Voluntary Disclosure Program Screening

I received an interesting call late Friday afternoon from a Canadian taxpayer who wanted to know more about the Canada Revenue Agency’s Voluntary Disclosure Program.

She said that she thought she was being “swindled”.

She called a “tax solution” type business and they said that for $3,000.00, they would “investigate” as to whether or not she qualified for the program.

To which I asked her this question;

“Has the CRA tried to get you to file outstanding returns, either by phone or by sending letters to you?”

“Yes”, she replied.

“Then you do NOT qualify for the program” was my response.

And I saved her $3000.00.

If the CRA has already reach out to you – or attempted to reach out to you – regarding unfiled returns or unreported income, then your disclosure is no longer voluntary.

For more information, read up on the CRA’s Voluntary Disclosure Program, through the CRA’s website, here.    Or Google “CRA VDP” and refer to the websites beginning with http://www.cra.gc.ca, or http://www.CRA-arc.gc.ca/voluntarydisclosures

 

July 9, 2016: The Canada Revenue Agency Revokes the Registration of the ACTLAP Children’s Foundation (A.C.F.)

The Canada Revenue Agency (CRA) has posted on their website that they will revoke the registration of ACTLAP Children’s Foundation (A.C.F.), a charity based in North York, Ontario, effective July 9, 2016. The notice of revocation has been published in the Canada Gazette.

On May 3, 2016 the CRA issued a notice of intention to revoke the registration of the ACTLAP Children’s Foundation (A.C.F.) as a charity, in accordance with subsection 168(1) of the Income Tax Act (The Act). The letter stated, in part, that:
“The audit by the Canada Revenue Agency (CRA) has revealed that the Organization operated primarily for the non-charitable purpose of furthering a tax shelter donation arrangement, the Pharma Gifts International Inc. program. The Organization agreed to accept alleged gifts of property from participants and to act as a receipting agent for this donation arrangement. For the period of June 16, 2012 to June 15, 2014, the Organization improperly issued receipts totalling over $64 million for purported donations of cash and pharmaceuticals, which were not legitimate gifts. Of the $1,724,814 in cash contributions it received, the Organization paid $1,289,385 to the promoters of the tax shelter. Of the $62,315,818 million [sic] worth of tax receipts issued for the gifts of pharmaceuticals, the CRA determined that the Organization significantly over-reported the value of the alleged property, resulting in grossly inflated tax receipts to participants.

The audit has shown that the Organization has failed to comply with several requirements set out in the Act. In particular, the Organization issued donation receipts for transactions that did not qualify as gifts, issued receipts otherwise than in accordance with the Act and its Regulations, did not devote all its resources to charitable activities and failed to maintain proper books and records. For all of these reasons, and for each reason alone, it is the position of the CRA that the Organization no longer meets the requirements necessary for charitable registration and should be revoked in the manner described in subsection 168(1) of the Act.”

Registered charities perform valuable work in our communities, and Canadians support this work in many ways. The CRA regulates these organizations through the Act and is committed to ensuring that they operate in compliance with the law. When a registered charity is found not to comply with its legal obligations, the CRA may revoke its registration under the Act.

Registered charities receive generous tax incentives under the Act including the ability to issue official donation receipts. To maintain this privilege, charities must continue to meet all the requirements of the Act.

The CRA is committed to preserving the integrity of Canada’s tax system.

The CRA audits every gifting tax shelter that offers official donation receipts in excess of the value of any property donated.

The CRA has also repeatedly warned Canadians of the consequences of participating in abusive tax shelters that it holds to be non-compliant with the Act.

There is a substantial amount of information on the CRA’s website and the CRA has published information, including warnings about tax shelters and donating wisely, in a variety of newspapers, magazines and various other media sources.

For more information, go to Tax shelters and Donor Beware, a special report from the Office of the Taxpayers’ Ombudsman.
An organization that has had its registration as a charity revoked can no longer issue donation receipts for income tax purposes and is no longer a qualified donee under the Act. The organization is no longer exempt from income tax, unless it qualifies as a non-profit organization, and it may be subject to a tax equal to the full value of its remaining assets.

For more information about the registration of Canadian charities or to find out more about a registered charity, go to the CRA’s Charities and Giving webpage.

