Overview of CRA Penalties and Interest for Income Tax and GST/HST

The Canada Revenue Agency (CRA) has many requirements which all taxpayers (individuals and companies) must abide by.  There are deadlines and due dates for filing income tax and GST/HST returns. There are due dates for payments to the CRA, both for balances owing and for instalments. There is the requirement that all returns must report accurate and complete information. 

Failure to comply with any of these requirements will almost certainly result in penalties and interest assessed, often inflating a tax balance owing to a shockingly increased amount.

For income tax returns, possible CRA interest and penalties include:

Interest: If you have an unpaid balance, you will be charged compound daily interest. You will also be charged interest on any penalties charged.  The rate of interest charged by the CRA can change every three months.  Interest rates are published on the CRA’s website.

Late-filing penalty: If you owe tax and do not file your return on time, you will be charged a late-filing penalty. Currently, the penalty is 5% of the balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.  If you have repeatedly filed late, the late-filing penalty may increase to 10% of your balance owing, plus 2% of your balance owing for each full month your return is late, to a maximum of 20 months.

Repeated failure to report income penalty: If you fail to report an amount on your return (whether intentionally or in error), and you also failed to report an amount in any of the previous three years’ returns, you may have to pay a federal and provincial/territorial repeated failure to report income penalty. The federal and provincial/territorial penalties are each 10% of the amount that you failed to report on your current return.

False statements or omissions penalty: If the CRA believes you were negligent, or knowingly made a false statement or omission on your tax return, you may be charged a penalty equal to the greater of:

• $100; and
• 50% of the understated tax and/or the overstated credits related to the false statement or omission.

For GST/HST returns, the CRA charges interest on:

• any overdue balance owing on a return;
• late or insufficient instalment payments; and
• any other overdue GST/HST amount that you have to remit to the Receiver General

For GST/HST returns, the CRA has a number of different penalties that may be charged for a variety of circumstances, including:

•   Failure to file (for any return with a balance owing, which is filed late)
•  Failure to file after receiving a Demand to File
•   Failure to file electronicall
•   Failure to accurately report information

     There are instances where taxpayers may qualify to have penalties and interest reduced, or completely eliminated by the CRA.  

     Speak with a qualified professional at Tax Solutions Canada to learn more: 1-888-868-1400.

GLGI Tax Ruling - What This Means to You

Two weeks ago, the first GLGI test case was decided in court, and the decision has been cited as a devastating loss for GLGI clients. In the case of Mariano v. Her Majesty the Queen, Justice F.J. Pizzitelli found that participants did not ‘have the intent to donate’ and thus were participating in the program solely for personal gain. This means, in this case at least, that any charitable donations claimed through the GLGI program are null and void, and any monies granted by a Canada Revenue Agency (CRA) tax credit are now required to be repaid, in full, with interest and penalties.

For any individuals who have been awaiting this judgement, the ruling is most unwelcome, and has led many to conclude that all further cases will mirror Mariano v. Her Majesty the Queen. An Appeal must be filed by November 19^th, but with the Mariano ruling, a favourable outcome is unlikely.

If you participated in the GLGI program and chose to wait to hear the test case outcomes, rather than accepting CRA’s now defunct offer, you may be facing a substantial tax debt, coupled with penalties and interest. With the court’s approval, CRA will be gunning for you, putting their full weight behind any and all enforcement action.

What kind of enforcement action are we talking about? The options range from a frozen bank account to a wage garnishment to a property lien, all of which are achieved without a court order and once leveraged can be incredibly difficult to remove.

This is not an attempt to scare you, but rather to illustrate the depth to which CRA will go to regain what is believed to be owed - and with this test case ruling, that stands to be a considerable sum.

Perhaps you are considering calling CRA directly to set up a repayment plan. We strongly caution you if you choose to take this route. The goal of CRA agents is to retrieve funds owed, as soon as possible, not over a 12 or 24 month term. As a result, CRA negotiations hinge more on gathering as much information from you, information that will later be used against you, and hitting you with monthly repayment terms that are often difficult to meet. CRA wants their money, it really is as simple as that.

