Can My Bank Freeze My Account Without Notifying Me?

Imagine the shock you feel and the very real chaos in your life when you find out by complete surprise that your bank account has been frozen.  The most common question that people ask is “can my bank freeze my account without notifying me?” The answer is yes! The bank has to comply with the order of the Canada Revenue Agency (CRA) who has the unquestioned ability to go after anything that you have if they believe that you owe them money. If you owe taxes to CRA, the bank must immediately freeze your account or they will face penalties.  

Unfortunately, stories like that of Marion Hill are all too common in Canada. Marion was a diabetic retiree living off a fixed income. She had a small debt with CRA and tried to negotiate a repayment plan with them. The collector with CRA refused to entertain a repayment plan as they often do, and demanded payment in full. 

Not too long thereafter and without notice, Marion’s bank account was frozen and her assets were seized by CRA. Only after an exposé conducted by Global News did CRA agree to return the money they seized and work with Marion to get her financial assistance.

You see, Marion got lucky because a national news network agreed to air her story. However, there are thousands of people in Canada just like Marion who are not so lucky. We get calls daily from taxpayers who have had bank accounts frozen, wages garnished, liens placed on their homes, assets frozen and more.

Generally speaking, CRA won’t negotiate repayment plans unless the correct strategy is implemented by the taxpayer (or their advisor).  The job of the CRA collector is to collect the taxes now.  CRA have to be pushed to agree to a plan. Taxpayers who try to negotiate with CRA directly often find themselves no further ahead – and often far worse off.

A common CRA collection tactic used by CRA when they do not know what you have is to offer you some short term payment plan to get you to disclose your income, employer, assets, bank, etc. However, once that short term period is over, the CRA make unaffordable demands and when you cannot meet those demands they refuse to negotiate further and seize your assets including freezing your bank account.  Remember, CRA do not need a Court Order (like other creditors) - they can act aggressively and by surprise.

Watch Marion’s story at http://globalnews.ca/news/1097684/woman-whose-bank-account-was-frozen-gets-5k-refund/

If you have found yourself owing money to CRA that you cannot pay the way CRA wants to be paid or otherwise being treated unfairly, visit www.taxsolutionscanada.com to find out what you can do to get help without having to convince a national news network to air your dirty laundry.

CRA Taking Too Long to Respond? Could Be Your Ace in the Hole to Qualify for Taxpayer Relief

The Taxpayer Relief provision is a program that CRA offers to people who want to apply to have all or some of the penalties and interest associated to a tax debt removed. Generally speaking you may qualify for Taxpayer Relief if: 

·        You have endured extreme financial hardship

·        There has been a death or serious medical problem in your immediate family unit

·        There has been a disaster such as a fire or flood

·        CRA has erred in some way

·        There is some other compelling extraordinary circumstance 

It is not as simple as just saying that you qualify – you must be able to prove it which makes some grounds for relief easier to be approved on than others. 

We have seen one common occurrence where many taxpayers have been successful qualifying for Taxpayer Relief which deals with errors on the part of CRA. 

As you know, CRA is a massive bureaucracy and can take months or even years to process tax returns and other applications. We have all heard how CRA loses files, changes the person working on the file, the extension becomes someone else, etc. and so one ends up sitting on hold trying to find someone to speak to.  

Where the taxpayer disagrees with the tax assessment or the way penalties and/or interest have been applied the correct course of action to formally record your disagreement is to file a Notice of Objection. When a Notice of Objection is filed it can take CRA a really long time to process it. Sometimes this happens because of disorganization, sometimes this happens because of backlogs and sometimes this happens because you may have an Objection that is similar to another person’s Objection that is before the courts. CRA will sometimes wait for the outcome of court decisions on similar Objections before making a decision on yours. 

In the case of assessments that relate to an individual’s involvement in a charity scheme we have seen Objections sit on hold for up to seven years. So what happens if many years later the Objection is rejected? Then they will assess you for interest retroactively. This can cause your tax debt to double and even triple in size. 

This is an excellent example of a scenario where you could be successful when applying to CRA for Taxpayer Relief on the grounds that CRA has erred. Now with that said, if approved for Taxpayer Relief, they will only grant it for 10 years retroactively from the date that you applied, so it is vital that if you are filing an application with CRA and anticipate that it could take a long time to be approved that you file for Taxpayer Relief immediately. While your Taxpayer Relief application will not be processed until a decision has been made on your Objection, in our example, the date will be on record which will protect you from the time limitations as it relates to Taxpayer Relief. 

