Toronto Tax Lawyer Under Investigation by the Law Society of Upper Canada

The Toronto Star recently reported on a Toronto tax lawyer who is being investigated by the Law Society of Upper Canada. It is alleged that DioGuardi took money from six clients before doing “any or very little” work, failed to provide legal services “to the standard of a competent lawyer” and, in one case, did not file income tax returns for a client “in a timely manner.” The law society alleges DioGuardi “failed to act with integrity” by having the six clients sign retainer agreements that benefited his firm, DioGuardi Tax Law, “to the potential detriment of the clients.” You can read the full article here http://www.thestar.com/news/investigations/2014/05/21/prominent_tax_lawyer_accused_of_cheating_clients.html

DioGuardi have indicated that they are fighting these allegations. 

It appears to us that DioGuardi was trying to prevent Canada Revenue Agency from seizing retainers they held to work on the cases.  The strategy he used seems to have run afoul of the Law Society of Upper Canada interpretation of how lawyers are required to operate.  DioGaurdi’s argument has some logic to it but surely it is impossible to have your cake and eat it too?  That is, claim to provide special layer protection and then not follow your own society’s governing rules (which are set up to protect clients of law firms)?

Is this more evidence that when dealing with tax problems (which can be scary enough), lawyers are not automatically the best solution. 

Don’t get us wrong. We refer people to good lawyers.  They are excellent in court and making legal arguments.  But only when that particular weapon is needed in your situation.

For more about your options when dealing with a tax problem please call Tax Solutions Canada today at 1-888-868-1400.

CRA Prosecutions - Over 80 People Already Convicted by CRA in 2014!

Anyone who thinks a CRA prosecution will not happen to them needs to take off the rose-coloured glasses. Fact: CRA prosecutes people for tax evasion and is often successful obtaining convictions. On top of penalties and interest that CRA assesses when they determine that someone has evaded their taxes, if the matter is brought to court additional criminal fines and imprisonment can be result for the person or business owner who is convicted.

Let’s look at 2014. CRA prosecutions in 2014 have led to over 80 convictions in Canada with penalties ranging from fines to jail time. In addition to being tried and convicted – those who are convicted face the humiliation of having the details of the case broadcast on CRA’s website for all the world to view.  Below are some examples.

In June, Allan Curle and Bruce Johnson, directors of Norall Group Contracting Inc. of Thunder Bay, were charged with tax evasion and sentenced to 14 months (Curle) and 10 months (Johnson) in jail, as well as a total fine of over $300,000. These fines represent 100% of the federal taxes each individual evaded, plus 50% of the cumulative total of federal income taxes evaded. These sentences came about after both failed to correctly file income taxes.

In July, Peter McCallion of Mississauga was convicted on fifteen counts of failing to file corporate, GST/HST and personal income tax returns. This resulted in fines of $1,000 per count, a total of $15,000, and McCallion was given 27 months to pay the fines.

If you know that you have undeclared income and CRA is not onto you yet – all of this can be avoided through the Voluntary Disclosure Program (VDP). Through a VDP application you can get to CRA before they get to you, they can accept the undisclosed information without prosecuting you or even charging you penalties.  You have to act first so act fast.  Tomorrow may be too late.  Even one phone call from CRA can wipe out your VDP rights.

If the ball has already started rolling and CRA is asking questions, red alert! You need to get professional representation right away. This could be a ticking time bomb and every interaction directly with CRA can weaken your ability to defend yourself.

For more about protecting yourself and declaring undeclared income, please call Tax Solutions Canada today at 1-888-868-1400.

GLGI Update: Current State of the Global Loan and Gifting and Initiative

Canadian taxpayers have been using donation tax shelters to both give back to those less fortunate and also reduce the high taxes that we pay in Canada. Many years after well-respected law firms and accounting firms endorsed specific plans and after CRA had assessed them as allowing the deductions and credits Canada Revenue Agency began to take a second look. One of the largest tax shelters that has fallen under CRA’s scrutiny is the Global Learning and Gifting Initiative (GLGI).

The GLGI is  a registered tax shelter which issued donation receipts to those who participated. The Global Learning and Gifting Initiative was the subject of a CRA audit which led the CRA to identify it to be a “sham” and thus the claims of thousands of taxpayers have been denied. This has been extensively reported on including by the Financial Post.

Currently more than 25,000 taxpayers who objected to the denials of their receipts and subsequently took CRA to court remain in limbo until the there is a final ruling on the matter.

So what happens when one unwittingly finds themselves being  audited by CRA and CRA denies their claims– particularly as it relates to tax shelters/charity opportunities?

