Canada Revenue Agency (CRA) Voluntary Disclosure Program (VDP) Changes March 1st, 2018.

The Canada Revenue Agency (CRA) have announced that effective March 1, 2018, changes will be made to the Voluntary Disclosures Program to narrow its eligibility criteria.

What is the Voluntary Disclosure Program (VDP)?

The VDP provides Canadians a second chance to change a tax return which has been previously filed with the Canada Revenue Agency (CRA), OR to file a return(s) which you should have filed with the CRA.

Your application under the VDP – if approved – allows you to file or amend a return without the CRA prosecuting you, or assessing penalties.

Who Can Apply?

Taxpayers!

Taxpayers can be;
• Individuals
• Employers
• Corporations
• Partnerships
• Trusts
• GST/HST registrant / claimants
• Registered exporter of softwood lumber products

You can apply, or you can have an authorized representative – like an accountant, or tax professional like inTAXicating, submit the application on your behalf.

How Many Times Can You Apply?

The CRA would prefer you use VDP once and stay up-to-date on filings from that point onwards, however should circumstances warrant it, you can apply again.

Conditions of a Valid Application

To qualify for relief, the application must:
• Be voluntary – You come to the CRA before the CRA gets to you.
• Be complete – You cannot file for one year, for example, you have to file everything and disclose everything.
• Penalty: Involve the application or potential application of a penalty and, for GST/HST applications, the application or potential application of a penalty or interest
• Time: Include information that is at least one year past due for income tax applications and, for GST/HST applications, at least one reporting period past due; and
• Include payment of the estimated tax owing.

The Process

Submit an application to the CRA, and if the CRA approves it, the returns in question are filed or amended and there is no penalties or fear of prosecution (unless you are engaged in criminal activities).

The CRA then expects you to pay the balance owing – or make arrangements to pay – because while there is no penalties, there is still interest accruing on the account.

* The above information applies until February 28, 2018.

The CRA will update their VDP guidelines as of March 1, 2018, so in order to be considered under the existing VDP, the CRA must receive your application, including your name, on or before February 28, 2018.

What Changes March 1st, 2018? 

On March 1, 2018, when the new VDP comes into effect, it narrows the eligibility criteria to access the Program and imposes additional conditions on applicants, making it more difficult for those who intentionally avoid their tax obligations to benefit from the VDP.

Income Tax Disclosures

With the changes to the program, two tracks will be created for income tax disclosures:

1. Limited Program

The Limited Program provides limited relief for applications that disclose non-compliance where the facts suggest that there is an element of intentional conduct on the part of the taxpayer or a closely related party.

Under the Limited Program, taxpayers will not be referred for criminal prosecution with respect to the disclosure and will not be charged gross negligence penalties, however, they will be charged other penalties and interest as applicable.

2. General Program

Under the General Program, taxpayers will not be charged penalties and will not be referred for criminal prosecution related to the information being disclosed. The CRA will provide partial interest relief for years preceding the three most recent years of returns required to be filed.

GST/HST, excise tax, excise duty, softwood lumber products export charge and air travellers security charge disclosures

For GST/HST, excise tax, excise duty, softwood lumber products export charge and air travellers security charge disclosures, three categories will be created:

1. Wash Transactions

Wash transactions are generally transactions where a supplier has failed to charge and collect GST/HST from a registrant entitled to a full input tax credit. This category provides relief only for applications involving GST/HST “wash transactions” that are eligible for a reduction of penalty and interest under the policy set out in GST/HST Memorandum 16.3.1, Reduction of Penalty and Interest in Wash Transaction Situations.

Registrants will not be charged penalties nor interest and will not be referred for criminal prosecution related to the information being disclosed.

A registrant must now disclose information on any non-compliance during the four years before the application is filed.

2. Limited Program

This category provides limited relief for applications that disclose non-compliance where the facts suggest that there is an element of intentional conduct on the part of the registrant or a closely related party.

Under the Limited Program, registrants will not be referred for criminal prosecution with respect to the disclosure and will not be charged a gross negligence penalty, however, they will be charged other penalties and interest as applicable.

3. General Program

All of cases fall under the General Program where registrants will not be charged penalties and will not be referred for criminal prosecution related to the information being disclosed.

The CRA will provide partial interest relief and a registrant must now disclose information on any non-compliance during the four years before the application is filed.

How to Determine if a Disclosure Falls under the General or Limited Program?

For both income tax and GST/HST disclosures, the determination of whether an application should be processed under the General or Limited Program will be made on a case-by-case basis and in doing so, the CRA may consider a number of factors, including but not limited to:
• The dollar amounts involved;
• The number of years of non-compliance; and
• The sophistication of the taxpayer/registrant.

