People Actually Get Approved for Taxpayer Relief?

If you have been hit with heavy-handed penalties and interest from CRA you are likely thinking about how to get relief. CRA offers a Taxpayer Relief program where, under extraordinary circumstances, CRA may cancel or withdraw penalties and interest associated with a tax debt. 

We are often asked if people actually get approved for taxpayer relief - the answer is yes.  As with any bureaucratic process that is linked to a powerful government agency there are very precise steps that have to be taken according to the process or you will get rejected. 

Here are some examples of how you might qualify.  

·        Extreme financial hardship. If you can prove that you are suffering from extreme financial hardship you may be approved for Taxpayer Relief. With that said, if you have a boat and a summer home in Florida, leaving you asset rich and cash poor, you likely will not qualify for Taxpayer Relief.  Having children at university or pursuing their potential in expensive senior level competitive hockey will also be unlikely to qualify you for relief. However, it is not an “all or nothing” application – sometimes you can get partial relief and that can go a long way to providing a solution you can live with.

·        Death or illness in the immediate family. If you or an immediate family member is suffering due to a serious illness or a death in the family that you can prove, you may qualify for Taxpayer Relief.

·        Disaster. If a natural disaster, such as a fire or flood, has occurred and has led to your inability to pay your tax debt or resulted in you filing returns late or having expenses disallowed (because receipts were destroyed, for example) – you may qualify for Taxpayer Relief.

·        Error on the part of CRA – this ground for qualification is the most difficult to navigate. A really good example is when CRA takes several years to make a decision on an objection you have filed and then all these years later CRA rejects it and hits you with full penalties and interest.  There are several other examples of where CRA is in the wrong and may therefore be persuaded to cancel or waive penalties assessed on your tax debt. 

This probably sounds great and you may be thinking right now that you qualify, but you must note that the Taxpayer Relief process is an official process and you must be able to prove your claims. Simply filling in the Taxpayer Relief application and sending it in is not good enough. A good application will include the application, a summation and exhibits to support your claim.  It has to hit precisely the right buttons in the way that works for CRA.   

Here is the typical Taxpayer Relief process: 

1.      The initial application is made – it can take 15 to 18 months to receive an answer. A Taxpayer Relief application will not stop collection action. If you owe, an arrangement should be in place because if you simply ignore the tax debt, CRA will take enforcement action against you.

2.      If the application is rejected you may apply for a second review where you can rebut CRA’s reasons for rejecting the application. Again there are very specific requirements to do this. 

3.      If the application is rejected again you may apply for a judicial review. This is where a judge reviews your claim and renders an opinion to CRA. Even though it is a judge it is only an opinion. A judge cannot issue an order requiring CRA to accept your application under Taxpayer Relief. 

Do not confuse regular tax filing and compliance with the complexity and subtle nuances of these Relief Applications.  If you do not make the argument correctly in the initial application you are likely setting yourself up for an expensive fight you will not win.  Don’t get in over your head – you may want to think about speaking to a professional who specializes in these applications to increase your chance for success. 

For more information about the Taxpayer Relief program please visit www.taxsolutionscanada.com or call 1-888-868-1400.

Good Cop/Bad Cop – Welcome to the Canada Revenue Agency Collection Strategy

Over the past few years, the Canada Revenue Agency (CRA) has made great strides in training its collection agents in deploying different methods to collect money from taxpayers. The tactics they deploy will depend on how strong their position is.

 

If they know what you own, where you work, or where you bank, they will simply refuse to negotiate with you and begin seizing your assets or garnisheeing your wages. However, if they are unsure about what they know, or feel as though other relevant information could improve their ability to collect, this is when the games will begin. We use the word “game” but not in the fun sense.  Put more bluntly they are CRA tactics (or tricks) to get you to disclose the information they need, essentially making you your own worst enemy. 