If the most recent GLGI tax ruling has led to sleepless nights, we sympathize. We know that this has been a long an arduous process, filled with uncertainty. Our tax specialists - including former senior CRA agents - can help walk you through your options and get the matter settled before you lose any more sleep.

Call us today for a free consultation: 1-888-868-1400.

Notice of Objection Procedures and Deadlines

Do you think the Canada Revenue Agency (CRA) treats you fairly? No? Well according to the CRA, all taxpayers are entitled to fair treatment. In fact, this right to fair treatment is enshrined in the “TaxpayerBill of Rights”.  

One of the best things you can do if you feel that you aren’t being treated fairly is to file a Notice of Objection (NOO). 

Why should I file a Notice of Objection? If you don’t understand or agree with your income tax or GST/HST assessment, this is your best opportunity to formally dispute the CRA’s position and make your voice heard.

When should I file a Notice of Objection? The deadline to file an objection is the later of the following:

                     i.        One year after the date of the return’s filing deadline

                    ii.        90 days after the day the notice of (re)assessment

Are you late?  Don’t lose hope if you are beyond these deadlines. The CRA may grant you an extension to file your Objection under certain conditions:

• the application is being made within one year after the expiration of the time limit for objecting;
• the person demonstrates that, within the time limit for objecting, the person was unable to act or to have someone else act in the person's name, or the person had a bona fide intention to object;
• the person demonstrates that, given the reasons set out in the application and the circumstances of the case, it is just and equitable to grant the application; and
• the person demonstrates that the application was made as soon as circumstances permitted it to be made.

Who can file a Notice of Objection? You may file the Objection yourself or you may hire a tax professional to do it on your behalf. 

How can I file the Notice of Objection? A Notice of Objection can be submitted online, filled out in hard copy and mailed or faxed to the Chief of Appeals.  While there is a specific form called the T400A, you can simply write a letter objecting to your assessment as well.

What happens after I file my Notice of Objection? The CRA will send you a letter acknowledging receipt of your objection and will advise you that someone called an “Appeals officer” will be contacting you as soon as possible (currently the wait is around 6 to 9 months). Once you are contacted, you begin the process of resolving your dispute with the Appeals officer by exchanging facts, reasons and arguments. The Appeals officer will then review your position and determine the correct assessing position. You are then notified of the decision in writing by the Appeals officer.

When properly written and presented, filing a Notice of Objection is a powerful tool when you want to ensure your fair treatment by the CRA.  If you want to protect your rights and be treated fairly by filing a NOO, call Tax Solutions Canada today at 1-888-868-1400.

GLGI 2015 Update: Devastating Loss in Court for GLGI

On October 19, 2015, Justice Pizzitelli issued his ruling in the long awaited GLGI test case of Marianov. Her Majesty the Queen.   As I wrote about in a previous blog, the outcome was the worst case scenario for clients of GLGI.   Justice Pizzitelli’s stinging rebuke of the GLGI program is captured in his case conclusion as follows:

“Having regard to all the foregoing, I find that the Appellants did not have the donative intent to make any of their gifts, did not own or transfer the property that is the subject matter of the gift in kind, i.e. the Licences, and that the Program was a sham; ..…..Accordingly, the appeals are dismissed, with costs to the Respondent.”

There you have it.  GLGI was found to be a sham, therefore no portion of your donation – not even the initial cash outlay – will be allowed.  A complete victory for the Canada Revenue Agency (CRA).

Those of you who took my earlier advice and signed the CRA’s offer of settlement prior to this decision can consider yourselves extremely lucky.  Not only did you get the cash portion of your donation allowed, you also received thousands of dollars in immediate interest relief!  

GLGI has until November 19, 2015 to file an Appeal to the Federal Court of Canada.  Frankly, given the clear and complete victory by the CRA in the Tax Court of Canada case last week, an Appeal, in my opinion, would be unlikely to succeed.  The reality is that the large tax debts owed by GLGI clients are not going away and legal action by the CRA looms larger and larger by the day.  