Other Significant Changes to the VDP

1. Payment

Payment of estimated taxes owing: Payment of the estimated taxes owing will be required as a condition to qualify for the program (When a taxpayer does not have the ability to make payment at the time of filing the VDP application, they may request to be considered for a payment arrangement.)

2. Anonymous Disclosures Eliminated

The “no-names” disclosure method has been eliminated and replaced by a new pre-disclosure discussion service.

The process for taxpayers and authorized representatives to make disclosures on a no-names basis has been eliminated. Under the new “pre-disclosure discussion” service, taxpayers or their authorized representatives can have a conversation with a CRA official on an anonymous basis, but that discussion does not constitute acceptance into the VDP.

3. Large Corporations

Generally, applications by corporations with gross revenue in excess of $250 million in at least two of their last five taxation years, and any related entities, will be considered under the Limited Program.

4. Transfer-Pricing

Due to the complexity of transfer pricing issues, applications will now be referred to a specialized Transfer Pricing Review Committee, which will review the applications instead of the VDP.

For efficiency, taxpayers may send their applications directly to this committee.

5. Review by Specialists

Applications involving complex issues or large dollar amounts will be reviewed for completeness by the relevant specialist from the program area prior to being accepted.

6. Disclosure of Advisors

The name of the advisor who assisted with the non-compliance should now be included in the application.

7. Cancellation of Previous Relief

The new VDP regulations provide the CRA with the ability to cancel relief which was previous provided to a taxpayer if it is subsequently discovered that a taxpayer’s application was not complete due to a misrepresentation.

8. Mandatory Waiver of Rights of Objection and Appeal

Under the Limited Program, participants will have to sign a waiver of their right to object and appeal in relation to the specific issue disclosed.

 

If you need assistance with a Voluntary Disclosure – at any time – we can help!

Email: info@intaxicating.ca

On the phone: 416.833.1581 (If you are outside of Toronto, and would like to speak to us live, please email us, and we will gladly call you at your convenience)

On our website: http://www.intaxicating.ca (Portal coming soon – currently under construction).

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Expected Changes to CRA’s VDP: Preview

On June 9th, 2017, the Canada Revenue Agency (CRA) launched a 60-day online consultation with Canadians on the Voluntary Disclosure Program (VDP), in which the CRA is seeking input from the public to ensure that the program is more “responsive, innovative and fairer for all Canadians”.

One of the key asks by the CRA is this question; “We are asking you – when should the VDP apply? Should it apply only to those who knowingly choose to not pay their taxes or also to those who make mistakes on their returns?”

Based on that question, many organizations have been putting out materials stating that the CRA is changing the program and that it is already been decided, however that is not the case, yet, as the consultation period has not even ended.

What Is Voluntary Disclosure?

The Voluntary Disclosures Program (VDP) gives Canadian taxpayers a chance to change a tax return they have previously filed or file a return that should have filed and by making these changes through the VDP, the Canada Revenue Agency (CRA) may give relief from prosecution and penalties.

By applying to the CRA under the VDP, a Canadian taxpayer might only pay the taxes owing plus interest.

The disclosure MUST meet all four of the following conditions to be valid;
1. A penalty would apply
2. It is voluntary, which means it is made before the CRA takes any compliance action against you
3. the information is at least one year overdue
4. it includes all the relevant information – meaning it is full and complete.

Anyone can use the VDP, including individuals, businesses, employers, payers, trusts and estates, whether a resident or a non-resident of Canada.

Why Changes to the VDP?

When the CRA found out that there were Canadian taxpayers hiding money offshore, they began to consider whether the current VDP was fair for all Canadians. Should a taxpayer who forgets to include an income source be granted the same relief as a taxpayer hiding money overseas and failing to disclose that income in order to reduce the amount of taxes they would have to pay in Canada?

The answer clearly is no, it’s not fair, and the CRA wants to change the program to make it easier for actual errors and omissions to be fixed, while making it much more difficult to allow tax evaders to utilize the program to avoid prosecution.

The most meaningful change expected in the VDP is the introduction of a two-track system:
1) the General Program, and
2) the Limited Program.

The Limited Program would limit the availability of the program in certain circumstances or where there is a “major non-compliance” as such relief for penalty and partial interest relief could be seen as “overly generous.”
Under the General Program, taxpayers who qualify for the VDP will not be charged penalties or referred for criminal prosecution with respect to the disclosure, and may be entitled to partial relief for any interest in respect of assessments preceding the three most recent years of returns required to be filed.

Whereas under the Limited Program, applications that disclose “major non-compliance” will not receive the same level of relief as they would under the current VDP. Taxpayers will not be referred for criminal prosecution and will not be charged a gross negligence penalty with respect to the disclosure, however, other penalties will be charged as applicable such as a late filing penalty, a failure to remit penalty, an instalment penalty or an omission penalty. Additionally, no interest relief will be provided.

