Overview of CRA Penalties and Interest for Income Tax and GST/HST

The Canada Revenue Agency (CRA) has many requirements which all taxpayers (individuals and companies) must abide by.  There are deadlines and due dates for filing income tax and GST/HST returns. There are due dates for payments to the CRA, both for balances owing and for instalments. There is the requirement that all returns must report accurate and complete information. 

Failure to comply with any of these requirements will almost certainly result in penalties and interest assessed, often inflating a tax balance owing to a shockingly increased amount.

For income tax returns, possible CRA interest and penalties include:

Interest: If you have an unpaid balance, you will be charged compound daily interest. You will also be charged interest on any penalties charged.  The rate of interest charged by the CRA can change every three months.  Interest rates are published on the CRA’s website.

Late-filing penalty: If you owe tax and do not file your return on time, you will be charged a late-filing penalty. Currently, the penalty is 5% of the balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.  If you have repeatedly filed late, the late-filing penalty may increase to 10% of your balance owing, plus 2% of your balance owing for each full month your return is late, to a maximum of 20 months.

Repeated failure to report income penalty: If you fail to report an amount on your return (whether intentionally or in error), and you also failed to report an amount in any of the previous three years’ returns, you may have to pay a federal and provincial/territorial repeated failure to report income penalty. The federal and provincial/territorial penalties are each 10% of the amount that you failed to report on your current return.

False statements or omissions penalty: If the CRA believes you were negligent, or knowingly made a false statement or omission on your tax return, you may be charged a penalty equal to the greater of:

• $100; and
• 50% of the understated tax and/or the overstated credits related to the false statement or omission.

For GST/HST returns, the CRA charges interest on:

• any overdue balance owing on a return;
• late or insufficient instalment payments; and
• any other overdue GST/HST amount that you have to remit to the Receiver General

For GST/HST returns, the CRA has a number of different penalties that may be charged for a variety of circumstances, including:

•   Failure to file (for any return with a balance owing, which is filed late)
•  Failure to file after receiving a Demand to File
•   Failure to file electronicall
•   Failure to accurately report information

     There are instances where taxpayers may qualify to have penalties and interest reduced, or completely eliminated by the CRA.  

     Speak with a qualified professional at Tax Solutions Canada to learn more: 1-888-868-1400.

GLGI Tax Ruling - What This Means to You

Two weeks ago, the first GLGI test case was decided in court, and the decision has been cited as a devastating loss for GLGI clients. In the case of Mariano v. Her Majesty the Queen, Justice F.J. Pizzitelli found that participants did not ‘have the intent to donate’ and thus were participating in the program solely for personal gain. This means, in this case at least, that any charitable donations claimed through the GLGI program are null and void, and any monies granted by a Canada Revenue Agency (CRA) tax credit are now required to be repaid, in full, with interest and penalties.

For any individuals who have been awaiting this judgement, the ruling is most unwelcome, and has led many to conclude that all further cases will mirror Mariano v. Her Majesty the Queen. An Appeal must be filed by November 19^th, but with the Mariano ruling, a favourable outcome is unlikely.

If you participated in the GLGI program and chose to wait to hear the test case outcomes, rather than accepting CRA’s now defunct offer, you may be facing a substantial tax debt, coupled with penalties and interest. With the court’s approval, CRA will be gunning for you, putting their full weight behind any and all enforcement action.

What kind of enforcement action are we talking about? The options range from a frozen bank account to a wage garnishment to a property lien, all of which are achieved without a court order and once leveraged can be incredibly difficult to remove.

This is not an attempt to scare you, but rather to illustrate the depth to which CRA will go to regain what is believed to be owed - and with this test case ruling, that stands to be a considerable sum.

Perhaps you are considering calling CRA directly to set up a repayment plan. We strongly caution you if you choose to take this route. The goal of CRA agents is to retrieve funds owed, as soon as possible, not over a 12 or 24 month term. As a result, CRA negotiations hinge more on gathering as much information from you, information that will later be used against you, and hitting you with monthly repayment terms that are often difficult to meet. CRA wants their money, it really is as simple as that.

If the most recent GLGI tax ruling has led to sleepless nights, we sympathize. We know that this has been a long an arduous process, filled with uncertainty. Our tax specialists - including former senior CRA agents - can help walk you through your options and get the matter settled before you lose any more sleep.

