What Do Lionel Messi, Cristiano Ronaldo and Floyd Mayweather Have in Common?

What Do Lionel Messi, Cristiano Ronaldo and Floyd Mayweather have in common aside from being top atheletes in their respective sports, and extreme wealth?

Tax Troubles!

Ronaldo and Messi with the Spanish Tax Authroity, and Mayweather with the IRS, which just goes to show you that no matter how much money you have, or don’t have, you still have to report income, file on time and pay your taxes!

In Ronaldo’s case, the Spanish Hacienda tax authority believes Ronaldo failed to pay €14.7 million in taxes pertaining to income earned on his “image rights” between 2011 and 2014.  The belief is that he used (and still uses) a shell company in the British Virgin Islands and Ireland, to hide at least €78m in image rights.

Ronaldo’s camp claim that he has fulfilled all his tax obligations, maintaining that the majority of his image-rights income is earned abroad and therefore not liable for Spanish tax.

How does Ronaldo’s situation differ from Lionel Messi’s tax case?
Barcelona star Lionel Messi and his father Jorge were found guilty of tax fraud in July 2016 after it was found they had hidden image-rights income from the Spanish authorities. Messi was fined €3.6m and sentenced to 21 months in prison (which was suspended) for defrauding €4.1m between 2007-09.

The Messi family had previously paid over at least €10m in back taxes and charges, long before their case made it to court.

In Messi’s case, the court determined there was a total failure to fill his tax obligations on image rights income.

A huge concern stemming from the The Supreme Court’s judgement in the Messi surrounded the role that Messi’s tax and financial advisors played and how both parties were not indicted as part of the prosecution since they there was evidence that they advised the player on how to evade taxes.

In Spain, a  guilty verdict for an aggravated tax crime means a mandatory jail time of two to six years, while conviction of the lesser offence brings a suspended sentence.  If Ronaldo admits to the details in front of the judge within two months after being accused, and pays over the amounts allegedly defrauded, his punishment could be reduced.

Messi’s 21-month prison sentence for tax fraud was reduced to a €252,000 fine, while his father’s 15-month prison sentence was reduced to a €180,000 fine.

These fines are in addition to the re-payment of the taxes originally owing plus any penalties and interest accrued to the balance.

Floyd Mayweather, and his estimated net worth of $340 million is in trouble with the IRS and has apparently filed a petition asking for a temporary reprieve from unpaid taxes from 2015 until after his fight with Conor McGregor in August.

Apparently, while he has substantial assets, those assets are restricted and primarily illiquid. The upcoming fight against McGregor, however, would provide Mayweather with enough liquid cash to pay the IRS debt from 2015 in full.

Mayweather, made $220 million alone from his 2015 fight against Manny Pacquiao. It is unclear how much he owes the IRS in taxes.  Given a 15-month lapse since the 2015 tax due date, Mayweather would owe 7.5% in penalties plus accruing interest on top of what he was already scheduled to pay.

Forbes estimated Mayweather’s net worth at $340 million in January.

 

So the moral of the story is this;

Not everyone wants to pay their taxes, and some will go to great lengths to reduce or avoid paying taxes. If that is something that you feel you must do, you have to be prepared for the consequences of your actions when and if the government comes back to you.

File on time.

Pay on time.

Don’t pay the government more than you should.

If you need help because you’re carrying a balance with the CRA and you want to discuss options, contact Goldhar Tax Solutions today!

http://www.goldhartaxsolutions.ca

@GoldharTAX

tax@goldhar.ca

Toll free 1.877.TAX.AID1, or 1.877.829.2431.

 

What is an IRS Form, W8BEN?

What is a W8BEN?

The W8BEN, or Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) is a form which, when completed, is provided to the US income provider (Not the IRS!) in order to prevent 30% of your earnings being withheld and remitted to the IRS.