What Might Constitute “Major Non-Compliance?”

Major non-compliance might look like this:
• Taxpayers who undertook active efforts to avoid detection through the use of offshore vehicles or other means
• Large dollar amounts being disclosed
• Multiple years of non-compliance
• A sophisticated taxpayer, or use of sophisticated tax avoidance techniques under the advice of a sophisticated professional, and
• The disclosure is made the CRA has released information aimed at cracking down on taxpayers failing to disclose all their income

The determination of whether an application should be processed under the Limited Program will be made on a case by case basis.

Other Considerations
While determining the status of an application to the VDP, the CRA will also consider;
• If they will require payment in full of the estimated taxes owing as a condition of acceptance
• If transfer pricing cases and applications from corporations with gross revenue in excess of $250 million qualify
• If applications that disclose income from the proceeds of crime will be allowed access to the program

The CRA will continue to cancel VDP applications if they learn that the disclosure was not full and complete, or if was intentionally inaccurate.

The release of the changes to the CRA’s VDP will be announced in the fall, and the above is speculation as to what the new program will look like. If you, or anyone you know has failed to fully or accurately disclosure income, it’s best for them to speak to a professional now, especially before there are changes to the program which might disqualify them.
At inTAXicating, we are always available to discuss the CRA’s VDP and you can find us at http://www.intaxicating.ca, or send us an email to info@inTAXicating.ca.

Tax Freedom Day, 2017. Working For Ourselves Now… Theoretically.

June 9, 2017 is Tax Freedom Day!

What is Tax Freedom Day?

Does it really exist?

What might it mean to me?

In their annual report, the Fraser Institute, a Vancouver-based think-tank added up all forms of taxation — from income and sales taxes, to more hidden costs such as gasoline taxes, carbon taxes, tobacco and alcohol taxes, municipal property taxes, payroll taxes and even CPP and EI premiums — to come up with a figure for the overall tax burden for Canadian families, and this year, they have determined that the average Canadian family with two or more people will earn $108,674 and pay 43.4% in taxes.

Based on the Fraser Institute math, 100% of income earned thus far in 2017 has been gobbled up by government in taxes, and only now are you working for yourself until the end of the year.

Last year, in 2016, it came a day earlier, on June 8th and because of variances in all types of taxes in different provinces, Tax Freedom Day differs across the country, ranging from May 21st in Alberta to June 25th in Newfoundland and Labrador.

One of the reasons for the extra day is to account for the fact that Canadians’ tax bill has risen, on average, by $1,126 this year, according to the Fraser Institute. Of that increase, $542, came from higher income taxes, but sales taxes (up $311) and other energy-related taxes (up $204) also took a bigger bite while liquor, tobacco, amusement, and other excise taxes, payroll and health taxes, and import duties all decreased.

The Ottawa-based Broadbent Institute, however, disputes the math behind the annual Fraser Institute report, because the Fraser Institutes uses “average” tax rates instead of median tax rates.

To come up with its “average” tax rates, the Fraser Institute simply adds up the amount of cash income earned by a taxpayer, and then divides that by the number of people. It then takes “outliers” and excludes those extremes from the calculations.

The Broadbent Institute said that skews the numbers in a certain way, and a better way than the average would be to use the median — the exact mid-point between the top and bottom and the rationale behind this surrounds the fact that the average income of Canada will always be higher than the median because of the small number of very high-income earners in Canada, which skews the average income amount higher.

Adding up only federal and provincial income taxes, the “average” Canadian in prime working years (between 25 – 54 years of age) earned $62,600 last year, and paid $12,000 in taxes, or around 19%, according to tax filings. Using the Broadbent method of calculation, the median for that group earned $50,500 last year and paid $7,000, or 14%, in income taxes.

Another main difference is that the figures used by Fraser Institute report doesn’t just include income taxes. It tabulates all sorts of fees that taxpayers don’t directly pay, such as payroll taxes and resource royalties that companies pay when they extract things like oil, minerals and timber.

It also only considers what it calls “cash income” on the other side of the ledger. That excludes employee benefits, investment income from pension plans and other forms of cash income.

The Fraser report also takes into consideration indirect costs like payroll taxes and other taxes which businesses pay in their calculations because even though businesses pay these taxes directly, the cost of business taxation is passed on to Canadians.

So now that we’re working for ourselves, let’s push all levels of government to treat our tax dollars more wisely, and let’s earn as much as possible (while continuing to pay our taxes on time!)

Canada Turns 150, the Income Tax Act turns 100

Bob Hamilton, the Commissioner and Nancy Chabwan, the Deputy Commissioner of the Canada Revenue Agency (CRA) Celebrates 100 Years of Taxes with #Canada150

2017 marks not only Canada’s 150th Birthday, but also the 100th Anniversary of the Income Tax Act (ITA).

