True Story – Canadian’s Bank Account Frozen Over a $4,000 Tax Debt that was only 7 Months Overdue (And CRA Had Cheques!)

We came across an individual recently (we promised not to disclose their information) who had a horrendous experience with CRA, one that was so ridiculous that we asked for their permission to post the story.

Jan (name changed) is self-employed and filed her T1 Gens for her 2012 tax year in April 2013, before the tax deadline. She had a small tax debt owing of $10,000.00. When she received her acknowledgement and Notice of Assessment in June of 2013, she promptly made out 10 cheques to CRA in the amount of $1,000 per month, making copies and sending them to CRA by registered mail. CRA commenced cashing the cheques and by January of 2014 Jan’s tax debt was only approximately $4,000.00. Jan was out of the country and unbeknownst to him/her the cheques stopped coming out of the bank account. Around March of 2014 (3 months after the last cheque came out of the bank account), Jan returned to the country, went to the bank and learned that his/her bank account was frozen by CRA.

First, the bank teller said that there was an issue with Jan’s bank account and then went to get a supervisor. The whole thing was extremely embarrassing. In Jan's case, she had the $4,000 available so CRA received their money right away. Infuriated by the entire situation, Jan called CRA and was told that they didn’t have a record of the last 4 cheques and so when they ran out they proceeded to freeze the account. CRA also acknowledged not sending Jan any notice that they would be freezing the bank account or any sort of demand to pay. The only paperwork Jan had received up until the account was frozen was regular monthly statements.

In this instance, Jan was lucky because she had the money to pay. However, many people in similar situations do not. Those who experience having their bank accounts frozen over much larger amounts of tax debt can face a very serious problem.

The key things to note here are:

1) CRA didn’t need a court order to seize Jan’s bank account.

2) CRA didn’t send any notice or warning to Jan (they do have a form that they often send out called a Requirement to Pay which usually comes around the time an account is frozen).

3) CRA often does not wait for long periods of time before taking enforcement action. If they are in a position to collect on a debt they will do so.

A frozen bank account is both embarrassing and inconvenient, especially when you have other bill payments coming out of it. This can quickly cause significant financial strain, and should be dealt with immediately.

If CRA has taken enforcement action against you, or you are afraid that they are going to soon, please contact Tax Solutions Canada today by calling 1-888-868-1400.

Second Quarter of 2014 and Over 65 Prosecuted for Income Tax Evasion and Other Tax Infractions

We are well into the second half of 2014, and already 68 individuals/businesses have been prosecuted for income tax evasion and other tax infractions. The Canada Revenue Agency is well-known for their aggressive and often underhanded methods when it comes to collecting what they believe people owe, and if they find any questionable behaviours (whether intentional or not), they are quick to prosecute. 

Often those prosecuted for income tax evasion find themselves in this position because of unintentional actions. We all know how busy life can get, and sometimes filing tax returns or keeping our books up-to-date can be put to the side in favour of other, more important issues. But there are repercussions, and CRA isn’t interested in your life story or the circumstances that can lead to tax issues.  These represent just a few of the many individuals/businesses prosecuted for such actions, from April to June. 

April 2014

-        British Columbia resident Stacy Senger was sentenced to fines for failing to comply with an order to file income tax returns and HST returns. The fines, totaling $5000, must be paid by October of this year.

-        Ontario resident Ken Gibbs was sentenced to fines totaling $7000 for failure to file personal and GST/HST returns. Gibbs was given 12 months to pay the fines.

May 2014

-        Manitoba – Winnipeg resident Ken Blackmore was charged with failing to file personal income tax returns and given a $12000 fine ($2000 for each missing return). He was ordered to file the returns within 60 days, and given 12 months to pay the fines. Failure to do so could result in a jail sentence.

-        Nova Scotia resident Michael Astephan was charged with four counts of failing to file his personal income tax returns for 2007 to 2010, resulting in a fine of just under $5000 ($1000 per count plus court costs). Astephan was given until May 2015 to pay the fines, and 30 days to file the outstanding returns.

June 2014

-        Alberta – 60 year old Tony Huether was prosecuted for failure to file personal income tax returns for 2007 to 2010. As a result of these charges, Huether was charged $1000 for each year, for a total of $4000. He has been given until October 1^st to pay the fines. 

-        British Columbia – West Kelowna businessman Bruce Roch Perrin was charged with income tax evasion and excise tax evasion after failing to report income. A CRA investigation resulted in a $28,922 fine and 9 months’ probation. Perrin was given 24 months to pay the fine.

If you believe that an income tax evasion charge might be looming, get it sorted now before you find yourself in the same predicament as those listed above. CRA can be ruthless, so protect yourself and solve the problem before they find out.

For more about CRA prosecutions for income tax evasion, or to get tax help, please contact Tax Solutions Canada today by calling 1-888-868-1400.