Now, just because you apply for Taxpayer Relief does not mean CRA has to approve you. Taxpayer Relief applications are approved at the discretion of the CRA which is why it is important that any application (Objection, VDP, Taxpayer Relief) or even the filing of a tax return is professionally documented, supported and followed-up. We recommend sending any pivotal documentation to CRA by registered mail. You will have the best chance to prove your grounds for relief if you have good documentation and evidence. 

For more information about applying for Taxpayer Relief please visit www.taxsolutionscanada.com or call 1-888-868-1400.

CRA Targeting the Middle Class

Yes folks, they are at it again! We routinely blog about CRA and the different groups that they target. This year alone CRA targets include condo flippers, those who operate POS (point of sale) terminals in their establishments, those who make charitable donations to certain identified charities and now it seems that the list of groups being targeted is expanding. 

According to The Financial Post and a number of other credible news publications, CRA currently has dozens of pilot projects underway targeting everyone from waitresses to used car salespeople and real estate agents. It seems to be an all-out assault on middle class income earners who generate some or all of their income through self-employment.

This is quite sad because these groups represent some of the hardest working sectors in our economy, yet with the flip of a switch they are dubbed ‘middle income tax cheats’ operating an ‘underground economy.’ The Financial Post reported that in St.Catherines there is currently a blitz against local servers in the food and entertainment industries.

Waiters and waitresses specifically: Make sure that you are keeping track of you tips and reporting them on your tax return. This is because, if your employer is increasingly recording them, CRA can learn of them whether or not you received them in cash and whether or not you deposited them into a bank account. Unlike the old times when people tipped in cash they now add it to their credit or debit terminal payment and the employer will pass it along to you (sometimes in cash) but the employer does not want to pay tax on this so he claims the payment to you as a valid tax deduction. Well, the employer’s deduction is your taxable income and CRA know about it.

Pay close attention to any and all correspondence that you receive from CRA. If CRA writes to you asking you for information this is your first indication that they are taking a look at you. CRA can conduct an audit or investigation without coming to your home or business and conducting a full blown audit. They may write to you asking you to clarify information on a past return. Pay attention to who wrote the letter. The letter may not indicate that the writer is an auditor. The title of the writer could be investigation or compliance officer. If this happens, seek professional tax advice (not from a tax preparer but an expert in tax problems) immediately as CRA could corner you into a re-assessment resulting in thousands of dollars in penalties and interest.

In the event CRA simply re-assesses you and assesses a tax debt, it is crucial that you act fast. You may file a Notice of Objection to object not only to the re-assessment but also to penalties and interest.

If you work in one of the targeted groups, declaring all income, maintaining clean books and ensuring that all of your returns are filed on time is a good measure to ensure that you come out on top in the event that you come under scrutiny.

At the end of the day stay smart, stay agile and if you think may have a problem, seek professional guidance immediately.

For more information about what you can do if you are being investigated by CRA please visit www.taxsolutionscanada.com or call 1-888-868-1400.

The 2 Most Common Ways to Lose Your Opportunity Under VDP

The Voluntary Disclosure Program is an official program offered by CRA where a taxpayer can come clean about undeclared income and past due returns with no penalties and much reduced interest. Failing to declare income or failing to file tax returns is a criminal offence. In addition to prosecution, fines and potential jail time you will most certainly be subject to significant financial penalties and interest under the Income Tax Act. 

For example, the 2012 penalties for late filing are 5% of the amount of the tax debt plus 1% per month for 12 months. If you also didn’t file your 2009, 2010 and/or 2011 returns on time the penalty increases to 10% of the amount of the tax debt and 2% per month for 20 months. CRA will also look for grounds to hit you with gross negligence penalties up to 50% of the tax debt that you owe.  All these penalties then incur interest just the same as the actual tax debt – compounding daily. 

This is why the Voluntary Disclosure Program is so advantageous. 

To qualify under the Voluntary Disclosure Program you must satisfy four criteria:

·        The tax debt must be at least one year old

·        The disclosure must involve a penalty

·        Disclosure must be voluntary

·        Disclosure must be complete

The 2 most common reasons that Voluntary Disclosure applications are rejected are because they were not voluntary or they were incomplete. This presents a double-edged sword to taxpayers because in order for disclosure to be complete you must come clean about all taxes you owe which may mean that you have to verify with CRA which years are outstanding or you may have to request tax slips.  