Call us today for a free consultation: 1-888-868-1400.

Notice of Objection Procedures and Deadlines

Do you think the Canada Revenue Agency (CRA) treats you fairly? No? Well according to the CRA, all taxpayers are entitled to fair treatment. In fact, this right to fair treatment is enshrined in the “TaxpayerBill of Rights”.  

One of the best things you can do if you feel that you aren’t being treated fairly is to file a Notice of Objection (NOO). 

Why should I file a Notice of Objection? If you don’t understand or agree with your income tax or GST/HST assessment, this is your best opportunity to formally dispute the CRA’s position and make your voice heard.

When should I file a Notice of Objection? The deadline to file an objection is the later of the following:

                     i.        One year after the date of the return’s filing deadline

                    ii.        90 days after the day the notice of (re)assessment

Are you late?  Don’t lose hope if you are beyond these deadlines. The CRA may grant you an extension to file your Objection under certain conditions:

• the application is being made within one year after the expiration of the time limit for objecting;
• the person demonstrates that, within the time limit for objecting, the person was unable to act or to have someone else act in the person's name, or the person had a bona fide intention to object;
• the person demonstrates that, given the reasons set out in the application and the circumstances of the case, it is just and equitable to grant the application; and
• the person demonstrates that the application was made as soon as circumstances permitted it to be made.

Who can file a Notice of Objection? You may file the Objection yourself or you may hire a tax professional to do it on your behalf. 

How can I file the Notice of Objection? A Notice of Objection can be submitted online, filled out in hard copy and mailed or faxed to the Chief of Appeals.  While there is a specific form called the T400A, you can simply write a letter objecting to your assessment as well.

What happens after I file my Notice of Objection? The CRA will send you a letter acknowledging receipt of your objection and will advise you that someone called an “Appeals officer” will be contacting you as soon as possible (currently the wait is around 6 to 9 months). Once you are contacted, you begin the process of resolving your dispute with the Appeals officer by exchanging facts, reasons and arguments. The Appeals officer will then review your position and determine the correct assessing position. You are then notified of the decision in writing by the Appeals officer.

When properly written and presented, filing a Notice of Objection is a powerful tool when you want to ensure your fair treatment by the CRA.  If you want to protect your rights and be treated fairly by filing a NOO, call Tax Solutions Canada today at 1-888-868-1400.

GLGI 2015 Update: Devastating Loss in Court for GLGI

On October 19, 2015, Justice Pizzitelli issued his ruling in the long awaited GLGI test case of Marianov. Her Majesty the Queen.   As I wrote about in a previous blog, the outcome was the worst case scenario for clients of GLGI.   Justice Pizzitelli’s stinging rebuke of the GLGI program is captured in his case conclusion as follows:

“Having regard to all the foregoing, I find that the Appellants did not have the donative intent to make any of their gifts, did not own or transfer the property that is the subject matter of the gift in kind, i.e. the Licences, and that the Program was a sham; ..…..Accordingly, the appeals are dismissed, with costs to the Respondent.”

There you have it.  GLGI was found to be a sham, therefore no portion of your donation – not even the initial cash outlay – will be allowed.  A complete victory for the Canada Revenue Agency (CRA).

Those of you who took my earlier advice and signed the CRA’s offer of settlement prior to this decision can consider yourselves extremely lucky.  Not only did you get the cash portion of your donation allowed, you also received thousands of dollars in immediate interest relief!  

GLGI has until November 19, 2015 to file an Appeal to the Federal Court of Canada.  Frankly, given the clear and complete victory by the CRA in the Tax Court of Canada case last week, an Appeal, in my opinion, would be unlikely to succeed.  The reality is that the large tax debts owed by GLGI clients are not going away and legal action by the CRA looms larger and larger by the day.  

What can you do? Give our team of tax specialists - which include former senior CRA staff – a call right away.  We will stand between you and the CRA to protect you from legal action while we negotiate a fair repayment plan based on your ability to pay.  We can also discuss how we can get reduce your CRA debt by thousands of dollars through a reduction in interest charges. 

Call now!  We offer a free, no risk consultation where we will discuss your individual circumstances and outline the best options available to assist you. 1-888-868-1400.

