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.

The Tax Snowball Effect – Clearing Up Many Years of Returns With No Receipts

We could almost liken it to a disease: the tax snowball effect.

You miss one year of income tax filing (busy with income generating work, flood in the office, procrastination…and lots of other reasons CRA will not really care about).  Then the next year you are worried that you do not have the money to pay the previous year, so you miss another year and so on. It just gets bigger and bigger.

Some people procrastinate, others are worried they will not be able to pay the tax, while still others just do not have good records or receipts and feel like they simply do not have what they need to get filed.  Some feel they cannot afford an accountant and are overwhelmed by the complexity of taxes and small business. Payroll taxes, GST/HST, income taxes – different reporting periods for each and forms, forms, forms. All of these things can contribute to late or missed filing.

One of the easiest of these problems to fix is not letting a lack of proper records be the reason you do not file. From your bank and credit card statements the financial information can be rebuilt. In a case where there are no statements (some businesses are all cash income and expenses with no records) you can have an indirect determination of income performed to estimate your income and expenses. Fancy words used by accountants and CRA for a formal method of estimating your taxable income by making assumptions based on lifestyle and business volume. There are always options – and these far outweigh the negatives that will accompany the choice to continue failing to file.

The worst thing that you can do is keep repeating the error of avoiding the responsibility.   

That will create even larger financial problems!! Ignoring it will not make it go away!

Consequences:

Penalties:

Here is what CRA states regarding penalties:

“Late-filing penalty: If you owe tax for 2013 and do not file your return for 2013 on time, we will charge you a late-filing penalty. The penalty is 5% of your 2013 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

If we charged a late-filing penalty on your return for 2010, 2011, or 2012 your late-filing penalty for 2013 may be 10% of your 2013 balance owing, plus 2% of your 2013 balance owing for each full month your return is late, to a maximum of 20 months.”

Most of the late filers are unfortunately in the category of multiple years. Assume the taxes owing for 2013 were $20,000 and the filing was 3 years late.  The penalties would be 10% of the taxes ($2,000) PLUS 2% ($440 because you owe the 2% on top of the 10%) for 20 months maximum.  Total is $9,000 in penalties.

Interest:

Here is what CRA states regarding interest:

“If you have a balance owing for 2013, we charge compound daily interest starting May 1, 2014, on any unpaid amounts owing for 2013. This includes any balance owing if we reassess your return. In addition, we will charge you interest on the penalties starting the day after your return is due. The rate of interest we charge can change every three months.

If you have amounts owing from previous years, we will continue to charge compound daily interest on those amounts. Payments you make are first applied to amounts owing from previous years.

Interest on unpaid taxes may be waived or cancelled under certain circumstances. See Taxpayer relief provisions.”

Putting our example back into dollar terms this will compound your total bill to $33,693.09.

So by waiting 3 years to deal with the tax issues you turned a $20,000 debt into a $33,693.09 debt.  Almost 70% more to pay with interest and penalties.  But please read on – we do offer you some real relief options later on - but first it unfortunately gets worse.

Prosecution:

There were over 100 prosecutions for 2014 alone – and many of these included not only heavy fines but also jail time. Check out the CRA Prosecution website for more examples: http://www.cra-arc.gc.ca/nwsrm/cnvctns/menu-eng.html.

Do not get caught in an avalanche. See a tax consultancy firm that specializes in reducing interest and penalties – sometimes close to zero can be achieved based on your facts – and who knows how far CRA can be made to go in getting reasonable repayment terms. Before you contact CRA or file your late returns you need advice on how to file late returns so that you can qualify for a reduction in interest and penalties. This is not part of the tax return - these are special CRA programs that are set up to encourage people who have made mistakes to get on track with the tax system.  

For more tax help please contact Tax Solutions Canada today at 1.888.868.1400.

Why, When your Tax Lawyer Says Bankruptcy, You Should Run: The Difference Between a Legal Problem and a Financial One

Listening to all the attack style ads being run by some local tax lawyers can become nauseating - particularly to the trained ear of a tax professional listening to imaginary fear mongering. CRA does have wide reaching powers and it is not difficult to find yourself in hot water with them – and then to shoot holes in your own case trying to deal with it without professional help.

Yes, CRA danger is real, so fear associated to consequences is totally legitimate. But sometimes we have to learn to tune in when fear is being used to sell.

For example - be wary of those lawyers who say that you cannot use a professional tax advisory practice or an accountant to resolve your tax problem, implying that because they are not lawyers they are somehow incompetent or do not have the so-called lawyer powers to protect your best interests. This is simply a fear tactic. The truth of it is, in all fields, you have specialists. Most accountants specialize in tax return preparation, while others specialize in bank audits. Yes, other accountants specialize in helping people with tax problems, but as with anything, with a solid history and good recommendations there are many accountants capable of addressing tax problems.

Another profession that this small group of lawyers likes to attack are trustees in bankruptcy. A trustee is a court appointed officer who administers proposals and bankruptcies. They are neutral, unbiased professionals and are obliged to serve the interests of all parties to the bankruptcy – creditors and the individual. Sometimes people simply cannot pay their debt. The existence of trustees is a threat to tax lawyers because, at the end of the day, if you cannot pay your debt there is no need to fight the CRA.  You can simply take up your right under Federal law to protection from your creditors and enjoy that protection (no garnishments, no frozen bank accounts, no liens on your house, no collection calls).  Creditors (including CRA) cannot say “no” – in fact the trustee’s powers to protect you (without bankruptcy) is higher than CRA’s power to attack you. Not to mention the fact that behind closed doors, many of these very same lawyers refer their clients to the same trustees being attacked in their ads.

Accountants are highly educated professionals. Trustees are highly educated professionals. Lawyers are highly educated professionals. All work in industries with high ethical standards. Any lawyer or professional who tries to use fear to sell their services and therefore begins denigrating another professional, should be a cause for concern.

In the past, we have seen the emergence of many tax consultancies that work with lawyers, accountants and trustees to serve the individual needs of all of their clients on an as needed basis - making dealing with a tax problem that much more affordable. Among the best of the consultancies are those with a strong work history at CRA.  After all, who knows the opponent’s game better than their former coach or players?  Just make sure that their experience is not from 10 years ago or more because CRA policies and procedures have changed an awful lot in that time.

The first step before going to an accountant or a lawyer is to sit down with a tax consultancy - one that can review the tax and financial aspects related to your tax problem. You will then be positioned to know what resources will need to be deployed in the process and also potentially save yourself thousands of dollars in the process.

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

Time is Ticking: 6 weeks Until the 2014 Income Tax Deadline

6 weeks and counting!!! The CRA income tax deadline is only 6 short weeks away… are you ready?

In the spirit of this often stressful season, we thought it might be the perfect time to take a break. Check out these 4 pics – can you spot the significance?

For tax help, whether to deal with late filing or to file for Taxpayer Relief, please contact Tax Solutions Canada today by calling 1.888.868.1400.