Good Cop/Bad Cop – This is played out in two ways.  In the first method the Good Cop contacts you and you think “wow! I got really lucky - this CRA person is so helpful and polite. No pressure. They are telling me I can get payment terms but to get me approval for this they need financial disclosure. Ok.” So most people simply give the information because they believe this is needed to get treated fairly.  Then the file gets transferred.  The Good Cop no longer has your file.  The Bad Cop is aggressive and tells you to pay them in full - in some impossibly short time frame (like next week).  With all the information you gave the Good Cop, the Bad Cop can quickly proceed to attack you by freezing bank accounts and retirement plans, garnisheeing your income and registering liens on your home and vehicles.  Remember, the Bad Cop does not need a Court Order or even to provide you with a warning.  He has legislated powers to just swoop in and collect.   

Another way this is played out is that the Bad Cop gets to you first and is so aggressive with you that they push you to the brink and you stop returning their calls or perhaps you just hang up on them. One collector will terrorize you and then when you are at your weakest, the next will come in like your best friend. In an attempt to garner some relief, you may try to work with the ‘nice’ collector only to see them remove their mask and reveal their fangs once you have disclosed personal information to them in the hopes of a payment plan. This will lead to face enforcement action, bringing us to the next tactic…. 

Financial disclosure forms – this is when CRA indicates they will accept a short term payment plan from you in exchange for proof that you can’t pay in full. They will send you a financial disclosure statement and ask you to disclose your income source and assets. When the short term payment plan expires (or you miss a payment) CRA now has all the information it needs to attack you if you will not pay according to their demands (rather than what you can fairly afford).  OR CRA decides that based on your financial disclosure that they feel you can pay more or pay in full.  At this point they will renege on the payment plan and come after you. 

No matter how nice your CRA collector is, they are not your friend! They don’t feel sorry for you and you don’t sign their paycheques. They have one mandate and that is to close their file. Their file cannot be closed unless you pay in full or are bankrupt.  

This does not mean that an arrangement can’t be made with CRA that is fair and reasonable? It is possible to negotiate a realistic payment plan, but unless you are a skilled negotiator with many years of experience dealing with CRA collectors, trying to do so could put you in worse shape. 

The best thing to do is get informed, do your research and talk to professionals who know how to deal with CRA. Some important strategies when dealing with CRA include never giving CRA cheques on your bank account – pay by money order or credit card – and never just giving up a financial disclosure statement. Always beware, when faced with collections action by CRA, of the good cop/bad cop tactics. 

For more information about how to get a payment plan in place with CRA visit www.taxsolutionscanada.com or call 1-888-868-1400.

The CRA Voluntary Disclosure Program – Do I Qualify?

If you are behind filing tax returns or know that there was something you omitted in a past tax return then you should be thinking about: 

·        Avoiding penalties and prosecution

·        Minimizing the interest charges

·        How to safely bring yourself in line with the tax rules

First things first – not filing your tax returns or failing to declare income is against the law. Bluntly, it is criminal.  Both will result in penalties and interest and may even result in CRA prosecuting you for tax evasion. If you check CRA’s website, each year thousands of Canadians are prosecuted for tax evasion.  What is interesting is that they are not criminally charged because they owe huge amounts of money – they are charged and receive a criminal record (to go along with the fines and jail time) to make examples of them. 

What can you do? One option (if you qualify and complete the process 100% correctly) available to some is the Voluntary Disclosure Program. Under the Voluntary Disclosure Program you can file late returns or declare income that previously was not declared. If accepted, CRA will not prosecute you or charge you penalties.

There is a catch – you have to qualify.

·        The tax year in question must be at least 1 year old and it must involve a penalty. 

·        Disclosure must be voluntary –if CRA has been sending you notices or has contacted you about any tax compliance problem, disclosure will not be considered voluntary. It is a good idea to have a professional review your case before filing a Voluntary Disclosure Program application – this way you can gain insight into whether you are likely to qualify or not.