When the Taxman Becomes Abusive: CRA Complaints

Dealing with tax problems can be stressful. Trying to communicate, negotiate or resolve problems with an immense bureaucratic organization can also be stressful.  Put those two challenges together, and for many individuals dealing with the Canada Revenue Agency (CRA) can leave them frustrated and mistreated, while their problems remain unresolved.

The CRA has its own Taxpayer Bill of Rights, which outlines in detail the fair treatment and professional service that each taxpayer is entitled to receive.  This Bill can be found on CRA’s website, at http://www.cra-arc.gc.ca/E/pub/tg/rc4417/rc4417-13e.html. Right #5 clearly states:  “You have the right to be treated professionally, courteously, and fairly”.   CRA’s policy goes on to state: “You can expect we will treat you courteously and with consideration at all times, including when we ask for information or arrange interviews and audits. Integrity, professionalism, respect, and co-operation are our core values and reflect our commitment to giving you the best possible service. You can also expect us to listen to you and to take your circumstances into account, which is part of the process of making impartial decisions according to the law. We will then explain our decision and inform you about your rights and obligations regarding that decision”.

While this is all well and good, the reality many taxpayers encounter includes dealing with CRA agents who are difficult or impossible to contact, and aggressive or belligerent officers who won’t listen to their concerns and who resort to threats or intimidation.

If you feel your service rights were not respected by the CRA, there are three steps that you are encouraged to follow as a means to resolving your service-related issue:

- Try to resolve the service-related issue directly with the CRA employee with whom you are dealing.

- If a resolution is not possible, you can ask to speak with the agent’s supervisor.  Be aware that any agent who refuses your request to speak with their supervisor is acting outside of CRA service standards.

- You can file a formal complaint with the CRA’s Service Complaints, using their Form RC193, Service-Related Complaint. The Taxpayer Bill of Rights clearly states in Right #16: You have the right to lodge a service complaint and request a formal review without fear of reprisal. The RC193 form can be obtained online at www.cra.gc.ca/forms. There is no fee to file a service complaint. 

Once a service complaint is filed, a complaints officer will be assigned to the case and will investigate the complaint. Your complaint will be reviewed to resolve it in a fair and timely manner. You will be kept informed by the officer of the status of your complaint and they will ensure that you receive the outcome by telephone or mail.

As a final recourse, you can contact the Office of the Taxpayers' Ombudsman if your complaint has still not been handled to your satisfaction. Once CRA’s complaint resolution process is complete, the Taxpayers' Ombudsman can be contacted to give a final and impartial review of your complaint.

Feeling mistreated, discouraged or stressed because of your dealing with the CRA? Tax Solutions Canada can help. Call us today at 1 888-868-1400.

Is it Worth Investing Your Time and Effort into a Taxpayer Relief Application?

Tax debts typically come with serious penalty and interest charges. Fortunately, as its name indicates, the Taxpayer Relief program (formerly known as fairness) allows taxpayers to apply for relief from penalty and interest charges. Individuals and businesses can request remission of penalties, arrears interest, and/or waiver of the accruing interest.

The legislation also enables taxpayers to request acceptance of late, amended, or revoked elections; as well as make requests for refunds or reductions in amounts payable that are beyond the normal reassessment period.

Getting relief from penalties and or interest, or acceptance of a statute barred reduction can often save folks huge money and make a life changing difference.

How to apply for Taxpayer Relief?

Filing a Taxpayer Relief application requires the completion of an RC4288 form (available on the CRA’s website) or submission of a letter outlining the specifics of the request. The Agency has the discretion to grant relief from penalty and/or interest when the following types of situation prevent a taxpayer from meeting their tax obligations:

·         extraordinary circumstances;

·         actions of the CRA;

·         inability to pay or financial hardship;

·         other circumstances

If filed using the correct form, with sufficient supporting documentation, a response from a Taxpayer Relief Officer can take anywhere from 4 months to 1 year or more depending  on the program’s workload. The decision-making criteria used for determining who will be granted relief are:

·         taxpayer’s history of compliance;

·         whether the taxpayer knowingly allowed interest to accrue on a debt;

·         whether the taxpayer exercised reasonable care and was not negligent in conducting their affairs; and

·         whether or not the taxpayer acted quickly to remedy any delay or omission.

