Avoiding Aggressive Canadian Tax Planning Professionals and How to Identify Them

Far too often, people come to us upset about a CRA problem that they feel their accountant either caused or contributed to. These taxpayers are experiencing a multitude of emotions – fear of what may happen, anger, frustration and confusion as to what they can do.  Some accountants are much more aggressive than others, so it is important to be on your ‘A’ game to spot an aggressive accountant.

Firstly, some disclosure. This writer is not an accountant - his company does not do any accounting. He knows first-hand about these matters because he spends a lot of time cleaning up the mess that aggressive accountants create.

When you meet with your accountant and they review your business income and expenses they should be getting facts from you to establish, for example, what percentage of your vehicle use is business related. A common abuse is when an accountant suggests that a taxpayer can claim a higher percentage of use of the home office, vehicle expenses, entertainment, etc., based on what they “get through for other clients”.  If an accountant is suggesting anything like this, our only suggestion is to run!

The best three ways to spot an over-aggressive accountant:

1. Research them and check for online reviews.
2. Listen to them and the advice they give – if there is anything questionable, they start talking about how you over-leverage expenses or tax shelters for example, this is a big red flag.
3. Pay attention – at the end of the day, you have to sign off on your returns – review them until you understand them. If you do not understand, make sure that every section is explained to you in a manner you can understand before you sign. If your accountant cannot take the time to explain it to you (or is incapable of that) you should question if you have the right answer.

The issue is that when you file your returns, you are responsible for whatever is in (or left off) the return. Sometimes we see individuals and businesses who want CRA to go after their accountant. It just does not work like that. They will come after you and then if enough people complain about the accountant, they may independently prosecute the accountant later.

A common flat out tax scam is accountants who will advise you to declare fictitious self-employed income to be able to write-off business expenses. This practice is illegal and there are actual examples of individuals and accountants who have been prosecuted for this on CRA’s website: http://www.cra-arc.gc.ca/nwsrm/cnvctns/menu-eng.html.

Be vigilant. If you think there is a problem in a past tax return, fix it. If CRA is unaware of it you can declare the mistake under the VDP program and avoid interest and penalties.

It is like a domino effect. It only takes one of these accountant’s clients to get on CRA’s radar and CRA will start auditing all that accountant’s clients.

If you are concerned about questionable tax practices on behalf of your accountant, remember – it is your responsibility to be tax compliant, so take the necessary steps to ensure you are protected!

For more assistance please contact Tax Solutions Canada today at 1.888.868.1400.