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.