Taxpayers often request relief on the basis that “I cannot afford to pay my taxes, so I did not file my tax return, and then the CRA assessed me big tax debt, I can ask for relief because I had no money.” Big mistake. Failure to file a tax return is a criminal offence which can result in prosecution, so you should always file. Before an application is made to the Taxpayer Relief program, all outstanding returns must be filed up to date, otherwise the CRA will not even consider the application.

If you’re thinking that the Taxpayer Relief Provisions may be an option for you, do some research or speak to a tax solutions professional about how to construct the best argument for relief. And you should always make arrangements to pay the penalties and interest in any case in order to stop the interest clock from ticking should the request be denied. However, if you are not satisfied with the Officer’s decision, you may apply for a second-level review and there is an option for judicial review if the second-level review is unfavourable.

The Taxpayer Relief program is a great option, if you qualify, to reduce penalties and interest. Ready to file? Call Tax Solutions Canada today at 1 888-868-1400.

Back to Basics: An Overview of Remission Orders

Taxpayers who have exhausted all available avenues of relief from a tax liability potentially have one last remedy for hope: an application for a remission order. Today’s blog is dedicated to helping you figure out how to navigate and file an application.

What is a Remission Order? A remission order is a remedy available under subsection 23(2) of the Financial Administration Act that provides the Governor in Council the power to grant relief from tax, or penalty (including any interest) where the collection of the tax or the enforcement of the penalty is unreasonable, unjust or contrary to public interest. Unlike the Taxpayer Relief Program, remission orders do not have a limitation on which tax years they can grant relief.

Process for Filing an Application
A remission order must be recommended to the Governor in Council by the Minister of National Revenue who heads the Canada Revenue Agency (CRA). As a result, in order to start the process, taxpayers must file an application for a remission order with the CRA’s Remissions and Delegations Section of the Legislative Policy and Regulatory Affairs Branch of the CRA. Once an application is submitted, a CRA officer reviews the case, makes a decision and then informs the applicant of the outcome.

In general, remission orders will only be recommended by the Minister once all available avenues have been exhausted including objections, appeals and taxpayer relief requests. In addition, the application must demonstrate that a remission order is necessary because the taxpayer meets one of the following circumstances:

·         unintended results of the legislation;
·         financial setback coupled with extenuating factors;
·         incorrect action or advice by CRA officials; or
·         extreme hardship.

Appeals
Should the applicant disagree with the decision of the CRA, they may request a judicial review of that decision in the Federal Court – a process akin to an appeal. The court analyzes the facts of the case determines whether the CRA exercised its discretion properly. Should the court decide in the taxpayer’s favor, the matter is referred back to the CRA for reconsideration.

Conclusion
Remission orders are complicated and a taxpayer’s final chance at relief from a tax debt. Taxpayers are encouraged to seek professional advice prior to applying for a remission order. The professionals at Tax Solutions Canada have significant experience in preparing remission order applications and can provide a free consultation to discuss your specific circumstances and eligibility.

Want to know more or need assistance? Please Contact Tax Solutions Canada today at 1-888-868-1400.

The GST/HST NRRP Rebate for Residential Rental Property

Taxpayers who purchase a new condo or home to earn rental income may qualify for a partial rebate of the GST/HST paid on the purchase through the GST/HST New Residential Rental Property Rebate (NRRP).

Similar to the New Housing Rebate, the NRRP offers landlords a partial recovery of federal and provincial sales tax on new residential rental properties. Typically, new home buyers in Ontario are charged 13% HST on their purchase, consisting of a 5% federal tax and 8% provincial tax. The NRRP refunds 36% of the federal portion of the HST (up to a maximum of $6,300) and 75% of the Ontario portion of the HST (up to $24,000). Other provinces can also expect similar treatment for the federal portion of the tax paid on new home purchases. Provincial rebate rules vary from province to province but usually provide similar rebate percentages as well.

Eligibility

You qualify for the NRRP if you meet any of the following criteria:

• You paid GST/HST when you bought a new or significantly renovated residential building, an interest in the complex, and the complex or complex units leased as a residential property;

• You're a builder and funded the GST/HST on the self-supply of a residential building, or you paid for an addition to a residential building with multiple units leased as a residential property;

• As a builder, you funded the GST/HST on the self-supply of a residential building or paid for an addition to a residential building with multiple units, and were involved in a sale that is tax exempt and the tax-empty multi-year lease of land is covered by a written contract;

• You're a corporation that looks after co-operative dwellings and funded the GST/HST on the purchase of a newly built or significantly renovated residential building, or you look after the builder's interest in the building and rent units for residential use for at least a year;

• You're a co-operative dwelling and funded the GST/HST on the self-supply of a unit zoned as residential or for the addition to a residential building with multiple units, and you rent units for residential uses for at least a year; or

• You funded the GST/HST on the self-supply of land that you also rent to someone else for at least a year to use as a residence.

