GLGI – Global Learning and Gifting Initiative 2015 Update

We last wrote about the Global Learning and Gifting Initiative in December 2014 - you can check that blog out here (http://taxsolutionscanada.com/legitimate-donation-or-fools-gold-the-current-state-of-the-global-learning-and-gifting-initiative-glgi/), and nothing new has occurred since we wrote – most people’s cases remain pending and objections are being held in abeyance while the test cases are plodding through the court system.

Canada Revenue Agency (CRA) has sent settlement offers to thousands of taxpayers who are involved with GLGI. 

In simple terms, CRA’s offer calls for most GLGI-based tax reductions you enjoyed to be repaid. CRA has also offered to drop the interest claim for the period from the date of their reassessment until the date the offer is processed.

Many GLGI participants have contacted us asking if the offer makes sense for them and what will happen if they cannot repay the full amount immediately.

Nobody knows how the Global Learning and Gifting Initiative court decisions will actually be decided.  If you do not accept the surprisingly generous CRA offer and CRA wins the case, you will be facing a tax debt significantly bigger than the settlement amount.  It may be possible to fight the interest portion of this much larger amount but that is what CRA is offering you now. 

So, the two main reasons we are seeing that some GLGI participants do not want to accept the offer are:

1. They are gambling that the test cases will somehow win against CRA.
2. They cannot afford to repay the amount.

To make a proper decision, each person’s situation needs to be evaluated on its own merits by an independent professional - one with balanced experience in both obtaining fair repayment terms and understanding the taxpayer’s financial and tax position.

Fortunately, we have been able to set many of these individuals on the right path. To be open, in most cases we have advised that the offer should be accepted immediately.  We have then helped the taxpayer obtain fair and reasonable payment terms with CRA while protecting the taxpayer from heavy handed CRA collection action.

The GLGI waters have proven to be very difficult to navigate, and the complexities make approaching the situation appropriately incredibly important.

At Tax Solutions Canada, we can help you better understand the language used by CRA and what it will mean to deal with their requirements when it comes to GLGI cases. Call us today at 1-888-868-1400. 

Missing Another Income Tax Deadline Just Doesn’t Make Dollars or Cents

The deadline to file your 2014 income taxes is fast approaching. People miss tax filing deadlines for numerous reasons.  Some of the most common ones we see are:

• I did not know there was a tax filing deadline.
• I did not have the money to pay the taxes and was going to file as soon as I had the money.
• I was too busy running my business and forgot.
• I cannot afford an accountant.
• I still owe money from last year, etc. and do not want to make the problem worse.
• Some of my friends have not filed in years and have saved thousands in taxes.
• CRA cannot sue you if the tax year is more than three years old – “statute barred”

Some of these reasons are factually incorrect.  Some are figments of the taxpayer’s imagination.

Whatever the reason, the why does not matter to Canada Revenue Agency (CRA) - they only care that you owe.

The consequences for failing to file your income tax return can be harsh, and have frequently ended with individuals facing criminal convictions. Visit the CRA links below and if you are a non-filer please DO something about it before your late filing issue becomes a nightmare:

• http://www.cra-arc.gc.ca/nwsrm/cnvctns/on/on141202-eng.html
•  http://www.cra-arc.gc.ca/nwsrm/cnvctns/on/on140708-eng.html

For those who have not yet been contacted by CRA there is a CRA program, Voluntary Disclosure Program (VDP), to encourage people who have missed tax filings to come clean and avoid penalties and much of the interest. However, access to this program has some very precise hurdles that require experience to navigate.  It is effectively a one-strike-and-you-are-disqualified system (it looks great politically but really they would prefer to get all the interest and principle) and it is easy to make a mistake and miss this once-off opportunity to get the tax house in order.

If you have some very specific reasons for having missed your filing there is another program that CRA has that can also relieve you of some of the interest and penalties. This is called a Taxpayer Relief Application and it too has very precise hurdles in order to be successful. Again, it is best to engage a professional corporation that does this type of work as their main business to ensure you get all the relief you are entitled to.

The penalties for late filing are significant.  The first year you file late, the penalty can reach 17% of the balance owing.  If you file late the next year (or any of the next 3 years), the penalty can rise to a staggering 50% of the balance owing.  The icing on the cake is that these penalties also attract expensive interest charges as well.

The way late filing penalties work is that you pay an immediate penalty of 5% of the taxes, followed by 1% for every month the return remains outstanding, up to a maximum of 12 months or a total of 17% of the balance owing. But wait - if you were late in any of the three previous years, the above penalty doubles to an immediate penalty of 10% plus 2% for every month the return remains outstanding, up to a maximum of 20 months or a total of 50% of the balance owing. As you can see, late filing your returns will quickly push you into a dark hole which will require the services of a tax professional if you ever plan on climbing back out. 

The best thing you can do is get expert advice on your situation and which relief programs you may have access to from a firm which specializes in tax disputes.  Once you know the facts, your taxes will be prepared and filed. Very fair repayment terms will be worked out with CRA by an expert who knows the rules by which CRA collectors are obliged to work (but which rules they do not share which is why the expert firms in this area are staffed by ex-CRA collectors and auditors who know the game!).