Quick Facts on charities:

• As of March 31, 2016, there were 86,191 registered charities across Canada.
• Canada’s approximately 86,000 registered charities issued receipts worth more than $15.7 billion in 2014.
• In the 2015-16 fiscal year (April 1 to March 31), the CRA’s Charities Directorate completed 726 audits of registered charities chosen using a variety of methods – including random selection, follow-up on possible non-compliance or complaints, and based on a review of annual information returns. During that same period, 20 charities had their registered status revoked by the CRA as a result of an audit.
• As of March 31st, 2015, the CRA reassessed more than 195,000 taxpayer returns, denying in excess of $6.6 billion in donation claims mostly due to tax shelter gifting arrangements.
• A copy of the Notice of Intention to Revoke and other letters relating to the grounds for revocation are available to the public on request, in the language in which they were originally written, by going to Request for registered charity information.

Related Products

Canada Revenue Charities Listings: http://www.cra-arc.gc.ca/chrts-gvng/lstngs/menu-eng.html
Charities Media Kit: http://www.cra-arc.gc.ca/chrts-gvng/md-kt/menu-eng.html

Stay connected

To receive updates when new information is added to the CRA website, you can:
• Follow the CRA on Twitter – @CanRevAgency.
• Subscribe to a CRA electronic mailing list.
• Add the CRA’s RSS feeds to your feed reader.
• You can also watch the CRA’s tax-related videos on YouTube.

In a nutshell, this charity received $1,724,814 in cash contributions.
It paid $1,289,385 of that money to the promoters of the tax shelter who were bringing in the people to donate.
This charity issued donation receipts totalling $62,315,818 million dollars.
It failed to keep adequate books and records.
It failed to devote 100% of its efforts to charitable work.

As a result, any of the taxpayers who have filed their tax returns claiming any of the donation deductions from this charity should hope that the CRA offers them a deal to accept the money donated on a dollar for dollar basis, or they should use the Voluntary Disclosure Program to amend their returns! (Just not the current year return).

Note: Please use common sense when making a donation! If you make a $100 donation and receive a donation receipt for anything more than that amount understand that the CRA will deny it… eventually.

When News Really Is Not News: Revenue Canada “Forbids” Unitarians From Working For Justice.

I came across a headline from CBC.ca which screamed “Revenue Canada forbids Unitarians from working for justice – Tax auditors continue Harper-launched probe of religious charity under new Liberal government” and I could not hesitate to stop and see what this was all about.

The link to the original article is here, and comments are already closed for this topic, a day after it hit the public broadcaster’s website with a whopping 732 comments.

To summarize the article for those who do not want to follow the link, the CRA (not Revenue Canada) advised the Canadian Unitarian Council that it’s council bylaws are too vague.  They did not “forbid” them for doing anything but being compliant with Canadian Charity regulations.

The CRA wrote, “Vague purposes are ambiguous and can be interpreted in many different ways,” in a compliance letter, which includes other demands more than a year after the political activity audit of this charity was launched.

The Canadian Unitarian Council bylaws were accepted by Industry Canada when the Toronto-based charity submitted them for approval (applied for charitable status) in 2013, however the Canada Revenue Agency (CRA) found the wording to be contradictory to the Charitable definition set out in the Income Tax Act, and have asked the charity to remove any reference to “justice” or “social justice.”

Where I find this post to be completely irresponsible is where the author begins to compare audits of charities to being a witch hunt which started under Stephen Harper’s Conservative government and is continuing under Justin Trudeau’s Liberal government.

“Many charities targeted by CRA’s political activity audit program, begun in 2012 under the Stephen Harper government, had expected relief from the Liberals, who campaigned on a promise to set charities “free from political harassment.”

It is the responsibility of the Minister of National Revenue through the Canada Revenue Agency to ensure that each and every charity is registered correctly and that they are following guidelines set out in the Income Tax Act and that those rules, regulations and by-laws which were submitted by the charity is being followed.

While it might be a huge pain in the ass for established charities, the CRA audit process provides an opportunity for charities to ensure they are compliant with rules and regulations and are eligible to issue donation receipts.

With all the chaos the CRA has had to deal with regarding the GLGI charity scam and other ineligible donation programs, it is VERY important for each and every taxpayer that the CRA does their due diligence and confirms the charity is following the letter of the law because if they are not, the problems fall to the people who donate!