A key requirement of the NRRP is that landlords must ensure their property is leased for a minimum of at least one year before disposition. The rebate may have to be repaid if the property is sold within one year after it is first occupied as a place of residence and the purchaser is not buying the unit as a primary place of residence for themselves or a qualifying relation.

It is also important to note that unlike the New Housing Rebate, the NRRP is never adjusted into the purchase price of the property by the builder of a new home. The NRRP requires a separate application to the Canada Revenue Agency and usually takes anywhere from six to eight weeks to process.

Contact the professionals at Tax Solutions Canada for a free consultation on how to make the NRRP work for you. Call us today at 1 888-868-1400.

5 Canadian Tax Tips from James Bell Former CRA Tax Auditor

Hello. My name is James Bell. I am the Director, Tax Solutions at Tax Solutions Canada, and I help my clients when they come to me with their Canada Revenue Agency (CRA) problems.  Why do they come to me?  Well, they tell me it’s because of my extensive CRA experience. 

You see, I spent over 22 years at CRA and worked in areas such as collections, audit, appeals, tax avoidance and criminal enforcement. During my time as a CRA tax auditor, collector and appeals officer, I certainly learned a thing or two about taxes, learning about the CRA’s best programs and more importantly how to successfully deal with an organization as large and complex as the CRA.   

Instead of the usual type of technical tax advice you can get from any number of websites, I’d like to share some practical Canadian tax tips with you based on my years working for the CRA and also on behalf of my clients: 

1.     JUST FILE!  I’ve run into many people who believe that since they will owe money once they file their return that they are simply better off not filing at all.  Wrong!  To highlight this point, here is a snippet from a recent article in the Globe and Mail where I touched on this topic: “Owing money to the CRA is not a criminal offence, but not filing a return is… Not only will filing on time keep you on the right side of the law, but you’ll avoid onerous interest and late fees.” If you think the CRA just goes after “the other guy”, think again and get that return filed before your money problem turns into a criminal problem.

2.     CRA PAYMENT PLANS?  If you owe CRA and can’t pay all at once, do you know that they will accept payment arrangements under certain circumstances?  It’s true! While CRA doesn’t make it a point to advertise that they will become a long-term creditor, they will do so provided you can’t otherwise borrow the money to pay off your CRA debt.  Once you’ve ruled out all the financing options, you then have to establish what your “ability to pay” is on a monthly basis and the CRA will base your payments on this amount. The key is being proactive and contacting the CRA about your debt before they contact you.

3.     DIVIDENDS = HEADACHE?  Many people already know that if you own a company, you can be assessed personally through the Director’s Liability provisions of the Income Tax Act and/or the Excise Tax Act for the company’s unpaid GST/HST or source deductions.   However, did you know that you could be on the hook for the company’s regular business tax as well?  It could happen if you paid yourself dividends. In that case, the CRA will likely assess you personally under the provisions of section 160 of the Income Tax Act. While dividends enjoy favourable tax treatment, they can also create a tax headache if your company falters.

4.     IF YOU LOVE YOUR SPOUSE, HOLD THE GIFTS!  I talk to people every day who owe the CRA a lot of money and believe that if they simply sign over their half of the house to their spouse, then the CRA is out of luck. Wrong! If you owe money from your 2010 tax year and in 2012 sign over your half of the home to your spouse for less than fair market value, then guess what?  You have just made your spouse a target for the CRA.  Your spouse may now have to pay the taxes you owe due to the very powerful section 160 of the Income Tax Act.   Save the gift giving until after you’ve paid off your CRA debt!

