Frequently Asked Tax Question Answered: How do I know if what I read about Tax Debt to the CRA is true?

This is one of the most commonly asked questions of me: How do I know if what I read on the Internet regarding debt to the Canada Revenue Agency (CRA) is true or not?

The answer is quite clear, however, complicated at the same time.

If you owe money to the CRA and you are looking for options, suggestions, or tips on the Internet, you have to pay special attention to the “Solution” options which are advertised as if they are providing legitimate advice.

The most important thing to do is to take note of the terminology used in these ads – over and over again – because the intention of these ads and blog posts are not to help you but to achieve a high SEO (search engine optimization) ranking.  These posts are written to capitalize on the number of eyes who will read that post because of the way it was written, not because it was intended to provide help to you.

Here is an example of a fear mongering ad, disguised as an article on taxes, meant to “help” you.  I am paraphrasing the content, but the example should provide a clear clue as to the true intention of the poster.

Title: Understanding Canada Revenue Agency (CRA) Tax Assessment & Arbitrary Assessments

The sample post: CRA tax assessment is when the Canada Revenue Agency conducts a review of your income taxes. The most common form of CRA tax assessment is the Notice of Assessment that is sent once the CRA has conducted a preliminary review of your tax return. There is another CRA assessment known as “arbitrary assessments.”   These assessments are also known as “notational assessments.” What this means is that, if you have not filed your taxes on time, the CRA could decide to complete and file your return for you.

Many people believe that, if you do not file your taxes, that the CRA will wait until you do file your taxes and then the CRA will penalize you by changing you penalties, fines, and interest.

This is not always true.

The CRA is able to choose to complete an arbitrary assessment in which the Canada Revenue Agency will estimate your income and the tax debt that you owe and then the CRA will charge interest on this debt as required.

The amount of tax debt that comes from a CRA arbitrary assessment will  not be as favourable to you as it would be if you completed your return yourself.

The CRA will use previous income tax statements to complete your return and will not take steps to include expenses or deductions or attempt to give you any tax breaks.

In many cases, the amount owing listed by the CRA will be very high and additional charges, penalties and interest will be charged since the assessment was late.

You will then be subject to CRA collection efforts such as a wage garnishment of up to 100% of your income, or the CRA will empty your bank account and then freeze it so you cannot use it.  They could also put a lien on your house and if you don’t pay them, sell it and keep the proceeds.

What do you do if you Receive a Notational Assessment?

If you receive an arbitrary CRA tax assessment, your options are;

  1. Pay the amount listed
  2. File an appeal of the assessment.
  3. You can also choose to file a return yourself at this point in an attempt to reduce your tax bill, but, this will trigger a CRA audit to ensure that your tax return is filed correctly.

In addition, if the CRA does not have the information it needs in order to complete an arbitrary assessment, it can take you to court where the court can order that you complete the return and pay a court fine.

If you ignore this court order, you could be subject to contempt of court charges and go to jail.

As you can see, your best option is to contact us, and we will help solve this problem.  We have an army of former CRA staff at our disposal who deal with hundreds of these daily.

Let us help keep you out of jail and away from the prying eyes of the CRA.

 

WHEW.

After reading this, if you were not afraid of the CRA, you must be by now.  This blog post started out trying to get people looking for CRA tax solutions and slowly wound its way through a series of lies and mis-truths and took the reader straight to audit and jail.  It just stopped short of proclaiming that King Tax Man was going to descend from the clouds and throw tennis sized hail-balls at you.

This type of article is not good.  It’s not accurate, heck, some of it is not even true.  But how would you know?

What are the red flags that you should notice?

Let’s break down this article and address some of the “facts”.

First paragraph – mentions of CRA, or Canada Revenue Agency – 5 times.  This is their SEO target, clearly.

I was also alarmed that the writer was unable (or unwilling) to state what a Notice of Assessment (NOA) is, and how the CRA actually issues them.  To set the record straight, a Notice of Assessment is the computer generated form which is issued once a change occurs on someone’s tax account.  This NOA carries with it a legal warning from which the CRA are able to take collections actions.

An additional lie occurred when the author stated that your tax return is looked over once it is filed.  In truth, no one has reviewed your tax return.  The data entry group take the paper-filed returns and just enter the information in the system.  Electronically filed tax returns are run through a program aimed at identifying any obvious errors or inaccurate deductions taken.

There is the idd case where the CRA will flag and wait for your tax return, however try not filing for 20-years and being under audit regularly, and then you can get to that level.

Canada’s tax system is a self-reporting system so the information is accepted as filed, and the Audit, or Verification department are responsible for checking the information to make sure it is correct after the fact.

Another HUGE issue, is that there is a significant difference between an arbitrary assessment and a notional assessment.

Arbitrary assessments are issued for personal (T1) taxes and occur when the CRA’s non-filer group, or a CRA collector takes information on your personal tax account for that current year, plus previous years and prepare the unfiled tax return for you, less deductions.

In many cases, they are pretty accurate.

A notional assessment is specific to GST/HST and in these cases the non-filer unit or the collections unit will assess an amount owing for each period outstanding based on a suggested amount the system provides.  That suggested amount is a combination of the previous filings, and the industry or SIC code that is associated to your file.