What can you do? Give our team of tax specialists - which include former senior CRA staff – a call right away.  We will stand between you and the CRA to protect you from legal action while we negotiate a fair repayment plan based on your ability to pay.  We can also discuss how we can get reduce your CRA debt by thousands of dollars through a reduction in interest charges. 

Call now!  We offer a free, no risk consultation where we will discuss your individual circumstances and outline the best options available to assist you. 1-888-868-1400.

When the Taxman Becomes Abusive: CRA Complaints

Dealing with tax problems can be stressful. Trying to communicate, negotiate or resolve problems with an immense bureaucratic organization can also be stressful.  Put those two challenges together, and for many individuals dealing with the Canada Revenue Agency (CRA) can leave them frustrated and mistreated, while their problems remain unresolved.

The CRA has its own Taxpayer Bill of Rights, which outlines in detail the fair treatment and professional service that each taxpayer is entitled to receive.  This Bill can be found on CRA’s website, at http://www.cra-arc.gc.ca/E/pub/tg/rc4417/rc4417-13e.html. Right #5 clearly states:  “You have the right to be treated professionally, courteously, and fairly”.   CRA’s policy goes on to state: “You can expect we will treat you courteously and with consideration at all times, including when we ask for information or arrange interviews and audits. Integrity, professionalism, respect, and co-operation are our core values and reflect our commitment to giving you the best possible service. You can also expect us to listen to you and to take your circumstances into account, which is part of the process of making impartial decisions according to the law. We will then explain our decision and inform you about your rights and obligations regarding that decision”.

While this is all well and good, the reality many taxpayers encounter includes dealing with CRA agents who are difficult or impossible to contact, and aggressive or belligerent officers who won’t listen to their concerns and who resort to threats or intimidation.

If you feel your service rights were not respected by the CRA, there are three steps that you are encouraged to follow as a means to resolving your service-related issue:

- Try to resolve the service-related issue directly with the CRA employee with whom you are dealing.

- If a resolution is not possible, you can ask to speak with the agent’s supervisor.  Be aware that any agent who refuses your request to speak with their supervisor is acting outside of CRA service standards.

- You can file a formal complaint with the CRA’s Service Complaints, using their Form RC193, Service-Related Complaint. The Taxpayer Bill of Rights clearly states in Right #16: You have the right to lodge a service complaint and request a formal review without fear of reprisal. The RC193 form can be obtained online at www.cra.gc.ca/forms. There is no fee to file a service complaint. 

Once a service complaint is filed, a complaints officer will be assigned to the case and will investigate the complaint. Your complaint will be reviewed to resolve it in a fair and timely manner. You will be kept informed by the officer of the status of your complaint and they will ensure that you receive the outcome by telephone or mail.

As a final recourse, you can contact the Office of the Taxpayers' Ombudsman if your complaint has still not been handled to your satisfaction. Once CRA’s complaint resolution process is complete, the Taxpayers' Ombudsman can be contacted to give a final and impartial review of your complaint.

Feeling mistreated, discouraged or stressed because of your dealing with the CRA? Tax Solutions Canada can help. Call us today at 1 888-868-1400.

Is it Worth Investing Your Time and Effort into a Taxpayer Relief Application?

Tax debts typically come with serious penalty and interest charges. Fortunately, as its name indicates, the Taxpayer Relief program (formerly known as fairness) allows taxpayers to apply for relief from penalty and interest charges. Individuals and businesses can request remission of penalties, arrears interest, and/or waiver of the accruing interest.

The legislation also enables taxpayers to request acceptance of late, amended, or revoked elections; as well as make requests for refunds or reductions in amounts payable that are beyond the normal reassessment period.

Getting relief from penalties and or interest, or acceptance of a statute barred reduction can often save folks huge money and make a life changing difference.

How to apply for Taxpayer Relief?