5.     CRA’S CURE FOR INSOMNIA:  VDP If you are thinking of moving to Bolivia because you have either not filed tax returns for a long time or have filed but under-reported your income – don’t pack those bags just yet! The CRA’s best-kept secret is their Voluntary Disclosures Program (VDP). If CRA hasn’t contacted you about your unfiled returns or unreported income, then coming forward and filing a VDP application is the way to go!  In my opinion, it is CRA’s best program and has saved my clients thousands of dollars in interest and penalties.  Best of all? CRA gives up their right of prosecution! Saving big money and avoiding criminal charges? Talk about a good night’s sleep. 

Don’t turn to just anyone to solve your tax problem.  Call Tax Solutions Canada today for expert advice from their ex-CRA and tax specialists: 1-888-868-1400 FREE.

The Grim Reaper AKA CRA Tax Auditor

Receiving a call or a letter from a CRA auditor is not fun. It is one of the biggest fears that people have. The CRA counts on you being afraid to keep you compliant with various tax legislations.

One of the most common questions that people ask is “why the CRA chose me?”, and one of the most common answers you may expect from an auditor is that it was based on “random selection”.  Is it really random? And you are just lucky enough to be “the one”? Probably not.  The CRA selects its audit targets based on a number of criteria. There are many factors that can increase your chances of getting a CRA audit.

1.    You are self-employed – CRA audits self-employed taxpayers far more frequently than those who receive straight T4 income. If you are in a cash business such as the retail and construction sector, or if you operate a restaurant or a hair salon, your chances of being selected for an audit are quite high. Sometimes CRA selects a specific target group, such as real estate agents, or health care professionals, since these self-employed sectors are considered as “high risk”.

2.    You claimed higher-than-average deductions – CRA compiles information for the same industry over multiple years. If your write-offs of the gifts, promotions, and meals and entertainment expenses exceed the statistical norm for the same industry, the CRA may want to take a closer look. Be sure to keep all your supporting documentation.

3.    You claimed continuous losses over years – It is normal to incur some losses during the early stages of your business as you start up. But if you have claimed losses for several years already and you are still operating at a loss, CRA may wonder why a reasonably prudent person allows himself to run the business at loss for many years in a row rather than close it. Is there an intent for profit, or is it just a hobby? The CRA expects you to make more income over time while you trim your losses.

4.    You split your income with family members – Income splitting is a popular mechanism for reducing tax because the person you split your income with is usually taxed at a lower tax rate. CRA is very sensitive when you pay your spouse or minor children money that is not reasonable and fair. Be sure to let your family members provide some services to your business and pay them the fair market rate as if you hired an unrelated person for the same services.

5.    You transferred large funds from your home country - Since 2013, information on international wire transfers of above $10,000 will be automatically sent to CRA. If you have funds or properties where the cost is over $100,000 in your home country, you are required to disclose the details using the form T1135 (foreign income verification statement).If you have not disclose this information, and  you transfer the funds to Canada, CRA will mostly likely want to challenge you the source of the funds.

6.    You amended your tax return after filing – If you made a mistake or realized an omission after you filed the income tax or GST/HST return, you may want to amend it. Even though it is necessary and desirable to do the amendment, CRA may wonder if there are any other mistakes or omissions on the return, therefore you are high on their radar screen for an audit.

When a CRA tax auditor comes calling, it is usually because of one of the above noted factors. If you’ve received the call and want to protect yourself, especially if you know that you will owe or are behind, call Tax Solutions Canada today at 1-888-868-1400.

Want to Get Rid of CRA Tax Penalties? Get to Know the Taxpayer Relief Program

Oftentimes our clients find themselves facing tax trouble as a result of circumstances beyond their control. In order to promote fairness and equity in our tax system, the Income Tax Act gives the Canada Revenue Agency (CRA) the discretion to resolve tax issues that arise due to the personal misfortune or circumstances of taxpayers. Administered as Taxpayer Relief Program, CRA has the power to:

1.    Cancel/waive penalties and interest;

2.    Accept late-filed, amended or revoked income tax elections; and

3.    Provide income tax refunds beyond the 3-year period normally allowed (for individuals and testamentary trusts only).

Cancel or waive penalties or interest

The CRA may grant relief from interest and penalties when the following types of situations prevent a taxpayer from meeting their tax obligations:

·         extraordinary circumstances (i.e. natural or man-made disasters, civil disturbances, serious illness or accident, or serious emotional/mental distress)

·         actions of the CRA (i.e. processing delays, incorrect information provided to a taxpayer, or errors in processing);

·         inability to pay or financial hardship; and

·         other circumstances (unique situations not covered by the other categories)

Late, amended, or revoked elections

The Income Tax Act contains many election provisions that give taxpayers the opportunity to select an alternative tax treatment when filing their taxes. However, most election provisions do not permit the taxpayer to file an election beyond its original deadline or to modify or cancel elections that have been filed.