Contacting CRA before you have officially made an application for Voluntary Disclosure could flag your file and cause them to contact you which will then mean disclosure could be deemed as involuntary. There are very careful steps in the process and only a professional who practices in this area on a regular basis will have the knowledge of the steps and know exactly what documented proof they need at each stage.  This is one reason why most people will have a tax professional who specializes in preparing and processing applications for the Voluntary Disclosure Program to deal with their paperwork. 

Also, in the case of businesses, you may be making disclosure concerning business tax but because you did not address an issue concerning HST for example, CRA could deem that your application is incomplete. 

The Voluntary Disclosure Program is a very structured process that must be navigated carefully or you could lose the valuable opportunity to avoid penalties, interest and prosecution.  CRA want to get the non-compliant taxpayers back to the table.  But they don’t really want to forgo the interest and penalties so they make it relatively easy to fail to make a successful application under the program. 

It is important if you want to apply under the Voluntary Disclosure Program that you have gathered all documentation, have reviewed and considered all tax years and types of tax that could present an issue and proceed accordingly.

For more information about the Voluntary Disclosure Program, please contact Tax Solutions Canada by visiting www.taxsolutionscanada.com or call 1-888-868-1400.

Can I Object to a Tax Assessment Based on the Tax Return I Filed Myself?

The idea of objecting to CRA’s Tax Assessment based on the return that you filed yourself sounds strange doesn’t it? You provided the information, so then why would you have a reason to object to the return?

When you file your return, CRA may have some other information on their file that leads them to believe you had more income or perhaps they determine that you were not entitled to some expenses or credits that you claimed. This causes CRA to assess you for more tax owing than what you filed. Often CRA assesses your return based simply on what you file, but they may revisit your return later and re-assess you.  Such an increased assessment can lead to penalties and interest, which can be significant. In the event that CRA determines you are a repeat offender and negligent in some way they can assess gross negligence penalties of up to 50% of the tax debt you owe!

If you are filing a return late you will be assessed penalties based on how many times you have filed late in previous years. For example, if you filed ONLY your 2012 tax return late, you will be assessed a penalty for late filing equal to 5% of the amount of the tax and then 1% per month thereafter, for up to 12 months. Now, say you filed your 2009, 2010 and 2011 tax returns late as well, the penalty would then be increased to 10% of the amount of the tax debt and then 2% per month for up to 20 months. CRA is unforgiving when it comes to these penalties, even if you have a legitimate reason for filing your returns late.

Returns filed late are often subject to more scrutiny by CRA.

While CRA’s website indicates that you can apply to have penalties cancelled through a Taxpayer Relief application, it can be more effective to leverage a Notice of Objection to object to penalties or the increased tax itself as assessed on your return.  Choosing the Notice of Objection route does not block you from Taxpayer Relief.

Filing an Objection is very time sensitive. An Objection must be filed within 90 days of the re-assessment. If you have a good explanation that will meet CRA’s high standards, you may be able to extend this time frame for up to an additional year. When you file an Objection, if CRA rejects it you then have three choices: 

·        Go to tax court and ask a judge to make a final determination

·        Make an application for Taxpayer Relief

·        Pay the taxes plus interest plus penalties – even if they are unfair

Going to court is the most costly of the three options. Nothing that CRA puts onto the re-assessment is necessarily the final answer or correct and you have a great deal to gain by fighting their arbitrary assessments of penalties and interpretation of what is income, what may be deducted legitimately and what credits you are allowed to claim. With that said, the Objection and Taxpayer Relief programs are both official programs with bureaucratic processes. You will be best served working through a professional to make applications under these programs so as to optimize your chance of being successful. This will also ensure that throughout the process you don’t give CRA any further information that could lead to more problems for you later in the event that your applications are rejected and they commence collection action against you. 

For more information about filing an Objection or a Taxpayer Relief application please visit www.taxsolutionscanada.com or call 1-888-868-1400.

Flipping Condos in Toronto Has Become a Dangerous Prospect

Over the past decade, the condominium real estate market in Canada has been an excellent investment in major city centres like Toronto. The business of flipping condos in Toronto is lucrative with some people purchasing condos pre-construction and then selling as soon as the condo is built (or even before), making a tidy profit. 

Condo owners have become a major target for CRA. In fact, The Toronto Star reported that in Toronto CRA auditors are aggressively looking at people who purchased condos pre-construction with the intention to flip them once construction is completed.

