The Canada Revenue Agency Informant Leads aka “Snitch” Line

You have come to this blog for more information on the Canada Revenue Agency’s (CRA) Informant Leads or Snitch Line.  Yes, the line does exist and if you are looking for the number in order to use it, that number is 1.866.809.6841.

You may have heard me speak on CFAX1070 about the CRA Snitch line, or possibly you heard my interview on CBC.ca regarding the existence and use of this line.  If you have not, then let me take a moment to clear the air on this line.  The Informant Leads line does exist.  In fact, it has become such a popular tool for finding new collection sources that it’s increased volume of calls can be directly attributed to a reduction in the need for collections staff / auditors and investigators who were responsible for digging up new leads.

It is absolutely not possible for someone to call the line, make up a story and have someone investigated.  Anyone who states that does not know the purpose of this line and obviously has no experience working in the CRA.  To say that is irresponsible and fear mongering.   The CRA will act on leads but there must be some proof provided.  Simply asking for your neighbour to be audited because they drive a nicer car than you is not going to begin years or investigations-hell for them.  If, however, you purchase an item from a retail establishment, and are charged taxes, but you notice that the teller never ran the purchase through the till, then you can be assured that they are pocketing the taxes instead of remitting it to the CRA.  Or, if you notice on the receipt that they have charged you the wrong rate of tax, then you need to notify the CRA.

In one case, while I was working at the CRA, I purchased a large ticket item from a local store only to find out later that the taxes on the bill totaled 28%.  I went back to the store to ask for it to be corrected, only to have them advise me that it was a “US cash register” and that the rate was incorrect.  I took the receipt into the office hoping to launch an internal investigation but was told it would be 6-weeks before they were able to look at it.

So I walked over to a phone beside my desk, called the snitch line, explained the issue and after providing the receipt as proof, found that an investigation was launched the next day and heard through the grapevine that over $200,000.00 was recovered from the company.

That is where the snitch line can be put to good use.

If, however, you hear your neighbour bragging about how much money he makes under the table and he lives way better than you do?  You can call the snitch line.   Or if your ex-spouse is unwilling to file their outstanding tax returns because it would mean they would have to increase child support payments, then you can call the snitch line.  The CRA will take the information, begin with an internal investigation to see if there is merit, then possibly drop by the home or business to get a feel for whether an audit is required or if a net worth assessment is needed.

At the end of the day, the intention of the snitch line is to provide a direct link to the CRA’s Audit department and it assists the CRA as they use these “tips” to recover funds from professional tax avoiders.

Key words the CRA likes to hear includes;

Their names, their address, an amount of unreported income greater than, say $50K, maybe a second set of books, or 2nd property in the name of their cat…

It never hurts to call.

It always hurts to not call.

This line is anonymous and believe it or not, the majority of “tips” come from exes who are left holding the bag while their ex-spouses are living it up.

I figured I would post this since it is the most frequently asked question I get.  Yes a line exists and yes it gets acted on… and fast if the dollar amount to be recovered is high.

I have actual experience seeing this line work and I know for certain of instances where people have called this line in effort to discredit or attack someone and at the end of the day, the CRA  has investigated that person or party and punished them for making a false claim.  Those in glass houses should never throw stones.

Snitch Logo

Advertisements

How Brilliant is the Internal Revenue Service?

How brilliant is the IRS? Really? I am 100% serious.

These guys just rolled out something that the taxation industry has long been in need of and after going through it, I give it top marks for creativity, originality and for the final product.

You see, the IRS unveiled a website called “Understanding Taxes” and it contains some great educational content, including detailed lesson plans, interactive activities, simulations, and more!

The site is broken into resources for educators, and for students. So if you’re teaching tax, you can grab resources to assist, including lesson plans with links to the applicable national and state standards, which makes it really easy to integrate Understanding Taxes into an existing classroom curricula, or to teach to your tax staff. The intention is for this material to be presented to high school or community college classrooms with the assumption being that once you get into higher levels of education, those with an interest are taking courses in taxation, finance and accounting.

