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Archive for November 2009

Why the Income Tax Act is failing us

November 30, 2009 by Dan White.

Do you ever wonder why there are so many tax problems for small business to deal with? The tax problems needing solutions are exponentially related to the number of complications in the Income Tax Act.

We cannot expect that CRA is ever going to allow simplicity, and we know that we need to ask ourselves, “What is it that I can do for a solution to tax problems?” The answer is simply that we have to keep audit ready books and records. And we need an audit trail whick is exactly what it sounds like…. An audit trail is a paper trail demonstrating that the money was used for legitimate business expenses.

To avoid tax problems and learn more about audit ready bookkeeping, go to www.danwhite.ca and www.tax-audit-solutions.com

Dan White

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Here is the article from the Montreal Gazette
By Kim Brooks November 11, 2009

Canada’s Auditor-General Sheila Fraser.
The Income Tax Act and related regulations run over 2,800 pages long. The legislation is so complex that even highly trained accountants and lawyers get things wrong, miss relevant provisions, and confess that they don’t understand aspects of the rules.
Last week, Auditor General Sheila Fraser included in her report to the House of Commons a chapter on the efforts of the Department of Finance and the Canada Revenue Agency to clarify and clean up at least some of the technical aspects of the Act. Her conclusion: they are failing Canadian taxpayers.

She’s right. But Parliament shares responsibility. The Income Tax Act is Canada’s single most important instrument of domestic economic and social policy. A bill to address technical inadequacies in the enacted legislation has been under discussion since 2002, yet Parliament has failed to act.

There can be no debate about the harm caused by overly complex, outdated tax legislation and unresponsive administrative practices. Businesses incur needless expenses for tax advice to carry out relatively straightforward transactions; low- and middle-income folks fail to access desperately needed programs delivered though the tax system; and taxpayers cannot be confident that they are filing their returns on the basis of the law that applies to them.

The Department of Finance has been working on technical amendments in addition to those reflected in the outstanding bill. As a result, there are over 400 such amendments awaiting enactment. While these measures languish, the Revenue Agency assesses taxpayers as though at least some of the provisions have already been enacted.

The delays and confusion trickle down. The Revenue Agency provides guidance to taxpayers in a variety of written forms. Some of the advice given by the Revenue Agency is out of date and other advice is not in accord with the law. For example, generally speaking, since 2006 student scholarships have been tax free. Yet the Revenue Agency’s interpretation bulletin on the issue still informs readers that only the first $3,000 of scholarship income is exempt.

Another example: Two cases earlier this decade determined that when someone who sells their business receives a payment not to compete with the new owner, that payment should be tax exempt. In an effort to plug this loophole, the Department of Finance proposed legislation that would tax non-competition payments. But those rules remain in draft form. Given that often the Department intends for proposed rules to be effective the date of their announcement, how should the Revenue Agency assess people who receive non-competition payments?
Compounding the problems caused by the complexity of the income tax, when taxpayers and tax advisors ask the Revenue Agency for advice related to their specific circumstances, they often confront long waiting times for responses.

In addition to the time wasted trying to comply with the rules and high fees for legal and accounting advice, tax complexity gives rise to more fundamental problems. Taxpayers may decide that the system is simply too complicated to comply with and fail to file returns, or pay less than they should. These decisions exacerbate the problem of the tax gap - the difference between what the Revenue Agency actually collects and what it would collect if everyone filed their return honestly according to the rules.

Canada is not alone in confronting a pressing need for the simplification of its tax legislation. In her most recent report, the U.S.’s national taxpayer advocate, Nina Olson, identified the complexity of the Internal Revenue Code as the most serious problem facing American taxpayers. In response to the enormous social costs of tax complexity, Australia, New Zealand and the United Kingdom have all launched major tax simplification exercises over the past decade.

The Auditor General is right to chastise the Department of Finance and the Revenue Agency for their failings in keeping Canada’s tax system current. However, the blame does not fall only on those agencies. In fact, they do a lot with surprisingly little. The government should view the Auditor General’s report as a wake up call. The Department of Finance and the Revenue Agency need an infusion of resources. They need to be able to hire and retain the best people to keep Canada’s tax legislation and administrative practices up to date.