The W8BEN claims the treaty rate between Canada and the US which means you cannot be taxed by both countries on the same income, and by completing this form, you are certifying the following information to the IRS;

  • I am the individual that is the beneficial owner (or am authorized to sign for the individual that is the beneficial owner) of all the income to which this form relates or am using this form to document myself as an individual that is an owner or account holder of a foreign financial institution,
  • The person named on line 1 of this form is not a U.S. person
  • The income to which this form relates is:
    • (a) not effectively connected with the conduct of a trade or business in the United States,
    • (b) effectively connected but is not subject to tax under an applicable income tax treaty, or
    • (c) the partner’s share of a partnership’s effectively connected income,
  • The person named on line 1 of this form is a resident of the treaty country (in this case, Canada) listed on line 9 of the form (if any) within the meaning of the income tax treaty between the United States and that country, and
  • For broker transactions or barter exchanges, the beneficial owner is an exempt foreign person as defined in the instructions. Furthermore, I authorize this form to be provided to any withholding agent that has control, receipt, or custody of the income of which I am the beneficial owner or any withholding agent that can disburse or make payments of the income of which I am the beneficial owner.
  • I agree that I will submit a new form within 30 days if any certification made on this form becomes incorrect (changes).

In a nutshell, you’re telling the IRS, you are NOT a US person, that you do not work in the US and that you will report your income to the CRA.

Otherwise, they keep 30% of it.

 

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)

inTAXicating Is 6-Years-Old! Happy Anniversary. Let’s Share Links!

I received a surprising message from WordPress on Sunday, September 21st that this blog, inTAXicating,has celebrated it’s 6th anniversary!

Time flies!

Happy Anniversary inTAXicating.keep-calm-and-happy-6th-anniversary-1

That means it has been 6-years since I have been posting suggestions, tips, and recommendations surrounding the ins and outs of the Canada Revenue Agency (CRA), the IRS, Revenu Quebec and the WSIB.  I have written about these government organizations based on my practical work experience at the CRA and in private industry working closely with all of them.

I have posted some great stories and have so many more to come!

Compliance, Collections, Cross-Border issues, FATCA, Assessments, Liens, Director’s Liability, Audits, Negotiations, Accounting… I’ve done it all, and I’ve shared a lot of inside information that no one else hears about, or knows about.  Having all of this knowledge and wanting to share it is the driving reason behind maintaining this blog, and opening up a tax solutions business at www.intaxicating.ca.

I am also always looking for great Canadian tax content to read and discuss, so if you are a tax blogger, or if you have a different go-to site for Canadian tax information, please either post a comment on this post, or send me an email at info@intaxicating.ca and I will add the site to my blogroll.

The more Canadian tax information we can get together as a community, means we can help Canadian taxpayers that much better!

 

On the Fence about FATCA? Canada and U.S. Sign Intergovernmental Agreement on Foreign Account Tax Compliance Act

Ever since  I caught wind of  the Foreign Account Tax Compliance Act, back in 2010, FATCA has been near the top of my radar.  For those of you who are unaware what FATCA is, The Foreign Account Tax dept of financeCompliance Act (FATCA) requires citizens of the United States (present, past, those with citizenship who do not live there, those who worked there a specific number of day, and those who received “accidental” citizenship through birth), to report their financial assets held outside of the United States to the Internal Revenue Service (IRS).  If providing that information means that the IRS would be taxing you and you have been trying to hide these assets, FATCA requires foreign financial institutions to report your information to the IRS.  The intent of FATCA was to combat offshore tax evasion and to recoup federal tax revenues.   FATCA is a portion of the 2010 Hiring Incentives to Restore Employment (HIRE) Act.

As the tax manager at Computershare Investor Services and the Assistant Vice President of Tax for CitiGroup (CitiFund Services) I got to know FATCA very intimately and at one point or another became the Canadian lead on information dissemination and compliance.  After almost 11-years of interpreting legislation at the Canada Revenue Agency (CRA) deciphering this text came second nature and thus taking the FATCA regulations and translating them into English was not a difficult task, but more something that I had to do in order to teach myself the requirements so I could pass along that knowledge to my employers and to my clients.

