Taxpayer Bill of Rights – What Does This Mean to You

As a Canadian, you are required to pay taxes every year and file your income tax statements annually. Unfortunately too many Canadians run into problems with CRA for a whole host of reasons. All it takes is for CRA to have a suspicion about you and then you will find yourself facing a wave of e-assessments, penalties, interest, audits, investigations and more… You just would not believe how many times CRA goes after taxpayers and they were wrong to begin with!

This is why it is important to know your rights according to the Taxpayer Bill of Rights.

What is the Taxpayer Bill of Rights? This is a set of rights that you have in your relationship and dealings with the Canada Revenue Agency. These rights are meant to protect you and confirm CRA’s commitment to serve the public with ‘professionalism, courtesy and fairness.’ This does not mean that if you owe money to CRA and they are aggressively collecting from you that a complaint under the Taxpayer Bill of Rights will stop them. It does however set out guidelines as to how they deal with you.

According to the Bill, you have the right to:

1.      Receive credits and benefits and pay no more or no less than required by the law.

2.      Have access to service in both languages.

3.      Having your information should remain private and confidential at all times. With that said if they issue a requirement to pay to your bank or employer in the course of collecting back taxes this is not protected.

4.      Dispute or appeal anything that you do not agree with.

5.      Be treated professionally, courteously, and fairly. 

6.      Have things explained clearly and accurately, and within a reasonable amount of time.

7.      Not be required to pay if you have filed any form of objection or asked for a review.

8.      Have the law applied consistently.

9.      Lodge a complaint if you feel as though CRA has been mishandling or conducting inappropriate actions/behaviours, etc. and be informed of an investigation’s findings.

10.   Have the costs of compliance taken into account when administering tax legislation.

11.   Expect the CRA to be responsible and accountable.

12.   Relief from penalties and interest due to extraordinary circumstances.

13.   Updated and published service standards and reports.

14.   Expect CRA to inform you about questionable tax schemes in a timely manner.

15.   Be represented by a person of your choice.

16.   Lodge a complaint and request a formal review without fear of reprisal.

Protect yourself by better understanding your rights. For clarification or more information about any of the sections in the Taxpayer Bill of Rights please contact Tax Solutions Canada by calling 1-888-868-1400 or visit us online at www.taxsolutionscanada.com.

Can You File an Objection and a Taxpayer Relief Application at the Same Time?

When you have been assessed and notified of a tax debt owing, it can be incredibly difficult to navigate the expectations and requirements with regard to the Canada Revenue Agency (CRA). This is especially true if you disagree with the assessment or if you believe circumstances existed which made it hard to comply with the Income Tax Act. If you find yourself in this position and wish to file an objection or apply for Taxpayer Relief, you can. But what if you want to do both? This is where things get even more difficult.

Notice of Objection: this is the formal process you follow when you disagree with a Notice of Assessment, Notice of Reassessment, Audit or a Determination. It outlines why you feel the assessment is incorrect and ideally provides proof explaining why CRA should change their decision. CRA determines the outcome after considering your objection. Depending on your circumstances it could take CRA many years to reach a decision. A great example of this is individuals who have gotten caught up in charity tax schemes. There are many cases before the courts and we have seen clients who have had objections held in abeyance as far back as 2005 pending the outcome of similar cases that are before the courts.

Taxpayer Relief Application: this is a program where you can apply for relief from interest and penalties. You may qualify for relief in the following circumstances: You are facing and can substantiate severe financial hardship, a documented medical problem, a death of an immediate family member, a disaster like a flood or fire, an error on the part of CRA or some other extraordinary circumstance.

Because you may only potentially be granted relief for 10 years back from the date of the application (not the tax year in question), many wonder if they the can file an objection and an application for Taxpayer Relief at the same time to get the relief application on record right away.

According to CRA, “If an assessment or reassessment for a tax year is issued by the CRA in a later year, or if an objection or appeal filed by a taxpayer may take considerable time to resolve, the taxpayer should send in their request for any potential relief before the 10-year time limit for that tax year expires.”

What does this mean? Well, if it looks as though your objection will take a significant period of time, or if the date you file is close to the 10 year-time limit, it is smart to file both at the same time.  Even with the impacts of the Bozzer v. The Queen decision of 2011, which gave the Minister leave to consider even those applications for relief concerning a tax debt more than ten years old, it is smart to file before you get to this point.

Now this is not to say that CRA does not commonly make mistakes or have employees who don’t even understand the agencies policies.

Here is a great example. We had a client who filed an objection and Taxpayer Relief application in the same month in 2011. In 2012 the objection was rejected. By 2013 there still had not been a decision made on the relief application. In 2013 we began paper-trailing the situation and dealing with the Taxpayer Relief division who said that the relief application was not processed because you cannot file an objection and an application for relief at the same time.

Not true. You absolutely can! Through demonstrating the circular citing that and leaning on the Taxpayer Relief division we were able to get a decision on the application expedited. This is why it is so difficult for individuals and business owners to deal with CRA. If you don’t understand their policies and procedures they will just do whatever they want and until you fight for your rights – you will continue to be railroaded.

So, can you file an objection and a Taxpayer Relief application at the same time? Yes. Should you? Absolutely. Where CRA is concerned – time is never your friend!

For more about filing an objection and a relief application at the same time please contact Tax Solutions Canada by calling 1-888-868-1400.

 

You Can File for Taxpayer Relief if the Debt Occurred More Than 10 Years Ago - With One Caveat

If you have received notice regarding a re-assessment of your tax filings and have been notified of a tax debt owing, this will often occur many years after the tax year in question. If you file your tax returns late, you will have your returns assessed in a batch and penalties and interest will be calculated retro-actively. A common complaint for taxpayers in this situation is that a reassessment that goes back several years often results in high interest and penalties. Once this occurs you have one of two choices: object to some or all of the penalties and interest assessed or apply for Taxpayer Relief.

