Tax Solution Alert - How Mayor McCallion’s Son Could Have Solved His Tax Problem

Remember Mississauga’s veteran and long-serving Mayor McCallion whose son who was the recent centre of controversy with respect to business dealings that led to a conflict of interest hearing against Mayor McCallion? While the conflict of interest allegations were later dismissed, Mayor McCallion’s son has managed to make the news again – only this time for an alleged problem that is all too common in Canada today – failing to file income tax returns.

Failing to file tax returns is far more common than you may think. Some folks get very busy, don’t think they will owe and so they don’t prioritize the filing of returns. Others fear that they will have to pay a large amount to CRA, which they cannot afford, so they think if they do not file their taxes it will buy them the time to come up with the money. Still others just find tax filing overwhelming – all the paper they do not understand or have misplaced…. There are a number of reasons people don’t file and some are deeply psychological.

In the case of Hazel McCallion’s son, a real estate agent, he allegedly failed to file tax returns for 9 years, leading to at least 50 charges by CRA. Late filing can quickly become the crime of tax evasion and common people are prosecuted regularly by CRA.

While we cannot speak specifically to Mr. McCallion’s case, which has yet to make its way through the courts, the real estate industry and real estate agents are certainly one group commonly targeted by CRA. It is an industry that alternates between feast or famine – yet the agent’s personal expenses just go on every day. Also, it is an industry where one can incur substantial tax deductible expenses.

Getting behind with filing tax returns can have a snowball effect and as each year passes the idea of filing those late returns and facing the massive tax debt (and penalties) that may ensue becomes a scarier prospect.

The good news is that you can get caught up without all the pain of penalties and interest.  Often with reasonable repayment terms and no criminal prosecution and public humiliation.

Has the CRA requested that you file returns for the tax year(s) in question? If yes, proceed to the next paragraph. If they have not yet contacted you to file, you may be able to file your late tax returns under the Voluntary Disclosure Program. You will have only one shot to make a successful application under this program and cannot afford to make a mistake with this. CRA can agree to accept your late returns and not assess penalties, interest or prosecute you for tax evasion.

If they have demanded that you file, then you must file. If you do not, CRA will likely at some point either notionally assess you (estimate what you earned and will owe and assess you for taxes based on these estimates) or prosecute you for tax evasion. It is not illegal to owe money to CRA. It is illegal to fail to file your returns. If notionally assessed, refile your returns to ensure that the tax year in question is reflecting accurate numbers. Once you file your late returns you will later receive an assessment from CRA. Once you receive your assessment, pay attention to penalties and interest that are charged and the types of penalties. Even if you filed your return voluntarily you can still file an Objection to CRA’s assessment of penalties. In the case of gross negligence penalties, CRA can assess them but we have had a lot of success in having them reduced or removed through an Objection because once the Objection has been filed it is the burden of CRA to prove gross negligence which is difficult for them to do when they are trying to argue with experience greater than their own – please see an expert in this field – and preferably someone who has worked at CRA in a senior role.

Even if you are fighting penalties – once you have an idea of what you will owe the next thing to do is look at strategies to deal with the tax debt. This may mean pursuing financing to pay the debt, making a payment plan with CRA or exploring other legal options to come to an arrangement that you can live with and that CRA will accept. Also, make sure that you are exploring other avenues to mitigate penalties and interest, such as the taxpayer relief program. We never advise trying to directly negotiate with CRA – this is best left to experienced tax professionals.

In the case of Mayor McCallion’s son – the consequences for the late filing could be a maximum fine of $25,000.00 and 12 months in jail for EACH count filed by the Minister.

You can read the full National Post article here: http://news.nationalpost.com/2013/12/20/peter-mccallion/?utm_source=dlvr.it&utm_medium=twitter.

For more about late filing and dealing with penalties and interest, please contact Tax Solutions Canada today at 1-888-868-1400.