To mark this anniversary, the CRA has put together a video that highlights the history of income Taxes in Canada and the role they play in building the country and lifestyle of Canadians – as well as how the CRA has evolved to meet the needs of Canadians over the years.

The 150th birthday of Canada is July 1st.

The 100th anniversary of the ITA is September 20th

Watch the video, and share with a de-taxer near you.

How do I correct or dispute inaccuracies on my credit file?


I get lots of questions related to Credit Bureaus and items which show up well after they have been paid or which do not belong on there at all.

Having worked for Equifax many, many years ago right after I started working for the CRA and they release all the temporary staff for an 11-month period due to budget cuts, I can proudly say that Equifax makes it very easy to communicate with them regarding any such issues.

It’s all laid out on their website, but I provided a summary here:

Complete and submit a Consumer Credit Report Update Form to Equifax.

It is necessary to specify what information is incorrect or what information does not belong to you.

Equifax will verify that information afterwards as part of their investigation.

You will need to include photocopies of all necessary documents and identification to update your personal Credit Report (Ex: receipts, legal documents, 2 photocopies of pieces of valid identification, including proof of current address)

Fax the request to them at:

Fax: (514) 355-8502

Your request will be processed within 10 to 15 business days. After this period has elapsed, a confirmation letter will be sent to your mailing address.

OR

By Mail:

Equifax Canada Co.
Consumer Relations Department
P.O. Box 190, Station Jean-Talon,
Montreal, Quebec H1S 2Z2

Your request will be processed within 15 to 20 business days . After this period has elapsed, a confirmation letter will be sent to your mailing address.

Equifax will verify the necessary information and mail you a confirmation.

 

Could it be any easier than that?!?

 

Back from vacation and catching up! How we can help – details included.

Just wanted to drop a quick note to all of you who called, emailed and hit me up on the blog or on social media that we’re back to work and trying to get to everyone as soon as possible.

If anyone has an urgent matter, please send an email to info@intaxicating.ca, in the subject line, please write “urgent” and that will be the top priority.

For new readers of this blog or who are seeing this blog through our website, here is what you need to know!

inTAXicating is a Canadian tax consulting business which provides solutions to Canadian Tax problems predominantly related to the Canada Revenue Agency (CRA), but not limited to the CRA.

With over 20-years experience in Canadian Tax (throw in some IRS tax, FATCA, Revenu Quebec, Cross-border matters and WSIB) combined with over 10-years working in the CRA in their collections division, you have the experience and expertise that no-one else can boast to have.

Our model is simple! Give you the truth based on the facts.

You get a free consultation and if it is determined that you can handle it best, or if your questions are quickly answered, then you are on your way.

If there are more complex matters which may eventually require greater expertise, then you have the option to handle you tax matters up to that point and then hand it over, or you may wish to hand it over right away…

It’s your taxes and you need to know what is being done and how to properly handle them going forward.

There are no magical cures for tax problems which took years and years to grow, so if anyone promises you a magic bullet, proceed with caution.

inTAXicating also believes that everyone who earns money needs to pay their taxes, however, they should pay what they owe, and in circumstances where there is no ability to pay, the government should understand that and give you a break.

No questions are bad questions.

I do not believe in the “natural person” being exempt from taxes because the CRA does not believe it, but I have spoken to many, many “de-taxers” and enjoy the conversations and helping them through the CRA’s prosecutions.

We specialize in all matters relating to CRA collections, specifically Directors Liability, Taxpayers Relief, s160 assessments, liens, and garnishments, RTP’s.

We provide audit representation, accounting (through a CA), as well as presenting the options to solve all tax matters including the ugliest and most complex tax matters. The messier the better!

In short, we want to help.

15 minute Consultation / responding to questions via email – free
Meeting – $250 plus HST (one hour meeting – detailed summary and recommended plan of action included)
Engagement – either hourly @ $250/hour or a fixed fee depending on the complexity and amount of work involved.
Accounting – best rates possible also related to the amount of work involved.

We try to stick to this model as best as humanly possible because it’s your money and you work hard for it, so you should not have to throw it away.

info@intaxicating.ca

Milowe Brost, Convicted of Theft and Fraud. Ordered to pay $390,878 in Evaded Taxes to CRA.

Milowe Brost, recently convicted of theft and fraud ordered to pay $390,878 in evaded taxes.

Another example of how a Ponzi scheme can result in a long-prison sentence and huge fine.

Unfortunately, the “victims” here are the people who took part in this scheme because they still owe taxes plus gross negligence penalties (50%) plus the CRA and the Courts have long considered people who partake in these scams and schemes to have done so knowingly and with full understanding they they are illegal.