You may be thinking ‘how can CRA find out if I bought a condo pre-construction and then sold it?’ CRA has many resources including powerful software that enables them to see who owns a property, when it was purchased, how much it was purchased for, when it was sold and how much it was sold for. CRA also simply audits the condo developer which starts the trail. If CRA suspect you may be in the business of flipping condos (and they have successfully held this against people who did this only once) they will use their powers under the Income Tax Act to demand you disclose details that will prove their case.

According to the article published in The Star, CRA’s prime focus is those who purchased a new condo or home and sold it within 12 months of possession. The article suggested and that individuals who buy new homes are advised to reside in them for at least 18 months or they risk being taxed on the gain as income. You would not have the ability to claim the personal residence exemption on the gain and it will not be taxed at the lower capital gains tax rate – but at the highest marginal income tax rate plus applicable penalties plus interest.

Apparently over 1200 questionnaires have already been sent out and in about 250 cases CRA auditors demanded that GST/HST rebates be repaid immediately.

When many people think of an audit, they think of the formal version of an audit where a CRA auditor comes to their home or business to review their paperwork. Most ordinary people don’t realize that this questionnaire is a type of an informal audit and should you receive one, you are strongly advised to obtain professional guidance on the matter immediately - before you provide any information to CRA.

The challenge is that if re-assessed as a result of one of these questionnaires, you not only face new taxes but you will also face penalties and interest, retroactively, on the debt. Gross negligence penalties can be up to 50% of the tax debt assessed. Additionally, if you have already been re-assessed, perhaps you agree with the tax you owe but feel as though you have been unjustly penalized financially, it is important to work with a tax professional as soon as possible to file a Notice of Objection to the penalties.

You only have 90 days after the assessment is made to file an Objection. If, for some reason, the 90 days has passed already but you are within 12 months, your professional can apply for an extension to file an Objection and state the qualifying reasons why you didn’t file within the 90 days.

Unfortunately there are many people who buy condos pre-construction and then their financial situation changes, causing them to also come under scrutiny. We tend to agree with The Toronto Star article in that this seems to be a full-on assault on average Canadians, many who are just trying to work towards a better future.

If you have questions about what do if you have received a questionnaire from CRA about a property or if you have been audited or re-assessed, please visit www.taxsolutionscanada.com or call 1-888-868-1400.

Charity Tax Scheme Objection 101 - What You Can Do if an Objection Has Been Held in Abeyance Forever

In recent years those who have participated in “creative” charity schemes (whether they realized it or not) have come under major scrutiny by CRA. 

CRA has been systematically auditing and re-assessing taxpayers in this regard over the past 8-10 years and penalties under these circumstances are severe. If CRA audits and/or re-assesses you as having been involved in a charity scheme they can assess gross negligence penalties of up to 50% of the amount of the tax debt that they allege that you owe. 

Because these charity schemes were rampant in the early 2000s, thousands of Canadians have found themselves in this position and have filed an Objection with CRA with respect to their new tax debts and the gross negligence penalties that have been assessed. Some of these Notices of Objection have been rejected and have made it all the way up to the Supreme Court. 

Because there are so many related cases where there is a case that is in the court process that is similar to yours and you have filed an Objection, you may receive a letter that indicates that your Objection is being held in abeyance pending a judicial ruling on a similar case. You may not receive this letter and after filing your Objection, for many years, may not hear a thing from CRA and upon follow-up be advised that your Objection is under review. 

So what happens when CRA takes many years to render a decision on an Objection and then rejects it?  They have added interest all these years – compounded daily. You can take CRA to tax court to have a judge make a final decision or you can file an application for relief of penalties and interest under the Taxpayer Relief provision. One common ground for Taxpayer Relief is an error on the part of CRA. CRA taking an unfair amount of time to render a decision on an Objection can be grounds. The challenge is that if your Taxpayer Relief application is successful you will only be granted relief of penalties and interest retroactively for 10 years from the date that you file your Taxpayer Relief application. 

For this reason it is vital that your application for Taxpayer Relief is submitted right away. 

There have been countless instances where, on Objection, CRA has agreed to withdraw gross negligence penalties that they initially assessed against you. 

If you know or are accused of having been involved in a charity scheme, it is highly recommended that you seek professional guidance as the consequences of doing nothing or trying to move along on your own could be severe. Charity tax schemes in Canada are common and many Canadians are duped into participating in them each year. What is most important is not that you may have unwittingly been involved in one but that you minimize the damage at the lowest cost in dollar and reputation. 

For more information about charity schemes, Notices of Objection or Taxpayer Relief, please visit www.taxsolutionscanada.com or call 1-888-868-1400.