The Understanding Taxes Student Site provides high schools, community colleges, and the general public with a technology-based instructional tool aimed at raising the awareness of the IRS’ policies, practices and general taxation education. It’s a win-win and I cannot wait for the CRA to do the same.

In the meantime, happy reading.

The link to the site is below;

http://www.irs.gov/app/understandingTaxes/index.jsp

IRS Special Edition Tax Tip 2011-05

I found this IRS tax tip quite interesting as it relates to third party tax functions and peovides a reminder to this people and companies who outsource that at the end of the day THEY are responsible for any tax debts and NOT the third party provider.

That is why tax forms for the CRA, MRQ and IRS require a signature.
So they have someone to hold liable.

Intaxicating tax tip: If you’re not sure, or do not understand what is contained on a form, slip or return. do NOT sign it!!!

Here is the IRS release:

Three Tips for Employers Outsourcing Their Payroll

Outsourcing payroll duties to third-party service providers can streamline business operations, but the IRS reminds employers that they are ultimately responsible for paying federal tax liabilities.

Recent prosecutions of individuals and companies who – acting under the guise of a payroll service provider – have stolen funds intended for payment of employment taxes makes it important that employers who outsource payroll are aware of the following three tips from the IRS:

1. Employer Responsibility. The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even though you forward the tax payments to the third party to make the tax deposits, you – the employer – are the responsible party. If the third party fails to make the federal tax payments, the IRS may assess penalties and interest. The employer is liable for all taxes, penalties and interest due. The IRS can also hold you personally liable for certain unpaid federal taxes.

2. Correspondence. If there are any issues with an account, the IRS will send correspondence to the address of record. The IRS strongly suggests you do not change the address of record to that of the payroll service provider. That could limit your ability to stay informed of tax matters involving your business (I do not necessarily agree with this as a good third party providor will either eat any penalty charged or should be providing updates to their client including copies of notices as part of thier day-to-day process.
3. EFTPS. Choose a payroll service provider that uses the Electronic Federal Tax Payment System. You can register on the EFTPS system to get your own PIN to verify the payments.

Information on EFTPS is available on the IRS web-site. The staff in the EFTPS are are VERY knowledgable and VERY friendly. Trust me… I know.

CRA releases New Forms for Treaty-Reduced Rates of Canadian Withholding Tax

The Canada Revenue Agency (CRA) recently released final versions of new forms, NR301, NR302 and NR303 which is to be provided by recipients of payments from Canadian residents to certify eligibility for treaty-reduced rates of Canadian withholding tax.

These Forms are not to be provided to the CRA, but rather to the Canadian resident payer of the withholdable amount or to certain intermediaries along a chain of payments subject to withholding.

Until recently, the CRA generally accepted reliance on the payee’s address for determining whether to apply a treaty rate. By releasing these forms, it signals that the CRA is requiring a greater level of diligence on the part of payers of withholdable amounts to be as sure as possible that the correct reduced treaty rate is applied.

Although the use of the Forms is not mandatory, and they will not guarantee avoidance of penalties, interest, or liabilities for underwithheld tax, many taxpayers will likely apply a 25% withholding rate on payments of withholdable amounts to recipients who do not complete the Forms.

The CRA is looking at the payor, to review the information provided by a non-resident on these forms, or in another format, and to make sure they have enough information to support that the non-resident is eligible for tax convention/treaty benefits on the income being paid.

In cases of inconstencies, the CRA is looking for intermediaries, prior to establishing a withholding tax rate, to question the information given and look at other information received from the non-resident, or known about the non-resident, if the payer knows or has reasonable cause to believe that the information on the form:
• is not correct or is misleading;
• contradicts information in the payer’s files; or
• is given without knowledge or consideration of the facts of a situation.

Forms are valid for the earlier of 2 years, or a change in the eligibility for convention benefits.

* Completing Form 301 is not mandatory. However, if a non-resident refuses to provide certification of beneficial ownership, residency, or eligibility for treaty benefits on request by a payer, the full statutory rate should be withheld.