The Taxpayer Relief Program gives CRA the ability to extend the statutory time for filing certain elections or to permit certain elections to be amended or revoked.

Refund or reduce the amount payable beyond the normal three-year period

For individuals (other than a trust) and testamentary trusts, the Income Tax Act sets a three-year limitation period from the end of the tax year to file an income tax return to claim a tax refund. It also sets a three-year limitation period from the date of the original Notice of Assessment to request an adjustment to an assessment issued for a previous tax year.

The Taxpayer Relief Program gives CRA the ability to relieve the limitations period and, in certain circumstances, to accept late requests to give the individual or testamentary trust a refund or reduction in tax.

It is important to note that there is a 10-year time limit on the taxpayer relief provisions.  This means that an application for relief filed in 2015 can only deal with issues related to a taxpayer’s 2005 and later years.

How to make a relief request: If you do find yourself in one of the situations above and feel that you are within the taxpayer relief provisions or would like more information, please feel free to contact Tax Solutions Canada for further guidance and we will be happy to assist you: 1-888-868-1400.

How to Get a CRA Wage Garnishment Removed or Reduced

Imagine that you owe the Canada Revenue Agency (CRA) a lot of money (or maybe you don’t have to imagine) and you’ve been ignoring their collection letters and now the phone calls have begun. You decide to ignore those calls too. Guess what the CRA is going to do next and without any further warning?  That’s right…a CRA wage garnishment!

A CRA wage garnishment is one of the most common collection tools that CRA will use to enforce payment of your outstanding debt. CRA does not need to go to court and get permission before issuing this powerful document. A CRA wage garnishment can be issued at any time once your debt becomes legally collectible (i.e. if you haven’t filed a Notice of Objection to dispute the amount). 

CRA will usually give you one written warning that legal action will commence if they do not receive payment in full within 14 days. Once that deadline passes, all bets are off in terms of what CRA will do next, but whatever they do, it won’t be pleasant.

What does a CRA wage garnishment mean for you? If you are an employee, CRA will issue this garnishment to your employer, directing them to take up to 50% of each of your pay cheques and send it to CRA. Once the garnishment is received, your employer has no choice but to do as CRA commands.  In addition to the financial pain that a wage garnishment will inflict on you, what about the pain of embarrassment?  Now your employer has been made fully aware of all your tax problems with the CRA.   Word will often start to spread throughout your company, and soon most of your colleagues become aware of your CRA problems. 

The best thing to do is to seek help before the problem reaches the point of a garnishment. However, don’t despair if the garnishment has already been issued! There is still an excellent chance to get it reduced or better yet removed all together!  Make no mistake, once CRA has the garnishment in place, they are now in a position of strength and have you at a distinct disadvantage. 

This is where knowing how to properly negotiate with the CRA collector comes in handy. The collector is playing a game – a very serious one – but you don’t know the rules. You do have rights – and CRA cannot keep legal action in place that causes you “undue hardship”.  The key is that you have to prove to CRA what your ability to pay is toward this debt.  If you can only afford $500/month and the garnishment is taking $1,000/month from you, then they are violating their own collection policies!   A voluntary payment arrangement is the way forward with the CRA, but that is easier said than done. Dealing with a CRA collector is not a “do-it-yourself” project.  

Don’t turn to just anyone to solve your tax problem. Call Tax Solutions Canada today for expert advice from their ex-CRA and tax specialists: 1-888-868-1400 FREE.

An Overview of the GST/HST New Housing Rebate

Taxpayers who purchase a new home may qualify for a partial rebate of the GST/HST paid on the purchase.

The GST/HST New Housing Rebate allows purchasers to partially recover the federal and provincial portion of the sales tax that is paid on the purchase price of a new or substantially renovated home that was purchased with the intention to make it the primary place of residence by the purchaser or a qualifying relation. Typically, the New Housing Rebate is claimed by the builder of a new home on the purchaser’s behalf and adjusted in the final purchase price of the property. In some instances, purchasers may file for the rebate independently.

