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.