In both cases, returns can be filed and the assessments removed, however, Notices of Objection should be attached just to provide recourse should the filings not be accepted.

Filing the missing returns does not trigger an audit.

The whole piece about the CRA taking you to court, etc., makes absolutely no sense as it’s not even true.  Arbs and Notionals are based on information in the CRA’s systems.  If the CRA doesn’t have information, they can still raise an assessment.

I suspect the writer was just trying to close out the reasons for using them by tieing in the jail / court fine, for not complying.  It’s not true at all, but it makes for a compelling story!

If the intention of the article was to really assist Taxpayers and let each and every Canadian decide if they want to pay for assistance / expertise, then all they had to do was discuss prosecution which is what the CRA can and will do if repeated attempts to file have been issued from the CRA (Demand to File) and have not produced the returns.

Maybe they didn’t know that existed…

Maybe they were not aware that failing to file is a criminal offense, if the CRA asks for the returns and they are not provided.

Certainly, they did not want you to know that failing to pay is not.

If someone looked at the above post, they would panic, contact this firm, and likely be convinced to pay a lot of money for something they could likely do themselves because they don’t want to make it worse, or go to jail.

It’s hard to get the truth out there when there are people and firms distorting the facts in order to make a profit off of taxpayers lack of understanding of how the CRA works.

Additionally, if they intentionally muddled the facts in this post to scare you into using their services, what other information have they creatively adjusted?

Or, if they believe this to be the truth, then they just don’t have the experience or expertise to know better, and do you really want to use them to represent you in dealings with the CRA?

Outcome:

I questioned the author in an online social media forum.  I said, “I’ve always understood that an arbitrary assessment was specific to T1 returns and that they were actually quite accurate because most of the information used is already posted to your T1 account, whereas a notional assessment was specific to GST/HST and those figures were based on the industry or SIC code. Can you confirm this is your understanding as well?”

He never responded…

Surprised?

I’m not.

When you have CRA tax collections problems then you need the expertise of the firm with an actual former CRA tax collector.  inTAXicating Tax Services.

Visit us at http://www.inTAXicating.ca

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Get the Largest Tax Refund Possible! Fast! Yikes!!!

After spending close to 11-years working in the Canada Revenue Agency (CRA), I have a pretty good idea what gets people into tax trouble.

Okay, I know exactly what gets people into tax trouble, and while it’s nearly impossible to list all of the reasons, I can tell you that there are ways to get you out of tax trouble which many of the people I come across on a daily basis have never considered.

I can honestly say, without any prejudice that I believe a main part of the problem has to do with targeted advertising this time of year, towards tax filing season and which is aimed at people who equate getting their money back fast through the quick, cheap filing of tax returns.

The ads go something like this;

“Get the Largest Tax Refund Possible”.

“Get the Most Back.”

“Get the Most You Are Entitled To.”

“Get your Money Back Now!”

Just hearing those advertising slogans scare me, and it should scare you too.

Getting money back from the government at tax time, does not mean what you might think it does. You are not getting money from the government because you fell into a threshold, but what you are doing is getting your money back from the government. Your money that you overpaid (or were over-deducted at source) which the government kept during the year – held interest-free in fact – which you are asking for back.

Amazing.

It’s akin to lending someone money for a year – they use it, or invest it and make money off of it – and then a year later you ask for it back and you get it, while they made money off of it.

So how does this tied into tax debt?

History has shown me that people do not wake up in the morning and decide that they want to start carrying a balance owing to the Canada Revenue Agency.  Nobody wants to worry when they go to use their debit card that there might not be funds there as a result of a CRA bank garnishment, or when they go to sell their home find out that there is a lien on it.

Tax problem occur over time and as the time passes and interest accumulates, people find their ability to deal with it declines and before you know it, the amount owing is massive and the CRA is breathing down your neck.

So imagine if after rushing to have your tax return completed – so you can get back a couple of hundred dollars – you find out that you owed money instead.  Now you have a tax problem.  A tax problem that you have not budgeted for.  Now in collections, you have time find a way to pay off this amount owing, and fast, before the CRA takes legal actions.  You can ask friends and family for money, or consider a second job to pay that off.  It can be done, it can take time, or it can snowball and you become a chronic tax debtor in the eyes of the CRA.

Now the fun starts.  Visits to your house, your employer and notices to your bank or clients all run the risk of causing you long-term embarrassment.

If only there was a solution available to help out the repayment.

Well, there is.

This scenario could be completely different if you have taken the time to speak with an accountant, or a reputable tax firm and knew in advance that you might owe and together you had the opportunity to determine the best way to handle this impeding debt by placing money into your RRSP, or applying for, and claiming deductions to reduce your amount of taxes owing at year-end.  With a good accountant, your tax planning is not just for the current year, but also for future years.  

Wouldn’t that make more sense?

One of the first questions I ask a prospective client, or anyone who comes to me for tax advice, is who completed your tax return and what are their credentials.  It’s important because I have taken tax returns which owned $3000, $4000 or $5000 each year and turned them in to $4000 and $5000 credit returns just by claiming deductions and tax credits available to those taxpayers.  Nothing illegal and nothing which would cause the CRA to reject the claim.