Collections Agents – Your Rights and Defending Yourself

The CRA is well known as an extremely difficult institution to work with – and with good reason. When they believe that you owe money, they are tenacious about collecting and closing the file so they quickly go from friendly and cooperative to cunning and fierce in their efforts to get the results they want. Even if you believe an assessment is incorrect, it can be incredibly difficult to get someone to listen to (and actually hear) you. 

Business logic and common courtesy (along with logic and fairness) seem to go right out the window. It isn’t as though you can just call CRA and have a logical and informative conversation that moves things forward to fair conclusion. 

When it comes to enforcement action, CRA collections agents are well trained to use all tools at their disposal to get you to surrender and hand over your hard-earned money.  Calls to your home and work place can be troublesome and embarrassing. Frozen bank accounts usually result in serious financial issues (cannot pay suppliers, or your mortgage and car payments).

One other big factor that makes this situation unique: CRA is not like any other creditor – they do not need a court order or even a hearing before they go after you.  Without specific notice to you CRA can (and do) place liens on people’s homes, freeze bank accounts and seize wages.  After they have sent the assessment or other notice they expect compliance and if it does not happen to their satisfaction their collection officers will take increasingly aggressive action.

So, when it comes to collections agents, how can you protect yourself? Are you just expected to bend to their will and give up? No. Defend yourself effectively – don’t let CRA intimidate you! You have rights.

The Taxpayer Bill of Rights is a document which outlines your rights as a Canadian taxpayer. It details the treatment that you can expect to receive, and explains how you can obtain recompense when a wrong has taken place. There are 16 rights relating to issues such as service, language and confidentiality. For example, the rights discuss how CRA must provide you with information in a timely manner, in a language that is clear and easy to understand, as well as the fact that you must have a chance to object to penalties and reassessments that you believe are incorrect.

Making a complaint according to your rights is a formal process – it is more than the simple making of a call. Depending on the type of complaint, you must correctly complete the appropriate form and submit it to the appropriate department. If, once you have received notice regarding your complaint and a resolution has been met and you are still dissatisfied with the outcome, you can file a complaint with the Office of the Taxpayers’ Ombudsman. The Ombudsman’s role is to complement and enhance the accountability of CRA, and provide more recourse for action on your behalf.

Keep in mind, no matter your complaint, the Taxpayer Bill of Rights is unlikely to end in the elimination of a tax debt. That being said, it is critical to know your rights with regard to your responsibilities as a taxpayer, as well as the ways in which the Bill of Rights works to protect you.

 
To find out more about defending yourself against CRA collections agents, as well as the Taxpayer Bill of Rights, please visit www.taxsolutionscanada.ca or call 1-888-868-1400.

How to File Late Income Tax Returns and Avoid Interest Penalties

So you have fallen behind filing your income tax return – now what? That depends on whether or not you will owe money. 

If the government will owe you money, go ahead and file your late returns. Note though that if you are a small business owner and your past due returns are more than 4 years old, you will not be entitled to the HST/GST input tax credits which could result in an unanticipated tax debt.

What if you anticipate that you will have a tax debt? Brace yourself, because once late filing penalties and interest are added the total tax debt will likely grow exponentially.

How you go about filing your late income tax returns will depend on different factors.

If the debt is more than 1 year old and CRA has not contacted you by mail or by phone requesting that you file any late returns then you may be a candidate to file an application under the Voluntary Disclosure Program (VDP). The VDP is a program created by CRA whereby if you disclose income to them before they learn of it on their own, they will accept your tax filing and you will not be subject to penalties for late filing and the interest you pay is at a markedly lower rate.

If CRA has contact you by mail or by phone requesting that you file your late returns – you must get them filed as soon as possible. You cannot just refuse to file your returns – it is against the law (tax evasion is a criminal offence). Once your late returns are filed it is true that having a tax debt may be stressful, however there are different solutions to deal with a tax debt:

·        A payment plan with CRA – this can be a tough negotiation if you need more than a month or two so that should be undertaken by a professional

·        A lump sum payment and then direct payment plan

·        Borrowing against an asset like a home or investment to raise the capital to pay in full

·        If none of the above are viable options, seek out a professional who specializes in these types of tax problems who can provide protection to help you deal with the financial aspect of your tax problem without losing everything that you have. 

Also, if you are suffering from extreme financial hardship, a medical problem or some extraordinary circumstance has led to your tax problem you may qualify to have some or all of your penalties and interest cancelled through the Taxpayer Relief Program. 

The thought of having to get late returns filed is fun – but it is better to just deal with it now and move forward on a fresh footing than face terrible CRA consequences.

For more information about how to get late returns filed please visit www.taxsolutionscanada.ca or call 1-888-868-1400.