April 23, 2009 by Dan White.

Toronto Star

Apr 23, 2009 04:30 AM

James Daw

There is still time to squeeze the most tax savings out of your 2008 tax return. So here are some answers to last-minute questions posed by Toronto Star readers.

Q: Will it be possible to claim dental braces under medical bills or expenses?

A: Yes, orthodontic work including braces is an eligible medical expense. Unfortunately, expenses equal to the first 3 per cent of a person’s net income, up to $1,962, will not be covered.

So have the spouse with the lowest income claim all medical expenses, and choose a 12-month period ending any time during the tax year when you would have had the most medical expenses. You can search the Canada Revenue Agency website cra.gc.ca for a list of all eligible medical expenses.

Q: My partner has failed to file tax returns since 2001. She would like to catch up but she is unemployed. She was in graduate school from 2000 until 2006. What evidence is needed to successfully qualify for the taxpayer relief provision?

A: The details are all set out at cra.gc.ca. First steps to apply for relief from interest and penalties: Gather records, complete the late tax returns and get in the application before the taxman comes knocking, and before the 10-year limitation period expires.

With all of the tax credits available to students, she may qualify for a refund at some point.

Q: I returned a quarter of my minimum 2008 withdrawal to my registered retirement income fund under the one-time opportunity you wrote about on April 2. Now how do I complete my tax return using tax preparation software?

A: Benjamin Gao of CuteTax Inc., provider of Tax Chopper online tax software, suggests users take advantage of the search function to find either “other deductions” or “line 232.” Click on the page, look for a box that refers to other deductions, and enter the amount of money you returned to your RRIF in the space provided.

Some people may have withdrawn money from a locked-in account and, if under the age of 72, contributed the money to an RRSP. In that case, report the contribution as an RRSP deduction on Schedule 7, a form you should find in the interview set-up. If you are using software that shows a replica of the tax forms, go directly to Line 232 or to Schedule 7.

Q: My wife and I and have a combined taxable income of $69,000. I applied for the Ontario senior homeowners’ property tax grant on form ON479, even though I realize our income is too high for the existing property tax credit. Will we get anything as a result?

A: Your combined net income – which would be higher than your taxable income if you were eligible to claim net capital losses or other deductions – is too high to qualify for even a portion of the grant.

The maximum grant of $250 ($500 starting next year) is only available to those homeowners who will turn 65 this year who have a net income of less than $45,000 as a couple or $35,000 as a single person.

A partial grant is available to couples with net income of less than $60,000 and single homeowners with net income of less than $50,000. Here is a link to a bulletin that includes a chart with examples of how much of the maximum $250 grant is payable at different levels of income: rev.gov.on.ca/english/bulletins/itrp/6493.html

jdaw@thestar.ca

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April 23, 2009 by Dan White.

This is an interesting case in terms of what happens when a mistake is made.

CRA does not have the authority to reallocate tax owing.

Dan White

*********

Federal tax collector can’t take money and run: Top court, Canwest News Service April 23, 2009 10:01 AM

The Supreme Court of Canada has ordered the federal tax collector to reimburse United Parcel Service $3 million that the courier company overpaid in GST. In a 9-0 ruling, the court concluded Thursday that the government is not entitled to a windfall simply because UPS mistakenly overpaid the tax in 1996-97.

OTTAWA — The Supreme Court of Canada has ordered the federal tax collector to reimburse United Parcel Service $3 million that the courier company overpaid in GST.

In a 9-0 ruling, the court concluded Thursday that the government is not entitled to a windfall simply because UPS mistakenly overpaid the tax in 1996-97.

“It cannot have been the intention of Parliament that persons who were not liable for GST but paid GST in error could not obtain a rebate,” wrote Justice Marshall Rothstein.

The ruling overturns a decision in the Federal Court of Appeal and restores a decision from the Tax Court of Canada.

The case arose from UPS mistakenly paying too much goods and services tax in its role as a customs broker for good entering Canada from a foreign country. UPS remits duties and taxes and them collects the amount from its customers.

The ruling noted that the GST overpayment arose from numerous errors in remitting the tax, arising from such things as mistakes made by the shipper on duty forms. UPS found itself out of pocket for the overpayments and did not seek reimbursement from its customers.

UPS sought a rebate by deducting the $3 million from taxes it owed the federal government.

The Supreme Court rejected the Federal Court of Appeal’s conclusion that it was the customers who actually owed the tax to Ottawa, so the courier company was not entitled to seek a rebate.
© Copyright (c) Canwest News Service

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April 23, 2009 by Dan White.

The issue here is never give your records to anyone unless you have a copy. Get a good scanner.