Wisely, the Minister of National Revenue said the 24 political activity audits underway would continue without interference from the Liberal government and the Notice of Revocation of Charitable Status issued to 5 other charities would not be rescinded by her government.

The Liberals did, however, cancel political activity audits on 6 other charities.

The fact that the Canadian Unitarian Council was a vocal critic of the Harper government is meaningless, as is the fact that many of the 60 charities audited in the $13.4-million political activities audit program were too.

The only thing that matters here is that Taxpayers like you and I will be able to donate to a charity, receive a donation receipt and be sure that the donation receipt is valid and will be accepted by the CRA.  Even if that means that charities which were started with all the best intentions in the world have to work a little bit harder to ensure they are fully compliant with the CRA’s Charities requirements, which can be found right here.

Personally, I’m happy to hear that of 38 completed audits so far, only one found no problems, six have been given notice the agency intends to revoke their charitable status, of which 5 will be appealing.

Considering the amount of discussion and opportunity to meet the CRA’s requirements during the audit process, it is likely that these charities which are appealing either do not meet the CRA’s charity requirements at all, or are refusing to change their bylaws and thus will have their status revoke for good.

At the end of the day, it’s not a war against charities, but it’s the CRA performing due diligence to ensure the taxpayer’s donated money is heading for a cause and not to pad the pockets of the charities Board of Directors.

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.

CRA Press Release: Tax preparer extradited to Canada (from Italy) for tax fraud in Canada

The following news items was released by the Canada Revenue Agency (CRA) on September 8, 2015, regarding a former Tax preparer from Vaughan, Ontario, who was convicted of Tax Fraud for adding fictitious deductions to 4,200 tax returns from 2003 – 2005.  She was sentenced to 10-years in jail and fined almost $700,000.

The news release read:

“The Canada Revenue Agency (CRA) announced today that Ms. Doreen Tennina was extradited to Canada from Italy on September 4, 2015, and is now in custody serving a 10-year sentence for tax fraud.

On May 31, 2013, Ms. Tennina was found guilty in the Superior Court of Justice in Oshawa, Ontario, on two counts of fraud over $5,000 under the Criminal Code and was sentenced in absentia to the maximum period of 10 years in jail on each count to be served concurrently.  A news release publicizing Ms. Tennina’s conviction and sentence was issued on June 4, 2013.

Ms. Tennina, a former Vaughan, Ontario tax preparer, fraudulently claimed carrying charges and charitable donations totaling $58,500,000 in 4,200 tax returns prepared on behalf of her clients from 2003 to 2005, inclusive. The false claims reduced the amount of federal taxes owed by over $10 million. She was also ordered to pay a fine of $699,608 for causing her company, Executive Accounting, to fail to report income received from the tax evasion scheme.

The preceding information was obtained from the court records.

Taxpayers who claim false expenses, credits or rebates from the government are subject to serious consequences. They are liable not only for corrections to their tax returns and payment of the full amount of tax owing, but also to penalties and interest. In addition, if convicted of tax evasion, the court may impose jail time and fine them up to 200% of the tax evaded.”

Remember, taxpayers who have not filed returns for previous years, or who have not reported all of their income, can still voluntarily correct their tax affairs if the CRA has not contacted them first for the returns.  If applicable, the Voluntary Disclosure Program (VDP) allows for filing / amended filing without penalty or prosecution provided the disclosure is full and complete.  These taxpayers may only have to pay the taxes owing, plus interest.

More information on the Voluntary Disclosures Program (VDP) can be found on the CRA’s website at www.cra.gc.ca/voluntarydisclosures.

A link to the news release is below;

Are There Really “Red Flags” At the Canada Revenue Agency (CRA)?

Are there “Red Flags” at the Canada Revenue Agency (CRA)?

How not to get noticed for the wrong things, this Tax Season.

One of the most commonly asked questions of me is about being “flagged” by the Canada Revenue Agency (CRA) and how to avoid getting flagged, or, what gets your flagged.

I hate to break everyone’s bubble, however, there are no red flags!

For the majority of Canadians who file their taxes year-in, year-out, and who make remittances, make their payments, open businesses, close businesses, make money, lose money, and everything in between, your tax account is just a record of transactions, conversations and payments received and made.  Even for those Canadians who should be doing the above and don’t or who fall behind and catch-up on one mass filing, their accounts have a bit more information due to CRA research, however, No flags.