The interesting thing about FATCA from a Canadian side was that with over a million “US Persons” here in Canada (probably much more now) I don’t believe the IRS understood that the majority of them were paying taxes in Canada and since the Canadian tax rate is higher than the US rate, there was some hesitation on the Canadian side to provide all this data to the IRS for no net gain.  Other countries rushed to sign intergovernmental agreements with the IRS to meet deadlines which have now been pushed out again as a result of the July 2014 start date for FATCA, but Canada did not.

The Canadian government was hesitant to force Canadian financial institutions to provide the very detailed information on Canadian citizens for fear that they would be double taxed, something the Canada-US Treaty strove to avoid.   In addition, the Canadian side wanted the Canada Revenue Agency included so that information could pass through secure channels and potential breaches of security and privacy could be avoided.  There was even talk that Canada refused to sign an agreement with the IRS, instead forcing the IRS to seek their own tax cheats from their own side of the border.

Then something changed.

The IRS began ramping up their search for US Persons via every mean possible – whether it was checking Facebook accounts to see where people are born, cross-checking it with school records – or by allowing people who had no previous knowledge of FATCA some amnesty when catching up on their delinquent tax returns, but then hammering them on their filing of the Report of Foreign and Financial Assets to the tune of $10,000 per late return – with no maximum.

People became scared, and when scared you have two choices to make.  Either flee or fight.  In this case it’s either comply or pray.

Those who chose to file had to wade through unclear rules and regulations and a lot of unclear information floating around on the Internet.  Is there penalty, is there not?  Will I be charges criminally, or will the IRS understand that I was not aware of my obligations.  Do I have to file 3-years of past-due returns or 10 years?  When are FBAR’s due?  Should this cost me $10,000 or $100,000?

Many questioned the over-reach on the US side while others commented that as an US citizen, the requirements were there and you should have known.

But with all that being said, on February 5th, 2014, Canada and United States announced that they have reach an agreement on Foreign Account Tax Compliance Act (FATCA).

The intergovernmental agreement lays out the details of how the US will be using FATCA to track down the Canadian financial activities of US persons to make sure they are paying required taxes to the IRS.

Under the terms of the agreement Canadian financial institutions will send some of the information they collect on their US clientele to the Canada Revenue Agency and the CRA will transmit the information to the IRS.

The agreement can be read in it’s entirety on the Canadian Department of Finance website.

My take from reading the release is that the Canadian government realized their hands were tied, however they were not going to allow the IRS to demand information which violates Canadian privacy laws and thus allowed the IRS to pursue their legitimate tax-base with the assistance of the CRA much in the same way the CRA and IRS work together to collect tax debts – through information sharing and not the actual collecting of debts for the other country.

Kerry-Lynne D. Findlay, the Minister of National Revenue said; “This is strictly a tax information-sharing agreement. This agreement will not impose any U.S. taxes or penalties on U.S. citizens or U.S. residents holding accounts in Canada. The CRA does not collect the U.S. tax liability of a Canadian citizen if the individual was a Canadian citizen at the time the liability arose. This includes dual Canada-U.S. citizens. That will not change under this agreement.”

Changes to the FATCA legislation under this agreement include, but are not limited to;

  • Certain accounts are exempt from FATCA and will not be reportable, including Registered Retirement Savings Plans (RRSP), Registered Retirement Income Funds (RRIF), Registered Disability Savings Plans (RDSP), Tax-Free Savings Accounts (TFSA), and others yet to be released.
  • Smaller deposit-taking institutions, such as credit unions, with assets of less than $175 million will be exempt from FATCA compliance.
  • The 30 percent FATCA withholding tax will not apply to clients of Canadian financial institutions, and can apply to a Canadian financial institution only if the financial institution is in significant and long-term non-compliance with its obligations under the agreement.