Dan White

Revenue Canada refuses to pay for million-dollar mistake
Taxpayer led to believe Harper government would compensate him for losses
Last Updated: Wednesday, April 22, 2009 | 4:23 PM PT Comments308Recommend618
By Kathy Tomlinson, CBC News

Jill Moore, left, and Irvin Leroux lost their business and their home in B.C. in a tax fight with the Canada Revenue Agency. (CBC)

A B.C. taxpayer who fought the Canada Revenue Agency over a million-dollar tax bill he didn’t owe — and won — says the federal government misled him to believe he would be compensated for his financial losses.

“They’re trying to now find a way to shove this under the rug or silence it so that they don’t get embarrassed,” 64-year-old Prince George resident Irvin Leroux said.

“Promises have been made at the political level,” added his wife, Jill Moore, “and still, here we are.”

Correspondence suggests Leroux’s MP, Conservative Dick Harris, was assured three years ago by the minister responsible that the government was prepared to compensate Leroux for Canada Revenue Agency errors that cost Leroux his business and his home. That settlement has not materialized.

‘Promises have been made at the political level.’
—Irvin Leroux’s wife, Jill Moore

“They took everything I was, everything I stood for, and destroyed it,” Leroux said.

CBC News made several requests to talk to the current revenue minister, Jean-Pierre Blackburn, about Leroux’s case but received no response.

Before their fight with the taxman, Leroux and his wife owned and operated a successful RV park in Valemount, B.C. In 2002, Irvin’s RV Park and Campground was awarded the prestigious SuperHost customer service award by B.C. Tourism.
Records lost by auditor, businessman says

Leroux said his tax troubles began in 1996, when an auditor from the tax agency showed up to look at the books. The auditor took Leroux’s business receipts and other records, he said, then misplaced those records at the CRA office.

“He told me someone had put them on the pile that was to be shredded,” Leroux said.

Without receipts to show his business expenses, numerous CRA audits over several years concluded Leroux owed almost $900,000 in personal income tax, plus over $100,000 in GST, including interest and penalties.
Irvin’s RV Park and Campground in Valemount, B.C., had to be sold. Irvin’s RV Park and Campground in Valemount, B.C., had to be sold. (CBC)

“I said, ‘You had all of these records. You knew I had paid out those expenses. You lost them, and now you’re telling me that you are going to disallow them all?’ ” Leroux recounted. “I said, ‘That’s fine, I will seek a tax lawyer. I will see you in court.’ ”

In 2005, he took his case to the Tax Court of Canada, where the CRA gave up in a so-called consent to judgment, essentially admitting its mistake. That reduced Leroux’s personal tax bill to zero and his GST bill to $20,000. Documents show that by 2006, Leroux was actually owed a $24,000 tax refund.

Years before his case got to tax court, however, the CRA had obtained a writ of seizure and sale against Leroux’s properties so it could move in and collect on his alleged tax debt, if necessary.

“These individuals have the right to come after every one of your assets without justification on what they are doing,” Leroux said.

Because its security was suddenly at risk, Leroux’s main creditor — the Business Development Bank of Canada — demanded in 2001 that he pay back his very large business loan.
Forced to sell all his assets

That touched off a chain of events, Leroux said, that forced the sale — at reduced prices — of his business, his home and other assets, valued at approximately $4 million.

“I lost my house, I lost my business, I lost my land, I lost my income, I lost my savings — I lost it all,” Leroux said. “Why? Because [the CRA] wouldn’t admit to their mistakes. They would sooner destroy me and try to bury me out there than admit they did wrong.”

“I’ve said to him the whole way, I will fight with you,” said Moore, his wife. “This is wrong. They can’t take it away and not even apologize. They can’t take it away and not be held accountable.”

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After Leroux’s tax bill was cancelled, his MP, 16-year veteran B.C. caucus chair Harris, stepped in and took his case to Ottawa.

Correspondence shows that in 2006, Harris had several discussions with then minister of national revenue Carol Skelton — a member of Prime Minister Stephen Harper’s cabinet — urging her to arrange compensation for his constituent’s losses.

At first, Skelton assured Harris that if Leroux filed a lawsuit against the government, an out-of-court settlement could be arranged, the documents suggest.

In a letter to the minister, Harris repeated what she had led him to believe: “I was told that ‘CRA does not have a mechanism to proactively pay damages,… however if Mr. Leroux launches a court challenge with a statement of claim, the department could… settle out of court.’ ”

In an email to Leroux, Harris wrote: “I am convinced that things are going as we were promised…. [The minister] wants the outcome of your case to be an example of how Revenue Canada must be held accountable for its abuses of Canadians.”
‘All hell is going to break loose’: Conservative MP

Later in 2006, when there was no sign of a settlement in the works, Harris wrote this angry email to the minister’s assistant:

“I am livid. This whole episode is the most inhumane treatment I have ever witnessed in my life. And I cannot believe that our own government would treat Canadians in this manner. Mr. Leroux is an honest, principled individual who had been driven to the brink many times by Revenue Canada. If Revenue Canada mount even the slightest objection to the statement of claim filing this week I ASSURE YOU AND THE MINISTER THAT ALL HELL IS GOING TO BREAK LOOSE. This is bulls–t!”
Conservative MP Dick Harris calls Revenue Canada’s treatment of the B.C. couple ‘inhumane.’Conservative MP Dick Harris calls Revenue Canada’s treatment of the B.C. couple ‘inhumane.’ (CBC)

Harris refused a request by CBC News to be interviewed about the affair, however, saying, “I don’t consider the work that I am doing for [Leroux], that it should become a news story, somehow.”