So instead of rushing to have your return completed for $40 or $50, think about spending the extra money this year and take advantage of an accounting firm which will sit with you, determine how to minimize your tax expenditures for this year and for future years.  Pay what you owe and not a cent more, and if you’re getting money back every year find out why.  Learn which deductions you may be eligible for and start keeping your receipts.  Take control of your year-end tax filing and stop sending the CRA penalty and interest revenue.

If you already have a tax problem, you need to have tax experts review your prior year tax returns to look for missed deductions and credits.  With a simple amending of the return, your balance could be reduced or wiped out completely.  This really is the best way to start paying back / down a tax debt!

It’s what I do.  For you.

It’s worth the money!

If you are looking for an alternative, please feel free to reach out to me here in the comment section, or email me at intaxicatingtaxservices@gmail.com.

Coping with Stress in Your Life

Everyone has stress.

I have a few tried and true suggestions aimed at reducing stress and making you more productive at work and at play.  Here they are;

1. Re-prioritize.  If you cannot seem to get everything done and you are constantly beating yourself up about this, then you should face the reality that you cannot do everything.  Don’t just re-prioritize your “to-do” lists (office and home). Re-prioritize your life list.  Make a date with yourself for an hour or two and go somewhere quiet, where you can be alone.

A few tips on re-prioritizing and making lists to live by include;

List what is important to you.
Put these items in order of importance.
Look carefully at your top three. Are these the items that support you financially and emotionally? You have been sabotaging yourself and to successfully stop the self-sabotage, you will have to change the way you have ordered your life up to now. Whenever you need to make a decision concerning the expenditure of your time, look at your life list. Will the activity support those items? If not, do not spend your time on those items. Which leads to the next step…

2.  Get Help. Stop trying to do everything yourself. Start with the most inexpensive thing, which for most people is help around the house.  Get someone to clean, or run errands. If you work in the home, this is really important because you will constantly notice what needs to done and it can distract you.  For your business, hire part-time help to help you with paperwork or tasks that require much of your time. You can hire Virtual Assistants if you are not ready for employees in your office. They can be hired by the hour and can do some of the tasks that you should not be spending your time doing. Virtual Assistants are independent contractors and are skilled in office, bookkeeping and computer work. They work out of their own offices on the computer and phone. Delegate, hire, barter. Do what you need to so that you stop trying to do everything yourself.

3. Be Active.  You cannot sit all day and keep working. It is not good for your body, it is not good for your mind and it is not good for your business. Get some exercise and the easiest way to start is to walk. I urge you to schedule time in your day, each day, for a walk. Often, during our work day we keep going, because we don’t want to lose momentum and we want to get stuff done.

But if you don’t take the time to walk and move your legs, you will not only lose your momentum, you will have used up all your energy and ideas. When you walk, your mind takes in new sights and sounds. It is helpful to let your mind relax into a flow, with no set direction or course. Your subconscious will continue to work on whatever project you are currently involved in, and you will be inspired with new ideas, solutions, and courses of action.
4.  Drink lots of water.  Take the time to drink 6-8 glasses of water per day.  This is quite simple but so important. Keep hydrated to flush out toxins, have healthier looking skin and boost your metabolic rate. Often we mistake thirst for hunger, so drinking enough water can help you control the amount you eat.

Keeping your body hydrated will help every part of your body and mind. You will have fewer headaches, and you will think more clearly. You want the clearest thinking for your business, don’t you?

5. Get more sleep. Adults should have 7-9 hours of sleep a night and if you are not getting enough sleep, everything will suffer. Your business, your personal life, and your health. You do not think creatively when you are tired, and you may make bad decisions. When you don’t get enough sleep, hormones in your body get out of whack. You will actually crave carbohydrates and eat more when you are tired. The foods you crave are usually ones that zap your B vitamins—the ones you need for energy!

The easiest way to start, is to move your bedtime up by 15 minutes. You can create the time to go to bed earlier by turning off the television. PVR your favorite shows. Watch them at a later time. Turn off the computer. Turn off the Blackberry and leave the phone alone. If you have trouble settling down, a hot shower or bath can relax you. A glass of milk or a small bowl of cereal can help.

Create a relaxing atmosphere in your sleep area with soft bedding and quiet. Read a novel or a magazine for a few minutes before you turn the lights out. (Or try tax legislation!)

Remember, as far as work, there will always be more. Leave it.

Go to sleep.

One important note: It is your choice whether you stay in a stressed out, unhealthy state. What do you want? A healthy business and body, or an unhealthy business and body? Think about it.

Ford turned a profit

Looks like people were pleasantly surprised to see that Ford Motor Company turned a profit in the last quarter of a billion dollars.

090506_Ford

Surprised?  Really?

Closing plants, removing over-paid unionized workers and rolling back their salaries on it’s own should have made the difference.  Selling a few extra cars in tough economic times certainly helped. 

I believe that I wrote a post last year stating that all the big 3 car companies would be forced under unless they were able to free the grip the auto workers union have on them. 

Maybe I do know something after all.