One question that came up after the release of these forms was that they do not address holding global securities through CDS or DTC.

For some direction, you need to check the update to IC76-12, “Applicable Rate of Part XIII Tax on Amounts Paid or Credited to Persons in Countries with Which Canada Has a Tax Convention” related to Forms NR301, NR302, and NR303.

In this update, the CRA states that payments made to CDS on securities registered in the name of Cede & Co. (the nominee name for DTC) are made without tax. Tax will be withheld by CDS based on information received from DTC and collected by DTC’s participants.

I recommend you read the news release below to familiarize yourself with these forms.

The link to the release follows; http://www.cra-arc.gc.ca/formspubs/frms/nr301-2-3-eng.html

Here are the forms;

Form NR301, Declaration of eligibility for benefits under a tax treaty for a non-resident taxpayer; http://www.cra-arc.gc.ca/E/pbg/tf/nr301/nr301-10e.pdf

Form NR302, Declaration of eligibility for benefits under a tax treaty for a partnership with non-resident partners; http://www.cra-arc.gc.ca/E/pbg/tf/nr302/nr302-10e.pdf

Form NR303, Declaration of eligibility for benefits under a tax treaty for a hybrid entity; http://www.cra-arc.gc.ca/E/pbg/tf/nr303/nr303-10e.pdf

From PWC Tax: Canadian corporate and personal tax rates on your Blackberry

Thanks to our friends at PWC Tax, you can now get notification of tax rate changes sent directly to your Blackberry. This is going to save quite a lot of time investigating current rates.

Here is the PWC email that came out;

“Whether you’re sitting in a budget meeting, considering the sale of an asset, or just want a quick fact – our free Blackberry app will give you access to Canadian and provincial corporate tax rates and personal tax rates right at your fingertips. We’ve built upon the success of our annual Tax Facts and Figures publication to bring you up-to-date tax rate information, no matter where you are.

Click http://appworld.blackberry.com/webstore/content/28203?lang=en to download the PwC Tax Rates app onto your hand-held device.”

IRS Kicks Off 2011 Tax Season with Deadline Extended to April 18

Taxpayers Impacted by Recent Tax Breaks Can File Starting in Mid- to Late February.

The following press release came out today, January 4th, 2011 from the IRS.

WASHINGTON — The IRS today opened the 2011 tax filing season by announcing that taxpayers have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15.

By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year.

Taxpayers requesting an extension will have until Oct. 17 to file their 2010 tax returns.

The IRS expects to receive more than 140 million individual tax returns this year, with most of those being filed by the April 18 deadline.

So who must wait to file their returns?

For most taxpayers, the 2011 tax filing season starts on schedule. However, tax law changes enacted by Congress and signed by President Obama in December mean some people need to wait until mid- to late February to file their tax returns in order to give the IRS time to reprogram its processing systems.

Some taxpayers – including those who itemize deductions on Form 1040 Schedule A – will need to wait to file. This includes taxpayers impacted by any of three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 enacted Dec. 17. Those who need to wait to file include:
• Taxpayers Claiming Itemized Deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.
• Taxpayers Claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.
• Taxpayers Claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.
In addition to extending those tax deductions for 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act also extended those deductions for 2011 and a number of other tax deductions and credits for 2011 and 2012 such as the American Opportunity Tax Credit and the modified Child Tax Credit, which help families pay for college and other child-related expenses. The Act also provides various job creation and investment incentives including 100% expensing and a 2% payroll tax reduction for 2011. Those changes have no effect on the 2011 filing season.

The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the recent tax law changes. In the interim, taxpayers affected by these tax law changes can start working on their tax returns, but they should NOT submit their returns until IRS systems are ready to process the new tax law changes.

Additional information will be available at http://www.IRS.gov.

For taxpayers who must wait before filing, the delay affects both paper filers AND electronic filers.

The IRS urges taxpayers to use e-file instead of paper tax forms to minimize confusion over the recent tax law changes and ensure accurate tax returns.