Want to stop looking over your shoulder, to avoid aggressive CRA enforcement tactics like frozen bank accounts, garnishments and liens on houses, and potentially even a criminal record? Contact Tax Solutions Canada today - we specialize in tax arrears and can help you get things back under control. Call us today at 1-888-868-1400. 

Toronto Star: Prominent Tax Lawyers’ Law Society Complaints Increase from 6-9

There are usually several sides to every story.  It seems like the Toronto Star reporter really spent a lot of time getting information from the key players in this drama unfolding in Toronto. Check out the following article: http://www.thestar.com/news/gta/2015/02/04/tax-fighter-philippe-dioguardi-has-serious-battles-of-his-own.html.

It is great that we live in a country where our courts get to make the decisions when it may not be all that clear who is right and who is wrong, and that may be just how this particular saga will finally get resolved.

Is this lawyer a hero for challenging (including, it appears, by not complying with) the rules set by his professional body?

The Law Society of Upper Canada sets out rules to protect the integrity of the process by which a lawyer may draw a client’s retainer funds that are required to be held in trust. Trust funds are sacrosanct. Many lawyers have been punished for messing with trust funds.

CRA definitely has the power to seize a taxpayer’s monies if there are unpaid tax bills. CRA freezes bank accounts, investment accounts (even RRSP accounts), places liens on houses and will garnishee wages every day.  If a person owes money to CRA and knows that the collector is going to seize his money, he cannot simply hide his wealth in a convenient lawyer’s trust account.  It is still the taxpayer’s money and the way the Income Tax Act and Excise Tax Act are written, CRA do not need a court order (or even a warning shot) they can just freeze and seize for unpaid tax debts including the money sitting in the lawyer’s trust account.

However, CRA is sometimes wrong and it seems only fair that the taxpayer ought to be able to use the resources available to defend against the CRA attack. The taxpayer should be entitled to legal defence, and the money the lawyer is holding on retainer to provide those services needs to be safe from being seized by CRA – so it is a fair fight.  That’s what I think the lawyer in question is saying.

But what do you think and what will the LSUC and the courts (if it gets that far) think?

The good news is that professional tax companies such as ours are not handcuffed by the Law Society of Upper Canada rules.  Monies paid to us for your defence against CRA are not open to garnishment and you can still avail yourself of all the types and levels of protection.

Protect your assets as much as possible. Tax Solutions Canada can help. Think a seize or freeze is in your future? Call us today at 1-888-868-1400.

Tax Time: Will You Owe After the 2015 Income Tax Deadline?

All Canadians who are employees have to submit their 2014 taxes by the April 30, 2015 income tax deadline. If you have a balance owing and do not pay at the tax deadline you will incur interest charges. If you file late with a balance owing, you will also be assessed a late filing penalty. 

Self-employed individuals with balances owing are required to make quarterly installment payments during the year. These installments are based upon one of three things:

• Reported income in the prior year,
• Estimated income for the current year, or
• The installment payment schedule sent to you by Canada Revenue Agency (CRA).

Not paying these installment amounts in full may attract penalties and interest.  

If you believe this applies to you, you are not alone. Tens of thousands of Canadians who do not have all their tax affairs in order and owe money they cannot quite pay the way the government sets out find themselves struggling each and every year.

Tax payers often do not file their personal income taxes because they have not filed for a previous year or years. You lost your T4 slips or owed money and planned to file when you could pay, hoping that by staying quiet you could keep CRA off your back? It does not matter to CRA why you missed the tax deadline – they simply apply an ever higher penalty rate to each subsequently missed tax deadline: following your first late filed tax return, you could face penalties amounting to 50% of your balance owing for any other late filing.  

It is important to dispel up a few urban myths regarding the 2015 income tax deadline:

• It IS an offence not to file your tax returns.
• It IS NOT an offence to owe taxes – even if you cannot pay them right away.
• CRA does not have “nice” and “not nice” collectors. They are all trained to use every tool that CRA has to collect from you as fast as possible. Being “nice” and asking you to fill in a form so they can approve a repayment plan is often a trap - one which can be avoided if you have experience with how and when to present the information.
• If the taxes owing need only two or three months to pay off, CRA will work with you. But if you will need longer you probably will do better if a tax specialist company experienced in negotiating reasonable payment terms with CRA handles the matter for you. A deal you cannot afford to maintain is no deal at all - but getting CRA to understand that takes knowledge regarding what CRA needs to see to grant you more reasonable terms.
• There are programs available at CRA to reduce or even eliminate interest and penalties due to unfiled tax years. When it comes to these programs, CRA is demanding with regard to access to these programs and a specialist tax services company makes sense when the amount at risk is significant to you.

Look at the penalties for late filing on CRA’s website.

If you owe taxes or are simply behind in filing your returns, make this the year you clear up the mess, stop looking over your shoulder (waiting for CRA to send their auditors and collectors after you) and where necessary get representation from a competent tax service company with expertise in resolving these issues.

Tax Solutions Canada is that company. We can help you deal with late filing penalties and interest and help you navigate the complex waters. Call us today at 1-888-868-1400.