In March, the CRA tried to have Leroux’s statement of claim thrown out of court. Leroux said he would have never filed the claim in the first place if he hadn’t been urged to by his MP, because he can’t afford a lawyer to pursue it.

Leroux said he now feels betrayed by the Harper government, including the prime minister. When Harper himself was campaigning to be leader of the Conservative Party, Leroux said, he spoke to the future PM at length about his fight with the CRA.

“He said to me, ‘I guarantee you if I have your support and I get elected in as the leader of this party,’ he says, ‘I will give you my word I will look into this matter for you and get the matter resolved.’ Now, he’s forgotten my name.”

“We’re tapped out,” Moore said. “There are no more lawyers we can pay. No more accountants we can hire.”

“We don’t have a system in place to protect us,” Leroux added. “Because I’ve gone through the system. I’ve gone through the steps. And every time I walk the steps, I find there’s always something there to push me back down. Where is the justice?”
‘No compensation will be paid’: CRA

Internal CRA emails written by assistant commissioner Rod Quiney in August 2006, obtained by Leroux under the federal access to information law, summarize the agency’s position in his case:

“I believe we have been very fair and have in all respects provided the appropriate respect for his position and appropriate redress [by cancelling the debt],” Quiney wrote.

“No compensation will be paid,” he concluded.

Leroux is thoroughly disappointed in the Harper government he supported.

“The people we elected to look after this stuff and protect us, they’re not there, because the bureaucrats who did all of this stuff are instructing the politicians on what to do.”

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April 22, 2009 by Dan White.

Tax breaks for Canadians inconsistent: audit

Updated Sat. Jan. 17 2009 12:16 PM ET

The Canadian Press

OTTAWA — The Canada Revenue Agency is so inconsistent about the way it grants breaks to delinquent taxpayers there’s a risk people will go “shopping” to various tax offices for the best deal, a new audit suggests.

The agency has failed to communicate rules to field offices, says the audit, and doesn’t adequately monitor the way its employees dole out relief to taxpayers who face interest charges and penalties on unpaid taxes.

“Processing inconsistencies existed, between offices and between different work areas within offices,” says the newly released report.

Under so-called “fairness provisions” dating from 1991, the Canada Revenue Agency can waive interest and penalties for taxpayers who through circumstances beyond their control have not been able to pay their taxes or have been late.

More than 341,000 taxpayers benefited from the waivers in 2007-2008, being excused from $618 million in payments.

Most of that relief was dispensed directly by agency computers, based on formulas built into the software. But almost 30,000 of those taxpayers had to be vetted by employees, who granted them $314 million in relief.

The auditors, who sampled 761 files, found a highly decentralized system for making decisions, and inconsistencies in the treatment of taxpayers asking for a break.

For example, head office sometimes updated the rules — but neglected to tell field employees in a timely way of the changes.

“This resulted in taxpayers being treated differently, depending on whether their files were processed before or after updated instructions were issued to field office employees,” says the report, dated October 2008.

The investigators cited several instances in which key information on how to make decisions was not disseminated for months, in one case for more than a year.

The agency also owns computer systems so antiquated that annual reports filed to Parliament on waived charges are partly based on manual calculations, and their accuracy is dubious.

The problems outlined in the audit are remarkably similar to criticisms levelled by the auditor general of Canada in a 2002 report to the House of Commons.

“The controls the agency has put in place to guard against inappropriate forgiveness of interest and penalties are deficient,” Sheila Fraser warned.

“A taxpayer expects the same treatment from every tax services office across Canada given the same set of facts.”

Her report noted that the agency was concerned about the way inconsistent decision-making could increase the “potential for `shopping’ for the best fairness deal.”

A spokeswoman for the agency said numerous steps have been taken since the audit to tighten the system, including the hiring of an external consultant to review procedures. The project runs until March 31, 2009.

Training measures, more updates of the rules, and a revamped form for requesting relief have also helped to improve the system, Caitlin Workman said in an email response to questions.

“The CRA understands that the current economic situation places financial pressure on Canadians, and will endeavour to provide relief when circumstances warrant,” she added.

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