Except for those facing a delay, the IRS will begin accepting e-file and Free File returns on Jan. 14.

IRS Releases 2011 Tax Rates

Below is the IRS press release identifying the 2011 Adjusted tax rates, effective January 1, 2011.

SECTION 1. PURPOSE
This revenue procedure sets forth inflation adjusted items for 2011. Other inflation adjusted items for 2011 are in Rev. Proc. 2010-40, 2010-46 I.R.B. 663 (dated November 15, 2010).

SECTION 2. 2011 ADJUSTED ITEMS
Tax Rate Tables.

For taxable years beginning in 2011, the tax rate tables under § 1 are as follows:
TABLE 1 – Section 1(a) – Married Individuals Filing Joint Returns and Surviving Spouses
If Taxable Income Is: The Tax Is:
Not over $17,000 10% of the taxable income
Over $17,000 but $1,700 plus 15% of
not over $69,000 the excess over $17,000
Over $69,000 but $9,500 plus 25% of
not over $139,350 the excess over $69,000
Over $139,350 but $27,087.50 plus 28% of
not over $212,300 the excess over $139,350
Over $212,300 but $47,513.50 plus 33% of
not over $379,150 the excess over $212,300
Over $379,150 $102,574 plus 35% of
the excess over $379,150

TABLE 2 – Section 1(b) – Heads of Households
If Taxable Income Is: The Tax Is:
Not over $12,150 10% of the taxable income
Over $12,150 but $1,215 plus 15% of
not over $46,250 the excess over $12,150
Over $46,250 but $6,330 plus 25% of
not over $119,400 the excess over $46,250
Over $119,400 but $24,617.50 plus 28% of
not over $193,350 the excess over $119,400
Over $193,350 but $45,323.50 plus 33% of
not over $379,150 the excess over $193,350
Over $379,150 $106,637.50 plus 35% of
the excess over $379,150

TABLE 3 – Section 1(c) – Unmarried Individuals (other than Surviving Spouses and Heads of Households)

If Taxable Income Is: The Tax Is:
Not over $8,500 10% of the taxable income
Over $8,500 but $850 plus 15% of
not over $34,500 the excess over $8,500
Over $34,500 but $4,750 plus 25% of
not over $83,600 the excess over $34,500
Over $83,600 but $17,025 plus 28% of
not over $174,400 the excess over $83,600
Over $174,400 but $42,449 plus 33% of
not over $379,150 the excess over $174,400
Over $379,150 $110,016.50 plus 35% of
the excess over $379,150

TABLE 4 – Section 1(d) – Married Individuals Filing Separate Returns
If Taxable Income Is: The Tax Is:
Not over $8,500 10% of the taxable income
Over $8,500 but $850 plus 15% of
not over $34,500 the excess over $8,500
Over $34,500 but $4,750 plus 25% of
not over $69,675 the excess over $34,500
Over $69,675 but $13,543.75 plus 28% of
not over $106,150 the excess over $69,675
Over $106,150 but $23,756.75 plus 33% of
not over $189,575 the excess over $106,150
Over $189,575 $51,287 plus 35% of
the excess over $189,575

TABLE 5 – Section 1(e) – Estates and Trusts
If Taxable Income Is: The Tax Is:
Not over $2,300 15% of the taxable income
Over $2,300 but $345 plus 25% of
not over $5,450 the excess over $2,300
Over $5,450 but $1,132.50 plus 28% of
not over $8,300 the excess over $5,450
Over $8,300 but $1,930.50 plus 33% of
not over $11,350 the excess over $8,300
Over $11,350 $2,937 plus 35% of
the excess over $11,350

Child Tax Credit.

For taxable years beginning in 2011, the value used in § 24(d)(1)(B)(i) to determine the amount of credit under § 24 that may be refundable is $3,000.