Similar to the New Housing Rebate, taxpayers purchasing a new condo or home to earn rental income may recover the GST/HST paid on the purchase through the GST/HST New Residential Rental Property Rebate, which offers partial recovery of federal and provincial sales tax on new residential rental properties.

Rebate Amounts

New homebuyers in Ontario are charged 13% HST on their purchase, consisting of a 5% federal tax and 8% provincial tax. The New Housing Rebate essentially refunds 36% of the federal portion of the HST (up to a maximum of $6,300) and 75% of the Ontario portion of the HST (up to $24,000). Similar rebate amounts are available under the New Residential Rental Property Rebate.

Eligibility

You may be eligible for these tax rebates if you’ve done any of the following:

·         Purchased a newly constructed home

·         Purchased a new condo

·         Built a house

·         Contracted someone to build a house

·         Substantially renovated a house or condominium

·         Contracted someone to extensively renovate a home or condo

·         Added a major addition to a home

·         Rebuilt a home that was destroyed by fire

·         Bought shares in a newly constructed cooperative housing project

·         Converted a non-residential property into a home

It is important to note that a key requirement for the New Housing Rebate is that the property must be purchased with the intention that the purchaser (or a qualifying relation) will make it their primary place of residence.

In order to qualify for the New Residential Rental Property Rebate, purchasers must ensure that the property is leased for a minimum of at least one year before disposition. The rebate may have to be repaid if the property is sold within one year after it is first occupied as a place of residence and the purchaser is not buying the unit as a primary place of residence for themselves or a qualifying relation.

Pitfalls and Traps

In recent years, CRA has become increasingly aggressive in auditing New Housing Rebate applications. Quite often, purchasers are reassessed many years after receiving their rebate on the basis that they do not meet the conditions necessary to qualify for the rebate. If they believe that you did not stick to conditions, then penalties can be harsh.

Want to learn more about these rebates and if you qualify? Contact Tax Solutions Canada today by calling 1-888-868-1400.

Trying to Negotiate a CRA Payment Plan with CRA Could Lead to Burns on Your Bank Account

You file your taxes, but cash is tight, so you don’t remit payment.  Time goes by and you still don’t manage to pay. You may occasionally receive a statement of account from the CRA, reminding you of your outstanding balance and indicating the amount of interest that continues to increase your taxes owing. More time passes – maybe as little as 90 days from the date your tax return was assessed, or maybe several months or even years.

And then one day you open a letter from CRA Collections, notifying you that you only have 14 days to pay your debt in full, and to contact CRA Collections. The letter warns you that failure to do so will result in legal action. Receiving this letter means that CRA is no longer willing to wait for you to pay your taxes in your own timeframe, and has assigned a collector to your account whose mandate is to get your account paid NOW. So, what do you do?

If you choose not to respond to this letter, you can expect increasingly unpleasant correspondence from the CRA to follow in due course. You will likely receive a form which confirms that the CRA has certified your tax debt in federal court, which is the official pre-cursor to the CRA proceeding with formal legal action against you. Failure to respond to the CRA at this point will most certainly result in legal action being taken. CRA may issue a Requirement to Pay – to your employer (garnishment of wages), to your bank (to freeze and drain your bank accounts), or even to your customers (forcing your accounts receivable to be paid directly to the CRA). The CRA may also register a lien on your home, or on other property you own.

CRA’s authority to impose collection action on taxpayers is vast. Add to this the fact that while some collectors will treat a taxpayer fairly and respectfully, there are many collections agents who will intimidate, threaten or pressure a taxpayer into a payment arrangement which they actually cannot afford, leaving them in even worse circumstance than before.

The CRA’s own Taxpayer Bill of Rights (found at http://www.cra-arc.gc.ca/E/pub/tg/rc4417/rc4417-13e.html) clearly spells out how taxpayers are entitled to be treated.  However, collectors aren’t actually required to inform you of those rights - it’s up to you or your authorized representative to know the boundaries that CRA must respect, even while trying to collect money from you.  Being uninformed puts you in an extremely vulnerable position when negotiating with the CRA - know your rights!

Call Tax Solutions Canada before you call CRA. We can help inform you about your rights as a taxpayer and protect you through the negotiation process. 1-888-868-1400.