If an objection is filed it can take years, depending on the grounds for your objection, before a decision is made, and if your objection is rejected, your next option is an application for Taxpayer Relief.

Where taxpayer relief is concerned, CRA has said that you cannot file for relief of penalties or interest on tax years over 10 years old. The challenge is that many taxpayers, especially those who have gone through the process of filing an objection - have their Taxpayer Relief applications rejected for this reason. This is unfair because it is often the slow process of the CRA that causes delays in processing that result in additional interest and result in the time being stretched out.

Prior to 2011, the Canada Revenue Agency (CRA) staunchly refused to grant relief from penalties and interest on a debt that occurred more than ten years previous, stating that the Minister had no power to grant taxpayer relief after the ten year period had passed. However, in 2011, the Federal Court of Appeal heard the case of Bozzer v. The Queen, and the landmark decision changed things significantly.

Bozzer v. The Queen: In December 2005, Mr. Bozzer applied for relief of interest on a tax debt assessed for his 1989 and 1990 taxation years. This request was denied because CRA policy excludes debts over 10 years of age. Following this rejection, Mr. Bozzer made his way up the court ladder, ending up in the Federal Court of Appeal. It was determined that the Minister, based upon the legislation which sets out to “administer the income tax system fairly and reasonably by helping taxpayers to resolve issues,” should be able to use his/her discretion with regard to all cases.

According to CRA’s website: “The FCA [Federal Court of Appeal] found that the Minister has the discretion to cancel interest that accrued during the 10 calendar years preceding the year in which the request for relief is made, regardless of the tax year in which the tax debt arose. For example, a request made in December 2011 for the 1998 tax year, the Minister may cancel any interest that accrued during the 2001 to 2010 calendar years. Prior to this decision, the CRA's position was that the Minister could not cancel any interest where the request was made more than 10 calendar years after the end of the tax year in which the tax debt arose.” 

What does this mean? For taxpayers, this decision means that it is up to the discretion of the Minister whether relief can be granted, regardless of whether the 10 year period has passed – rather than just receiving an outright no.

Sounds great right? Well in a perfect world CRA would no longer refuse to consider a relief application that involved interest and penalties over the 10 years preceding the application. Unfortunately we do not live in a perfect world and so taxpayers continue to have their Taxpayer Relief applications rejected, citing the 10 year rule even with the Bozzer ruling on the books.

The challenge with the Taxpayer Relief process is that:

1.      You may make a first application

2.      If rejected, you may provide more information and ask for another review

3.      If rejected you can ask for a judicial review = tax court

If you have had a first application rejected because of the 10 year rule, then it is important that you have your second review prepared professionally and cite the correct case law in order to optimize your chances of being successful. 

For more about Bozzer v. The Queen, the impacts to Taxpayer Relief, or to file for relief, please contact Tax Solutions Canada by calling 1-888-868-1400 or visit us at www.taxsolutionscanada.com.  

Brampton Landscaper Prosecuted by CRA - Impacts of Late Tax Filing

As the summer winds down and we are greeted by the emergence of fall, filing your taxes may be the farthest thing from your mind. For those individuals who remain tax compliant year in and year out, once the returns are filed and the assessments returned taxes are usually forgotten about until the following spring. 

What about those individuals who missed the tax deadline? Out of sight, out of mind right? Not so much. The Canada Revenue Agency has the power and resources on hand to uncover those late filers - and they do. For example, a recent CRA conviction saw Tuccio Zita, a Mississauga landscaper, convicted of failing to file both a corporate tax return and a GST return, resulting in a fine for each offence. 

How does the CRA find out about non-compliant taxpayers? There are several ways. The CRA Snitch Line that individuals can call to report non-compliance, is quickly becoming an important avenue for discovery for the CRA. For example, angry ex-wives/husbands, jealous competitors, etc.  Also, if clients receiving receipts then file those as part of their own individual returns, these can come back to haunt the owner of a business. There are various other methods, but the important thing to remember here is that if you have not filed, it IS just a matter of time.

What happens if you are caught not filing your tax returns? This is an example of the penalties:

-        If you failed to file your 2012 tax return, the CRA will apply a 5% penalty to the amount that you owe, plus an additional 1% per month for up to 12 months.

-        If you have missed the deadline several years in a row, this penalty may jump to 10% plus 2% per month for up to 20 months.

-        Interest - don't forget about this. The numbers above are just penalties, and once the debt has been applied you will be charged daily compound interest on both the tax debt owed and the penalties.

-        If you miss the tax deadline two or more times over a four year period you may find yourself saddled with a 'repeated failure to report income' penalty, to the tune of 20% of the total income that was earned but not reported.

These fines are stiff, but you are not without options. If you know that you have missed the 2013 tax deadline and are hoping that the problem will just fix itself by next tax season, beware. If the CRA catches up with you (as it did with Mr. Zita) your options are sharply reduced. Please speak with a professional tax expert about the Voluntary Disclosure Program. If you have not yet been contacted by the CRA the VDP can help get you relief from interest and penalties. Keep in mind that the process is complex and you only have one chance - so it needs to be done right the very first time.

If you have missed the tax deadline, don't avoid the issue. Tax evasion is a very real issue, and if you are facing this charge it may be a long road ahead. Instead, stop it before it starts.

For more information about what to do if you have missed the tax deadline, or for helping dealing with your tax problem or tax debt, please contact Tax Solutions Canada today at 1-888-868-1400.