Tax Slips – The CRA Knows More Than You Think

Every time you receive a tax slip, the issuer sends a copy to Canada Revenue Agency (CRA).  So just because you don’t report your income, whether it was taxed or not, does not mean that the CRA is not aware of it. These tax slips are issued for employment income, contract income, an RRSP that you cashed in, investment income, etc.  This means that even if you moved and didn’t receive a tax slip and forgot to include it on your return the CRA has it. This can lead to a tax audit or investigation.

Sometimes misreporting or failure to report income is intentional; more often it is not. For example, many individuals are unaware that they must report any withdrawn RRSPs for a given tax year. Since this is income, you are required by law to report it – specifically because you are taxed on this withdrawn money. If the CRA finds out that you failed to report withdrawn RRSPs, not only will you be assessed to pay the tax debt but you will also be assessed penalties and interest.

Even that income that you think will never be reported might have been. If you own your own business or work as a contractor, and tax you extract from others has to be reported. For example, a contractor is hired for home renovations. He charges the property owner HST. The property owner will claim the HST as an input tax credit – meaning that even if the contractor did not remit the tax HST to the CRA, his client triggered the connection back when the client made the claim. This means that the CRA, thanks to this claim, is well aware that you have income and an HST debt, even if you have not reported it.

Tax slips are not the only way for the CRA to find out about your earnings, regardless of whether you report them or not. Another common tax audit trigger is when someone else, having paid you in the past, is being audited. If a supplier or client is being audited, a thorough investigation of their tax filings, income and expenses will be conducted. This means that they can uncover payments for invoices or invoices issued to you and if they have questions it could lead to you being audited.  CRA auditors are usually well trained and follow the trail – from your client’s/supplier’s books to you. 

Some contractors don’t realize that if they earn more than $30,000 in a year that they have to collect and remit HST. When attempting to file on-time many are stunned to learn that they have a large HST liability.

The CRA Snitch Line is also another important factor in the CRA’s arsenal of discovery. Anyone can call the CRA Snitch Line and report an individual’s or business’s behaviour as it relates to non-compliance and their taxes, so even if no tax slips have been filed, or no one else is being audited, it doesn’t mean that your past tax mistakes are going to remain a secret from CRA.  Ex-spouses, ex-tenants (say you rented the basement), ex-business partners and any other disgruntled person you had business dealings with can turn on you via the Snitch Line.

Protect yourself from being audited as a result of submitted tax slips, the audit of other people or the Snitch Line. Fix your tax problems before it gets to this point because once CRA catch you your opportunity to resolve fairly goes way down.

For more information about protecting yourself from unknown tax slips and being audited, please contact Tax Solutions Canada today by calling 1.888.868.1400 or visiting us online at www.taxsolutionscanada.com.

 

Beware – the CRA Snitch Line is Not a Myth

The tax deadline is behind us, and even though you may have filed your returns online, there is always a chance that you incorrectly claimed expenses or miscalculated earnings. These can be remedied through various tax solutions like the Voluntary Disclosure Program, which, for example, allows you to amend and re-file returns and declare errors and non-disclosure that has occurred on a past return.

Maybe the issue occurred on a past return and some years have passed so you are thinking it is best left alone. Well, the problem with this is that the CRA has a number of resources (including the CRA Snitch Line) to catch up to you – and you cannot qualify under programs like the Voluntary Disclosure Program once the CRA has contacted you because disclosure will no longer be voluntary. Penalties and interest will be assessed and, depending on how much time has passed, interest and penalties can double and even triple the size of your tax debt.

Just because you don’t file your taxes or don’t report earnings, that doesn’t mean that the Canada Revenue Agency doesn’t know about them. Any earnings reported by employers, clients, etc. are taxable, and just because you don’t make the CRA aware of them, doesn’t mean that others haven’t. And even if no one reported your earnings, that doesn’t mean others have not reported you. The CRA Snitch Line does exist – and people use it.

What is the CRA Snitch Line? The CRA Snitch Line is a direct link to the CRA where individuals can call anonymously to report others who have not reported earnings. And the CRA takes these tips very seriously, critically investigating any calls they receive.

Take this example. You own your own business and earned some cash income that you didn’t declare on a return. You think that you are safe because the CRA has not contacted you and you think that because there is no record of the cash exchange it will be difficult to prove that you earned the income. Then you and your spouse split up and she is demanding alimony and a lot of additional support. She knows you had some cash income so not only does she tell her lawyer, she also reports you to the CRA Snitch Line.

Ex-spouses, ex-business partners, disgruntled accountants, suppliers and even past clients have been known to call the CRA Snitch Line to create problems for someone they have a dispute with. Say for example your books are clean – a call to the CRA Snitch Line can result in an audit and high costs to you to hire audit representation.

Don’t think that just because your income has not been reported that you are safe from CRA audits or enforcement action. The CRA Snitch Line exists for a reason. Don’t get caught up in a CRA audit after having been reported to the CRA Snitch Line. Settle your tax problems now by working with an organization experienced with and committed to resolving them and who can leverage resources like the Voluntary Disclosure Program to mitigate your tax liability. 

