Taxpayers Ombudsperson to Examine CRA Legal Warning Process

The Taxpayers’ Ombudsperson, Sherra Profit has announced that the Office of the Taxpayers’ Ombudsperson (OTO) will be undertaking an examination into the systemic issue of the Canada Revenue Agency’s (CRA’s) practices regarding providing legal warnings to taxpayers when collecting unpaid taxes.

Obviously, the OTO have received many complaints alleging that staff at the CRA have been taking legal actions – freezing and seizing funds from bank accounts, garnishing wages, taking refunds – without notifying taxpayers first, or without working to make a payment arrangement first.

Oh oh.

Apparently, the purpose of this exercise is to allow for the Ombudsperson to identify the current process the CRA uses in order to take legal actions, specifically to see if the notice being given is “sufficient”.

Additionally, there will also be a review of whether the CRA clearly identifies their entire collection process on their website.

Is it clear enough for the average Taxpayer to understand not to carry a balance with the CRA?

After the examination, the Taxpayers’ Ombudsperson will make her findings public in a report.

For those of you not familiar with the Office of the Taxpayers’ Ombudsperson (OTO), they “work to enhance the Canada Revenue Agency’s (CRA) accountability in its service to, and treatment of, taxpayers through independent and impartial reviews of service-related complaints and systemic issues”.

The website can be found here; https://www.canada.ca/en/taxpayers-ombudsman.html

The OTO wants to initiate systemic examinations when complaints or questions are raised about a service issue that may impact a large number of taxpayers or a segment of the population, in order to keep on top of the pulse of Taxation and the CRA here in Canada.

Recommendations arising from these examinations are aimed at improving the service provided to taxpayers by the CRA.

Quotes
“While the CRA’s collections practices and collections officers’ behaviours are some of the most common complaints received in my office, we have received more specific complaints about the legal warnings aspect.  CRA collections officers generally try to work out an acceptable payment arrangement that will allow taxpayers to avoid undue financial hardship. Taxpayers who contacted my office indicated they were taken by surprise, and said they have faced financial hardship and stress because of the lack of notice prior to CRA taking legal action.”

Sherra Profit
Taxpayers’ Ombudsman

Well…

Let me tell you, Office of the Ombudsperson, that there are 3 important pieces to the puzzle that you do not know about or have overlooked;

1. The issuance of the Notice of Assessment (NOA) comes with legal warning built right into the notice.  As the CRA’s collectors will tell you over and over again, the CRA is not a bank and thus, by issuing the NOA the CRA is demanding payment in full.  If, for whatever reason, a taxpayer cannot make payment in full, they are expected to contact the CRA and let them know.
2. Recent attempts by the CRA to lower their workloads resulted in the creation of New Intake inventories where by the collectors were advised and trained to take immediate legal action against a taxpayer once the 90 days grace period granted upon the issuing of a Notice of Assessment has passed.  Day 91 = legal action.
3. Trust accounts, situations where trust funds are due to the CRA as due right away and no collection restriction applies, ie/ jeopardy.

The answer here might include spelling out information on the CRA website a touch more clearly, and it should include having it in a few more places, maybe flashing and more noticeable because to educate and inform each and every Canadian Taxpayer all the time so everyone knows, just is not feasible.

Personal experience working at the CRA has afforded me a much different view of the CRA’s legal warning procedures and when I compare how I handled files to how others did, I get it… There are issues.

I cannot tell you the number of times I gave verbal legal warning, followed that up with written legal warning, then followed that up with another call and then upon freezing a bank account, got that call of surprise and shock.

However, I do know of a few others who froze bank accounts and instead of sending the legal document to freeze the account to the bank and the Taxpayer on the same day, held on to the Taxpayer’s copy for an extra day or 2 in order to prevent the Taxpayer from getting the notice first and emptying his / her bank account.