Whether it’s through an audit or some other form of review which leads to a re-assessment, the amount owing is determined and based on that amount penalties and interest are applied retroactively. If CRA is of the opinion that you have been grossly negligent or have taken deliberate actions to evade taxes, you could be subject to additional gross negligence penalties of up to 50% of the tax debt. Criminal prosecution for tax evasion remains a weapon in the CRA arsenal of making examples of Canadians who do not follow the law the way CRA and its army of lawyers at the Department of Justice see it.

Once your returns are re-assessed,  you have 90 days to “object” to the assessment. If for some reason you have not objected within the 90 day period, you have up to 1 year afterward to request an extension  of time to file your objection.  It is far better to get the objection filed within the initial 90 day period than have to ask your CRA opponent for permission to file late.

If your objection is rejected you still have the option to take the matter to Tax Court. This is the case with the more than 25,000 taxpayers who are currently awaiting a decision as it relates to the Global Loan and Gifting Initiative.

If you are not successful regarding the main issue of your objection (i.e. the donation) you may be successful with regard  to the gross negligence penalty.   The burden on CRA to prove gross negligence is extremely difficult for them and if you know the standards intimately there is a high success rate in having gross negligence penalties removed.

The court process is very long and so many who have filed objections after 2006 may have had their objections held in abeyance (put on hold) pending the outcome of the other cases that are similar in nature and before the courts.

Here are some considerations:

• If you are re-assessed and have had charitable donations disallowed by CRA, you must object within the timelines detailed above.
• Objections must be professionally prepared. There are two reasons. Firstly, the Objection needs to be drafted in a way that makes the CRA Objections Officer’s job easy – clear and logical laying out of your position that works consistently with how the Officer is trained to think and process. Secondly, The Objections Officer needs to have reasons to accept your objection. This is done by including the appropriate case law, references to legislative sections and other materials that support your position. Finally, you need to anticipate that a rejected Objection may lead to an appeal and there are needs to build the arguments in the appropriate way for a positive result.
• While an objection is in process, collection action is paused. However, if you are unsuccessful, CRA will, upon making a decision, apply the penalties and interest retroactively. This is one reason why it is very important, if you have grounds for taxpayer relief, that an application for taxpayer relief is filed at the time you make your objection.
• Through a taxpayer relief application, even if your objection is disallowed you may be able to get CRA to agree to cancel all or some of the penalties and interest. With that said, taxpayer relief can only be applied 10 years retroactively so recording that an application has been prepared and filed is critical. Here is an example: if you were re-assessed in 2006 for involvement in the GLGI in 2002, you filed your objection in 2006, and you filed your application for taxpayer relief in 2006, then your case was held in abeyance for 6 years – if a decision was made in 2014, CRA would have to consider your application for taxpayer relief backwards to 2002.

A good tax professional will look at both the grounds for the objection and taxpayer relief together. The grounds will likely be different and you do not want the grounds in one filing to damage your rights under the other option. This can be a complicated web to untangle.

If you have a GLGI case pending a court decision it is our view that you should lock in your rights by getting your taxpayer relief application on file as soon as possible.

For more about filing an objection or applying for taxpayer relief, call Tax Solutions Canada today at 1-888-868-1400.

 

A Generous and Fair Tax Court Ruling - Tax Court More Sympathetic Than CRA

When you have been slapped with a tax debt that you believe is unfair or that you believe is incorrect, the prospect of objecting and heading to tax court to dispute the issue may seem daunting. Once CRA assesses you and proceeds to hold that debt over your head, it might seem easiest to just deal with the debt rather than attempting to fight for your rights. But wait, although tax court may require a bit of leg work, this recent article from The Toronto Star demonstrates just how beneficial it can be to object! 

In 2009, Thunder Bay resident Trudy Tallon claimed medical expense tax credits after spending the winter in various warm climates to help relieve her chronic pain. These locations included Thailand, Cambodia, Costa Rica and Venezuela, among others. The CRA initially denied these claims, but rather than accepting the refusal, Tallon took the matter to court and has since received a favourable ruling. Talon was allowed to claim a medical expense tax credit of over $17,000.

Check out the full article here: http://www.thestar.com/business/personal_finance/2014/07/29/woman_can_claim_17500_tax_deduction_for_winter_in_thailand_court_rules.bb.html

According to The Toronto Star, "This decision shows that the courts are frequently more sympathetic to taxpayers than the CRA and want to give them the benefit of the doubt. Therefore if a claim for a tax credit or tax deduction is turned down, it may be worth it to appeal the decision.”

If you feel as though you are being unfairly penalized and CRA refuses to accept your objection to a reassessment, don’t just assume that that is as far as you can go. As a taxpayer you have rights, and this generous ruling shows that sometimes tax court is far more sympathetic than CRA. Just keep in mind that the process is a formal one, and working with an experienced firm is the best way to ensure positive results.

To find out about objecting to a CRA assessment, and for help with this formal process, please contact Tax Solutions Canada today by calling 1-888-868-1400.