For more information about the CRA Snitch Line, please contact Tax Solutions Canada by calling 1.888.868.1400 or visiting us online at www.taxsolutionscanada.com.

What is Tax Amnesty in Canada?

What is tax amnesty in Canada? Tax amnesty is when the government allows a taxpayer to declare income or amend a mistake on a past return and agrees to accept a defined amount, and in exchange for this disclosure agrees not to charge the taxpayer penalties or to prosecute (as in criminal) the taxpayer for tax evasion.

In Canada, tax amnesty is administered by the Canada Revenue Agency (CRA) under the Voluntary Disclosure Program, also known as VDP.

If you have filed a return in the past where you failed to declare income, declared more expenses than you were entitled to, made an error that incorrectly reduced what you owed, or are behind filing and the CRA has not requested that you file, you may qualify to apply for tax amnesty under the Voluntary Disclosure Program.

Under the Voluntary Disclosure Program, one can make a VDP application if:

1.       The income being declared is at least one year old.

2.       The income being declared would have been subject to a penalty.

3.       Disclosure must be voluntary.

4.       Disclosure must be complete.

Number 1 and 2 are pretty self-explanatory, but number 3 and 4 are where the water gets muddy. This is why, if you want to make an application for tax amnesty under the Voluntary Disclosure Program, you should do so through a professional that specializes in the field.

When the CRA says the disclosure must be voluntary, that means that the CRA must not have contacted you about ANY tax issue on ANY type of tax at all; not by phone and not by mail. If the CRA has contacted you, then your disclosure is not considered voluntary.

When the CRA says the disclosure must be complete that means that if you are making a disclosure about your 2010 return, and then there was also an issue in your 2008 return that you did not bring up or address in the VDP application, you will not qualify for tax amnesty.

The voluntary disclosure application process works as follows:

1.       A letter is sent to the CRA describing the tax disclosure that you want to make, the type of tax and the tax years in question.

2.       If based on the information in the initial letter your application is initially accepted, the CRA will reply and assign both a VDP number and a CRA VDP officer to your application.

3.       You will then have 90 days to get all of your amended or late returns prepared. This is time sensitive and MUST be done within 90 days.

4.       After 90 days and once your returns are filed, then the CRA will give you final confirmation that your VDP application for tax amnesty was approved.

If you do not qualify for tax amnesty, the route taken to solve your tax problem would be a completely different one, which is why it is important to always have your tax problem reviewed by a professional and then go from there.  Do not waste money on a program that cannot work for you.  Tax Solutions Canada has expertise in a variety of programs including VPD.

For more information about tax amnesty or if you would like to see if you qualify, please contact Tax Solutions Canada by visiting www.taxsolutionscanada.com or call 888-868-1400.

 

Why You Should File Your Taxes Even If You Have Missed The CRA Tax Deadline

This is the time of year when many Canadians, especially small business owners, find themselves scrambling to get themselves organized for the CRA tax deadline. As long as you are scrambling, it is a good sign because it means that you are committed to getting your taxes filed by the CRA tax deadline, even if you get totally stressed in the process.

If you’re not working hard on getting the accounting done and the taxes filed, it is either because tax time doesn’t get you worked up or it is because you have already missed a prior CRA tax deadline so you are not exactly motivated by the idea of having to have your return in on time – I mean what does it matter, you’re already behind, right? Wrong.

1.       Every day you are behind filing your taxes, interest compounds.

2.      When you are behind filing, in addition to incurring a penalty for filing late, you will also incur a monthly penalty for each month that passes that you haven’t filed. This will continue over a period of 12-20 months depending on your past history of missing the CRA tax deadline.

3.      Also, filing your taxes late can impact your ability to apply for a loan or mortgage. Many banks and financial institutions will want to see a copy of your most recent Notice of Assessment when applying for credit – if you don’t have it they may not approve your financing.

4.      CRA collection action. If you are behind filing, the CRA can place a lien on your home, garnish your wages and even freeze your bank account if they suspect that you will owe once filed.

It’s just not worth it, especially since there are programs out there that can help you deal with your tax problem that don’t involve bankruptcy. These include:

1.      A government program where you can declare income that was not declared or declared incorrectly on a past return or file returns that are past due. If you are approved the CRA will agree to waive all penalties associated with the re-filing.

2.      A government program where, under certain circumstances, the CRA may agree to cancel some or all the interest and penalties associated with your debt.

3.       Programs to borrow the money to pay the CRA.

4.       Programs to legally bind final payment plans with the CRA.

5.       A program that can freeze the interest accumulating on your tax debt and allow you to make a single manageable monthly payment and more…

See - there are options out there, so if you have missed the CRA tax deadline in the past, 2013 is the perfect year to get past due returns filed and put your tax problem behind you.

For more information about the 2012 CRA tax deadline or if you are behind filing returns and need help, please contact Tax Solutions Canada by visiting www.taxsolutionscanada.com or call 888-868-1400.