Taxpayer Relief: No Tax Relief for Years Older Than 10 Years? The Court Doesn’t Think So

The taxpayer relief program enables you to apply for relief of interest and penalties in relation to a tax debt. When applying for taxpayer relief it is solely at the discretion of CRA to grant or reject your application. CRA can either cancel all of the penalties associated to a tax debt or eliminate part of the penalties.

CRA will consider a taxpayer relief application where some extraordinary circumstance led to the tax debt or inability to pay the tax debt. Some examples of grounds for taxpayer relief consideration include:

•    Medical problem – you or an immediate family member
•    Death – immediate family member
•    Extreme financial hardship
•    Error on the part of CRA

While the above are some common examples – CRA will consider any taxpayer relief application that reaches the threshold of an extraordinary circumstance.

Historically you could not apply for taxpayer relief on tax years older than 10 years. So, for example, in theory, if the year is 2014, you could apply for taxpayer relief for tax years backward to 2004.

This was until the Bozzer Case was decided. In December of 2006, Mr. Bozzer applied for taxpayer relief asking that CRA consider cancelling the interest that had accumulated on his tax debt. CRA rejected this application stating that the tax years in question were 1989 and 1990, that is, tax years older than the 10 year limitation.

Mr. Bozzer subsequently applied for a second review of the decision which was also rejected and a judicial review of the matter which was dismissed.

Mr. Bozzer went all the way to the Federal Court of Appeal where he argued that the 10 year time
limitation could extend 10 years backward from the date of the application for taxpayer relief but for the interest relief to be applied only the interest that had occurred in the past 10 years.

Tax years – 1989 and 1990

According to a recent CCH article the Federal Court agreed with Bozzer and the decision means that regardless of how old the tax year is, CRA can consider a taxpayer relief application for the preceding 10 tax years, as opposed to saying that an application is automatically rejected if the tax year in question is older than 10 years from the date of the application. You can read the full CCH article here http://www.cch.ca/newsletters/TaxAccounting/October2011/index.htm.

As it relates to taxpayer relief applications – time is of the essence. The longer you wait to make your application the more you stand to lose, including also asking for relief of penalties. The sooner you file your relief application the better.

For more information on filing a taxpayer relief application, even if the tax years in question are more than 10 years ago, please call Tax Solutions Canada today at 1-888-868-1400.

4 Pics One Word – Also Means: To Be Successful in a Dispute Against CRA

Anytime a taxpayer has a dispute with CRA, there is huge financial benefit to _ _ _. Do you know the answer to this puzzle? Hint: The answer is only 3 letters.

  

Dealing with a tax problem? Want to win a dispute against CRA? We can help. Call Tax Solutions Canada today at 1-888-868-1400.

CRA News 2014: Change to the Voluntary Disclosure Program

Calgary Tax law firm Moodys Gartner Tax Law LLP released an interesting article that we thought was worth sharing and a blog: Ten-Year Limitation Period for Tax Debts Arising Prior to 2004. The topic deals with a change to the Voluntary Disclosure program as it relates to time limitations.

The article states: “As of March 4, 2014, taxpayers with tax debts that arose prior to March 4, 2004 may find relief in the 10-year limitation period on collection provided by subsection 222(4) of the Income Tax Act. This relief may be of particular interest to taxpayers who are considering voluntary disclosures of unreported income beyond the 10-year period for which relief from penalties and interest can be granted by the minister pursuant to subsection 220(3.1).”

You can read the complete article here: http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&ved=0CB0QFjAA&url=http%3A%2F%2Fwww.moodysgartner.com%2Fdownloads%2Ftax-for-the-owner-manager.pdf&ei=bMINVImhNc2kyATBs4GoDA&usg=AFQjCNGJZMUqdaGzroUGd8pZOvscbr3IcA&bvm=bv.74649129,d.aWw 

For more about the Voluntary Disclosure Program please call Tax Solutions Canada at 1-888-868-1400.