·        Disclosure must be complete – This means that no information can be omitted whatsoever. For example, if there is some other non-disclosure not included that comes up later you will have a problem. Your Voluntary Disclosure Program application is your one-off chance to come clean about everything.

The standard process: the application is made, shortly thereafter a Voluntary Disclosure Program officer is assigned to the account, the past due returns are filed and then you are advised if you were approved or not. Herein lies the problem – you only find out if you are approved after you apply.  However, you have now shown CRA you owe them money and if you do not qualify under the Voluntary Disclosure Program, you are going to be dealing with some heavy collection enforcement.  

 

Some people find a false sense of security with ‘no name’ Voluntary Disclosure Program applications but unfortunately with those applications you have to disclose your sex, postal code and a couple of other small things. This doesn’t make it too difficult for CRA to figure out who you are. This is why the best approach is to first find out if you qualify. If you don’t, there are other avenues you can use to combat the penalties associated with a tax debt. Choosing the right option for you will depend on your personal circumstances.

 

For more information about the CRA Voluntary Disclosure Program please visit www.taxsolutionscanada.com or call 1-888-868-1400.

Countdown to the 2013 Tax Filing Deadline – Are You Prepared?

The countdown to the 2013 tax filing deadlines has started. Individual filers – as you know, you must have your returns filed no later than April 30^th and sole proprietors you must be filed no later than June 15^th. 

So what happens if you miss the tax filing deadline for your 2013 tax return? If you owe money it could be very costly. Here are the 2013 late filing penalties:

If you will owe tax for the tax year 2013 and fail to file your tax returns on time the late filing penalty is 5% of the balance owing to CRA. In addition, you will also have to pay 1% of the balance for each month that the return is late to a maximum of 12 months, the total penalty up to 17% on top of the taxes. 

Now, if you failed to file your 2010, 2011 or 2012 tax return on time the penalty may be increased. In this case CRA may increase your late filing penalty to 10% of the tax debt owed and charge you 2% per month on the balance owed, up to a maximum of 20 months. Not to mention the fact that you could be subject to prosecution (which is criminal charges)! 

Many hard working Canadians miss the tax deadline for different reasons. Some because their books are not in order and they have no idea where to start. Others know they will have a tax debt and are afraid that once they file and CRA becomes aware of their tax debt CRA will start coming after them. 

While it is true that if you have a tax debt CRA will come after you to collect it is not illegal to owe money to CRA. Failing to file returns is and can land you in big trouble. We have written elsewhere about what to do when you owe CRA money you cannot pay in full immediately so do not let that stop you from taking action and only making the problem worse for yourself. 

Where you have missed one or more deadlines to file do not panic!  There are different options available to combat penalties associated with a tax debt. These include a Voluntary Disclosure Program application or an application under Taxpayer Relief.  

Simply not filing makes you vulnerable to criminal prosecution and CRA issuing a notional assessment for those missing returns.  The notional assessment can be issued at any time and is basically where CRA estimates your income and assesses penalties and interest accordingly. And what CRA calculates will usually be much more than you really owe because they have no motivation to include your deductions and can even base it on a net worth assessment. When this happens they will use the amounts on their assessment to come after you. 

There is still enough time before the 2013 tax filing deadline to get prepared. If your books are not in order contact a tax professional to find out what you need to do to get ready - including what support services they can offer. If you don’t have proof of expenses you can order bank statements to start coming up with some estimates.  

Also, take a good hard look at your budget to start thinking about ways to pay your tax debt. If you absolutely know that you cannot pay the tax debt that you will owe, take a deep breath - there are solutions to deal with your tax debt. There are even some that will provide legal protection so that CRA cannot garnish your wages, freeze your bank account or seize your assets.  

For more information about the 2013 tax filing deadline, or for assistance with an already existing tax problem, please visit www.taxsolutionscanada.com or call 1-888-868-1400.