Filing a Taxpayer Relief application requires the completion of an RC4288 form (available on the CRA’s website) or submission of a letter outlining the specifics of the request. The Agency has the discretion to grant relief from penalty and/or interest when the following types of situation prevent a taxpayer from meeting their tax obligations:

·         extraordinary circumstances;

·         actions of the CRA;

·         inability to pay or financial hardship;

·         other circumstances

If filed using the correct form, with sufficient supporting documentation, a response from a Taxpayer Relief Officer can take anywhere from 4 months to 1 year or more depending  on the program’s workload. The decision-making criteria used for determining who will be granted relief are:

·         taxpayer’s history of compliance;

·         whether the taxpayer knowingly allowed interest to accrue on a debt;

·         whether the taxpayer exercised reasonable care and was not negligent in conducting their affairs; and

·         whether or not the taxpayer acted quickly to remedy any delay or omission.

Taxpayers often request relief on the basis that “I cannot afford to pay my taxes, so I did not file my tax return, and then the CRA assessed me big tax debt, I can ask for relief because I had no money.” Big mistake. Failure to file a tax return is a criminal offence which can result in prosecution, so you should always file. Before an application is made to the Taxpayer Relief program, all outstanding returns must be filed up to date, otherwise the CRA will not even consider the application.

If you’re thinking that the Taxpayer Relief Provisions may be an option for you, do some research or speak to a tax solutions professional about how to construct the best argument for relief. And you should always make arrangements to pay the penalties and interest in any case in order to stop the interest clock from ticking should the request be denied. However, if you are not satisfied with the Officer’s decision, you may apply for a second-level review and there is an option for judicial review if the second-level review is unfavourable.

The Taxpayer Relief program is a great option, if you qualify, to reduce penalties and interest. Ready to file? Call Tax Solutions Canada today at 1 888-868-1400.

Back to Basics: An Overview of Remission Orders

Taxpayers who have exhausted all available avenues of relief from a tax liability potentially have one last remedy for hope: an application for a remission order. Today’s blog is dedicated to helping you figure out how to navigate and file an application.

What is a Remission Order? A remission order is a remedy available under subsection 23(2) of the Financial Administration Act that provides the Governor in Council the power to grant relief from tax, or penalty (including any interest) where the collection of the tax or the enforcement of the penalty is unreasonable, unjust or contrary to public interest. Unlike the Taxpayer Relief Program, remission orders do not have a limitation on which tax years they can grant relief.

Process for Filing an Application
A remission order must be recommended to the Governor in Council by the Minister of National Revenue who heads the Canada Revenue Agency (CRA). As a result, in order to start the process, taxpayers must file an application for a remission order with the CRA’s Remissions and Delegations Section of the Legislative Policy and Regulatory Affairs Branch of the CRA. Once an application is submitted, a CRA officer reviews the case, makes a decision and then informs the applicant of the outcome.

In general, remission orders will only be recommended by the Minister once all available avenues have been exhausted including objections, appeals and taxpayer relief requests. In addition, the application must demonstrate that a remission order is necessary because the taxpayer meets one of the following circumstances:

·         unintended results of the legislation;
·         financial setback coupled with extenuating factors;
·         incorrect action or advice by CRA officials; or
·         extreme hardship.

Appeals
Should the applicant disagree with the decision of the CRA, they may request a judicial review of that decision in the Federal Court – a process akin to an appeal. The court analyzes the facts of the case determines whether the CRA exercised its discretion properly. Should the court decide in the taxpayer’s favor, the matter is referred back to the CRA for reconsideration.

Conclusion
Remission orders are complicated and a taxpayer’s final chance at relief from a tax debt. Taxpayers are encouraged to seek professional advice prior to applying for a remission order. The professionals at Tax Solutions Canada have significant experience in preparing remission order applications and can provide a free consultation to discuss your specific circumstances and eligibility.

Want to know more or need assistance? Please Contact Tax Solutions Canada today at 1-888-868-1400.