Hope Scholarship, American Opportunity, and Lifetime Learning Credits.
(1) For taxable years beginning in 2011, the Hope Scholarship Credit under
§ 25A(b)(1), as increased under § 25A(i) (the American Opportunity Tax Credit), is an amount equal to 100 percent of qualified tuition and related expenses not in excess of $2,000 plus 25 percent of those expenses in excess of $2,000, but not in excess of $4,000. Accordingly, the maximum Hope Scholarship Credit allowable under § 25A(b)(1) for taxable years beginning in 2011 is $2,500.
(2) For taxable years beginning in 2011, a taxpayer’s modified adjusted gross income in excess of $80,000 ($160,000 for a joint return) is used to determine the reduction under § 25A(d)(2) in the amount of the Hope Scholarship Credit otherwise allowable under § 25A(a)(1). For taxable years beginning in 2011, a taxpayer’s modified adjusted gross income in excess of $51,000 ($102,000 for a joint return) is used to determine the reduction under § 25A(d)(2) in the amount of the Lifetime Learning Credit otherwise allowable under § 25A(a)(2).

Earned Income Credit.
(1) In general. For taxable years beginning in 2011, the following amounts are used to determine the earned income credit under § 32(b). The “earned income amount” is the amount of earned income at or above which the maximum amount of the earned income credit is allowed. The “threshold phaseout amount” is the amount of adjustedgross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The “completed phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) at or above which no credit is allowed. The threshold phaseout amounts and the completed phaseout amounts shown in the table below for married taxpayers filing a joint return include the increase provided in § 32(b)(3)(B)(i), as adjusted for inflation for taxable years beginning in 2011.

Number of Qualifying Children
Item One Two Three or More None
Earned Income $9,100 $12,780 $12,780 $6,070
Amount
Maximum Amount of Credit $3,094 $5,112 $5,751 $464
Threshold Phaseout $16,690 $16,690 $16,690 $7,590
Amount (Single, Surviving Spouse, or Head of Household) Completed Phaseout $36,052 $40,964 $43,998 $13,660
Amount (Single, Surviving Spouse, or Head of Household) Threshold Phaseout $21,770 $21,770 $21,770 $12,670
Amount (Married Filing Jointly)Completed Phaseout $41,132 $46,044 $49,078 $18,740
Amount (Married Filing Jointly)
The instructions for the Form 1040 series provide tables showing the amount of the earned income credit for each type of taxpayer.
(2) Excessive investment income. For taxable years beginning in 2011, the earned income tax credit is not allowed under § 32(i) if the aggregate amount of certain investment income exceeds $3,150.

Standard Deduction.
(1) In general. For taxable years beginning in 2011, the standard deduction amounts under § 63(c)(2) are as follows:
Filing Status Standard Deduction
Married Individuals Filing Joint Returns $11,600
and Surviving Spouses (§ 1(a))
Heads of Households (§ 1(b)) $8,500
Unmarried Individuals (other than Surviving Spouses $5,800
and Heads of Households) (§ 1(c))
Married Individuals Filing Separate $5,800
Returns (§ 1(d))
(2) Dependent. For taxable years beginning in 2011, the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $950, or (2) the sum of $300 and the individual’s earned income.
(3) Aged or blind. For taxable years beginning in 2011, the additional standard deduction amount under § 63(f) for the aged or the blind is $1,150. These amounts are increased to $1,450 if the individual is also unmarried and not a surviving spouse.

Qualified Transportation Fringe. For taxable years beginning in 2011, the monthly limitation under § 132(f)(2)(A), regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass, and under
§ 132(f)(2)(B), regarding the fringe benefit exclusion amount for qualified parking, is $230.

Personal Exemption.
(1) Exemption amount. For taxable years beginning in 2011, the personal exemption amount under § 151(d) is $3,700.

Interest on Education Loans. For taxable years beginning in 2011, the $2,500 maximum deduction for interest paid on qualified education loans under § 221 begins to phase out under § 221(b)(2)(B) for taxpayers with modified adjusted gross income in excess of $60,000 ($120,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $75,000 or more ($150,000 or more for joint returns).

SECTION 3. EFFECTIVE DATE
This revenue procedure applies to taxable years beginning in 2011.