This intergovernmental agreement is only the beginning.  Recent G-8 and G-20 commitments agreed upon in September 2013, intended to fight tax evasion globally and to improve tax fairness, provide for an automatic exchange of tax information as the new global standard.  This agreement signaled an intention to begin exchanging information automatically on tax matters among G-20 members by the end of 2015.

So like it or not, FATCA is just the beginning of a world-wide crack down on tax evasion.

Still on the fence?

inTAXicating Tax Services works with several Canadian tax-preparation firms who specialize in US taxes, and FATCA compliance.  If you wish to get caught up, please feel free to reach out to us at info@intaxicating.ca.  If, you have further questions and wish to discuss your requirements, you can email, or call us at 416.833.1581.  If you wish to comment, you may do so below.

A Lesson in POWER: How to ALWAYS Level the Playing Field with the CRA.

Power is a funny thing.

Pretty much everyone wants it at some point in their life.

Most of the people who have it do not know how to use it properly.

To be honest, few will ever get it.

The most important thing to know about power is that it is most successful when used in two ways; either by declaring yourself King and having your cronies keep everyone else at bay by whatever means possible, or secondly by taking the time to get key players on your side and using your network to help you maintain power but all along helping those around you learn and grow, and they help everyone else under them do the same.

Which model do you think is most often associated with government tax collections agencies?

Having spent a lot of time working at the Canada Revenue Agency (CRA) in the collections and enforcement division and being responsible for training collections, enforcement and audit staff there I can honestly say not as many staff there who feel you have to do what they say no matter the consequences as you would think.

It is true that there are employees of the CRA who feel that being in a position of power allows them to do things, say things and act in a manner which is improper or unjustified.  There are also staff there who take their positions of power to a whole new level and they let their egos control their decision-making process which means they wield power in order to realize an outcome in their best interest, not yours.

I have seen how power corrupts and the result is never easy to correct.

The CRA has a lot of power.

Throughout my decade of employment at the Canada Revenue Agency I was surprised with how much power the Agency has and how many taxpayers feared this power.  I could hear collection officers tell taxpayers that they could clean out their bank accounts like “this!” (Insert snapping of fingers sound here), which is true, but also not true.  I learned to be subtle in my use of my apparent super-powers and the way I used my power was to visit my clients and by always making sure that when sitting with a taxpayer / representative that my chair was at its highest so that I would be looking down at them.  It was all I needed when dealing with the career tax evaders because it worked, but it was a tactic not necessary when dealing with 99% of the people I met with.

However, we already know that the CRA has a lot of power and in most cases before they use it, they are going to let you know first by phone, letter or a visit to your home or place of employment.  Once the CRA has decided they need to use their powers they are bound by the guidelines set out in the Income Tax Act and Excise Tax Act and by policies and procedures set out in their tax office.  The extent to which they use their powers is either their decision or it is influenced by their team leader or manager.

Once the CRA starts using their powers, your ability to control the outcome diminishes greatly. What you can control, is how much power you will ALLOW the CRA to use against you.

This is done by being proactive – reading notices, asking questions and keeping all your paperwork in one spot where you can access it once it is asked for.  But if you are past that point, or if it is just not possible, then you can take power back by enlisting the help of people who know the CRA policies, procedures and most importantly, their techniques and tactics.

If the CRA knew they were dealing with someone who knew more about their job, more about their techniques and more about how quickly they need to take an action which they claim is urgent, then the playing field is changed forever.

Having someone there to look after your best interests, who will tell you what the best plan of action for you, and you only, then taking that plan to the CRA and telling them the same is the best way to always level the playing field.  Negotiating is always easier when you know more than your opponent.

So please, if you have a tax problem, old or new, and you have been spinning your wheels with the CRA, the IRS, the MRQ, WSIB or the CRTC, don’t let it continue any longer.  Come visit inTAXicating.ca, or send us an email at info@intaxicating.ca and take advantage of our free consultation to leave how to put these issues behind you once and for all.

Have you ever been put in a position where you accepted something which was not in your best interests because the other side had all the power?

Happy to read your comments below.