It’s not as clear as one might want it to be…

OTO… You’re going to be so disappointed with what you find, but you need to understand before you try to make the CRA A kindler and gentler place that everything is already in place, policy and procedurally, to do just that.

It could just be that people who are not informed do not feel they have a person or place to ask questions without fear of reprisal!

 

Why Your Tax Representation Matters

Every couple of days I receive a call from a taxpayer or corporation regarding huge sums of money they have paid to other so-called “tax solution” firms, without any apparent movement or resolution of their file.  Usually these stories involve secrecy and the requirement for additional funds in order to bring the file to a close.

Would you go to a dentist who treated you like that?

Or have your vehicle repaired at a shop where you were not even sure they had any mechanics there?

When dealing with tax-related matters there should be no secrecy.  There should be questioning whether work was done or not and there certainly should not be doubt that the job was not completed.

Unfortunately this happens more and more.

The representation you chose, when under fire by, not just by the CRA, but all areas of government, like the WSIB, RST, or CRTC, is far more important than you could possibly imagine.  Especially in light of the fact that the CRA, for example, keeps a permanent diary record of your conversations and their attempts to resolve your tax file.  They also carry forward an account summary every 6-months, so in the instance where an account has been transferred to another collector, that new collector will know within minutes how the CRA wants to treat you and / or your representative.

Lie to them.

Break promises.

Call them names, like the “taxman”.

It’s all there and its used against you… Forever.

Case in point:

A couple of years ago I met a couple of directors of a corporation who booked a 2-hour meeting with me for only $500 plus HST. They had come with the intention of having me assist them in negotiation with the Canada Revenue Agency (CRA) who were in the process of raising a Director’s Liability Assessment against them the unpaid debts of the Corporation they operated.  They could not afford to pay the balance in full and were worried the CRA would take their house.

These directors had also heard about a way to reduce penalties and / or interest and they wanted more information.

They had already met with 2 other tax solution firms and one of them had fed the CRA with a sob story which the CRA did not buy, and after failing to return calls, and have any meaningful conversation with the CRA, disappeared with their money.  The CRA kept trying to reach this representative and the directors had no idea how quickly the collections efforts had progressed and how upset the CRA had beceome.

The second firm charged them a lot of money, then set out to make a payment arrangement with the CRA, even accusing these directors of “fudging” their records in order to show less income than they actually had.

They were frustrated, had spent a lot of money and had now incurred the wrath of the CRA.

Then we sat down together to talk, and after only a few questions and a review of the notices they brought with them, I notified them of the statute of limitations the CRA must follow when raising a Director’s Liability Assessment under s.227.1 of the Income Tax Act and S323.1 of the Excise Tax Act, which was 2 years from the date the corporation ceased to operate or the date the director officially resigned from the corporation.

They said the business closed 3 years ago, and that their accountant had officially closed the corporation with the government.

We talked about the Taxpayer Relief Program and about key language to use when speaking to the CRA in order to begin to change the permanent diary record they keep on the corporation and the directors.

The meeting concluded.

I immediately pulled a corporate profile report, checked that against the date of the assessments the CRA were raising and found them to be beyond that limit.

I used the signed authorization forms to contact the CRA, and that 5-minute conversation resolved the account… Forever.

I provided the directors with a report of the meeting, including the information we discussed, the CRA’s actions to date, their likely next steps, plus recommendations about how to deal properly with the CRA going forward, and I explained to them that there was no need for a payment arrangement because the account had a zero balance.

Luck?

No.

Additional fees?

No.

Were they happy… You could say that.  After they wiped away the tears and finished squeezing the life out of me, they talked about the relief they felt knowing this matter was finally behind them, and how they had other tax matters they wanted me to handle for them.

If representative #1 or representative #2 knew anything about collections or looked beyond their huge payout, they could have helped these directors with this assessment, with the 9-month-long audit that followed or the issues with WSIB, and the CRTC so that these directors owed nothing and their files were closed and in good order.

Does representation matter?

You bet it does!

#inTAXicating

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.