For those engaged in criminal behaviour, however, there are no “flags”, because you are being investigated criminally and whether you know it or not, the CRA knows you and is watching your activities and comparing that to what you file.  Your tax account is known because it is being actively worked by someone.  There are words or phrases placed in your permanent diary which tell anyone who reviews your account what you are up to, but it certainly doesn’t mean you’ve been red flagged.

So why do people talk about flags?

They’re actually talking about stuations like some described below which catch the attention of the screeners on a case-by-case basis, and could result in them being audited outside of their normal audit review period.

1) When you get your tax returns completed and filed for the year, and there are issues, possibly mistakes, which the CRA catches and in anticipation of getting the solution, have a hard time getting a hold of you.

2) You are suddenly self-employed and you are not sure what to claim, or how much you are entitled to, or you claim things or amounts different from your industry standard.   The CRA compiles industry profiles which they use to assign you a “SIC Code” and they compare your returns with the Industry Standard to ensure you fall in line.

3) The dreaded “Net Worth Assessment”.  If you appear to the CRA to be unable to afford the lifestyle that you are currently living in, then the CRA can, and will, issue a Net Worth Assessment and force you to prove that you are not hiding income.  Yes, this can be a challenge, especially in light of the assessments being done from tax centres outside of the Greater Toronto Area who cannot fathom a million dollar house and a $75,000 income.  They don’t take too kindly to the concept of being being helped by family or personal wealth.  Just be warned that a tax return showing $1.00 of income for the year and an address in a wealthy neighbourhood is cause for further questioning.

4) Big changes from year-to-year.  If there are major changes in your income or expenses whether personal or business-related, are going to draw the attention of the CRA.  The CRA wants to make sure that you have not made a mistake, or worse, that you have bought into a tax scheme.  Expect questions, so get proof ready!

There are some tax situations that are just automatically looked at closer – each the year the CRA with the help of the Department of Finance choose a sector of industry to look at in closer depth usually because something has been detected in previous years or because there is a lot of cash floating around these business, such as construction, or dentists, doctors, IT consultants…

Home office deductions for example are frequently looked into as this is often a common problem for taxpayers claiming the home office in order to use deductions without actually utilizing their home as their office.

Even if you honestly never ever use your company vehicle for personal use, it will take some hard doing to prove to the CRA that this is true. Just driving back and forth to work in the business vehicle is classed as personal use. Your best protection here is to keep very detailed records concerning the business vehicles.

6) Renting for income:  Do not assume that rental losses are going to be accepted at face value by the CRA.  While the CRA will give you some grace time to start generating a profit from your rental business, it will still be watched with a close eye based on your industry, location and address(es).

7) Who prepares your return matters!

The CRA is starting to follow the IRS and taking a long hard look at tax accountants and tax preparers to see if there is a pattern among certain firms / indivuduals who either claim deductions they are not allowed to claim on your behalf, or who are missing certain expenses or deductions.  The CRA’s hope here is to weed out the bad apples, and educate the current crop to ensure they take advantage of the deductions and tax credits available to each client.

Should be a valuable change to the Canadian tax filing scheme.

But at the end of the day, doing it right, and on time, is the best way to stay out of the CRA’s bad books.

If, however, you have any questions, concerns or comments, please feel free to reach out to me at any time, at worlans@intaxicating.ca.

 

Not All Tax Information Found on the Internet is true! Are you shocked?!?

Did you know that not all the tax information and suggestions you find on the Internet are true?

Of course you knew that!

I’ve joked with everyone from my children, to family, friends, employers, employees and even director’s and CEO’s of huge organizations that tax information “must be true!  It’s on the Internet”, no matter how absurd it might appear to be.

We all know, or should know to take everything we read with a grain of salt… and that fact-checking is critical when trying to decide if information is legitimate, completely made up, or aimed to scare you.

Sources

As we scroll through pages and pages of information, reading about situations and stories about how the Canada Revenue Agency (CRA) administers tax law here in Canada it is easy to lose sight of goal, which is to get a better understanding of what is acceptable and what is not regarding so many aspects of taxation.  The best indicator of how close to the truth an article is can be determined by the sources cited in that piece.

