholding on payments you receive if;
* The IRS tells the requester that you furnished an incorrect TIN,
* You do not certify your TIN when required,
* You do not furnish your TIN to the requester,
The IRS tells you that you are subject to backup withholding because you did not report all your interest and dividends on your tax return (for reportable interest and dividends only),
* You do not certify to the requester that you are not subject to backup withholding (for reportable interest and dividend accounts opened after 1983 only).

In-TAX-icating

In-TAX-icating.

Definition:

a: To excite or stupefy by taxation to the point where physical and mental control is markedly diminished

b: to excite or elate to the point of enthusiasm or frenzy… about taxation.

Passionate about Taxation.  Passionate about helping you!