An article about the CRA with a link to the CRA website (which backs up the facts) is the best indicator that the author knows their stuff.

If, however, you come across an article which has no references, no supporting links to the originating source, or links from a website titled something like “I_want_to_stop_the_CRA.org” then you can be assured the information is not going to be accurate, it is not going to help you, and more likely it was written to scare you, or present a horror story to get you to contact them to help you.

Don’t waste your time on those… Ever!

When a prominent tax lawyer wanted everyone to stop looking for solutions on the Internet it was presented that the CRA could find out you have a tax problem by sneaking into your house, taking your computer, breaking in to it, and seeing that you have been looking for tax help online.

GASP.

Well, guess what?

If the CRA has to come and seize your computer, they already know you have a tax problem!  They cannot seize your computer unless it’s part of a criminal investigation.

The true intention of these ads is not to warn you about a new power that the CRA has secretly acquired, but rather this firm doesn’t want you seeing that there are options available for you online to fix the problem yourself.  So they scare you away from the Internet so you won’t find helpful tips and solutions at firms like this one, inTAXicating.

Better to hire them then get advice from a real former CRA Collection employee to help get you back on track.

In a capitalistic marketplace I don’t blame them, but I am concerned.  Tax is confusing, especially when a tax problem suddenly arises and the CRA is pressuring you to fix it quickly in one of their 3 ways:

1) Pay it

2) File up-to-date and watch the balance go away, or,

3) Go bankrupt.

How can you be expected to make that sudden choice which has significant short and long-term implications on you, your business, your family and your life, without having the facts, all the facts, and not just the facts the CRA wants you to have, or that you believe they are telling you.

That’s where I come in, specifically, this blog, this business and this business model.

I want you to know the truth.

I want you to be able to make an informed decision whether that decision is made via information found on this blog, or on my website, or through an email to me.  I want you to be able to understand the CRA and their collection, enforcement, audit, filing process and administrative process as well as I do.

I want you to understand the corporate culture there and that very infrequently is there an agent on the other side of the phone with your picture on a dart board in their cubicle.

I want you to know your options, your best next steps and that your long-term plan of action will not only help you resolve your tax situation but also keep you and the CRA happy.

I want you to know that in situations where I feel that you cannot do this alone, that I can help you, and will help you, make matters right, and I want you to know that a tax problem does not occur overnight and resolving them can take a long-time.

I have the knowledge and understanding that no-one else can claim to possess about the CRA collections policies and process and I don’t say that to boast, but rather to inform.  I don’t profess to have an “army” of “real” CRA staff with me, nor do I pretend that background is in any area other than where it shows on my web-site, blog, and on my LinkedIn profile.  Collections, collection, collections.

I’m also not going top pretend that a background in Appeals or Audit is going to help you better than a back ground in Collections.  To each their own.

I write my blog posts myself and where possible I cite everything I can to the CRA website so that you can be comfortable knowing that information you read on my social media platforms are sourced from the people who want you to pay your taxes and question your deductions and filing deadlines.

I don’t write my posts in order to scare anyone or to force them to use my services, because quite frankly, I want everyone to be able to navigate the Canadian tax system without ever having problems and running afoul of the CRA and in a perfect world, one day I’ll be able to provide a users guide to the CRA to allow people to file, re-file and pay without incurring penalties and / or interest and where the CRA understands why people can’t, won’t or are unable to do so and then have the CRA deal with them in an understanding manner.

But for now, we have to take it one day at a time, and one situation at a time.

The best day to start fixing tax problems is today.  There are always solutions and there are always options.  In deciding what you want to do, you need to make sure you are getting the right information and from the right sources.  Be wary of what you read on the Internet because it can make you want to close your blinds, change you name and hide from the CRA when all they want you to do is to close an account or file a nil return.

Get the facts!

inTAXicating Tax Services offers a free 15-minute consultation to determine how to best proceed with a tax situation.

From there if’s decided that a written plan of action is needed, I can produce one for you.

If from that, a decision is made to engage inTAXicating to represent you in your dealings with the CRA, then we determine if the hourly or fixed plan works best for you.

You don’t have to worry about opening those brown envelopes.  Help is here!

http://www.intaxicating.ca

http://www.intaxicating.wordpress.com

info@intaxicating.ca

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