But more fundamentally, it is time for Canada to undertake comprehensive income tax reform. Our last major reform effort, a tour de force driven by the work of the internationally regarded Carter Commission, was in 1972. The benefits of simplification are well documented. The integrity of our tax law and the viability of the self-assessment system is at stake.

Kim Brooks is the H. Heward Stikeman Chair in the Law of Taxation at McGill University, Faculty of Law
© Copyright (c) The Montreal Gazette

Posted in Tax Topics | Print | No Comments »

Regarding the HST and how things shake down for investments.

November 28, 2009 by Dan White.

Regarding the HST and how things shake down for investments.

Personally I think the whole investment industry needs an overhaul, starting with getting rid of the Securities Commissions.

The investment industry is too complicated and there are too many things that can go wrong. There are too many regulations that Canadians have not asked for and there are too many people losing their savings.

Having said that, I agree with Tom Bradley, having any tax on building wealth is wrong.

The solution as I see it is to opt to become an active trader and recover your GST by way of input tax credits. What this means to me is a whole new business evolution were there is no such thing as passive investors. Investors will need to learn about business and then they won’t have a HST Problem.

In order to emplement the business solutions and to be able to stand up to a CRA audit, you will need to learn how to create audit ready trading records. You will need to set your investing up properly to pass the test of being an active business.

Failing setting up your books and records properly, you will find that CRA can and will be abusive in a tax audit.

To learn more about audit ready accounting, go to www.tax-audit-solutions.com or go to www.danwhite.ca or go to www.blog.danwhite.ca

Read on to see what Tom has to say about how HST is going to effect passive investors.

Dan White
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HST will hurt investors and their nest eggs

Protesters on the front lawn of the B.C. Legislature before the Throne Speech in Victoria, Aug. 25.

Protesters on the front lawn of the B.C. Legislature before the Throne Speech in Victoria, Aug. 25. GLOBE AND MAIL

Tom Bradley explains how Ontario and B.C.’s new HST isn’t helpful for investors

Tom Bradley

Published on Friday, Nov. 27, 2009 4:29PM EST Last updated on Saturday, Nov. 28, 2009 3:46AM EST

Note to reader: I have an axe to grind. I own and operate a low-cost mutual fund company – and I’m hopping mad about the HST.

The impact of Ontario and British Columbia’s harmonized sales tax will be negative for investors. No matter who you want to blame – the government or the investment industry – there is no getting around the fact that resulting higher all-in fees, compounded over a long investment horizon, add up to real dollars. For a long-term investor, it will be the difference between an Audi and a Taurus, or golfing in Florida versus watching the Battle of the Blades on CBC.

There are compelling arguments and precedent for not further taxing Canadian’s retirement capital, but unfortunately they’ve fallen on deaf ears because of bad timing and the wrong messenger.

The timing relates to budget deficits. From what the insiders have told me, bureaucrats have been sympathetic to the investment issues around HST, but the response from a higher authority has been clear and consistent: “This is going to happen because we need the money. Focus on implementation and we’ll talk about the inequities later.” Recessions are a bad time for rational arguments and good policy.

As for the messenger, Joanne De Laurentiis and her team at the Investment Funds Institute of Canada (IFIC) have done a good job of laying out the arguments why the HST is bad for Canadian investors. But IFIC is an organization whose membership is made up of too many firms that charge world-leading fees, and have been reluctant to share the benefits of their scale with clients. IFIC’s association with Bay Street’s fat cats has hurt its credibility when arguing against HST.

The banks, which represent tens of millions of investors, have been surprisingly mute on the issue. They have huge mutual fund operations that attract HST, but most of their other investment and savings products are tax exempt. Their silence may be the result of their conflicted position, but it may also be because the impact of the HST is hard to figure out. As is often the case with tax policy, the legislation will significantly change the wealth management landscape, and not for the better.

Canada’s regulatory patchwork, cut up by geography, product type and ancient history, has already inadvertently shaped how investment products are designed and sold. Structured products, for example, fall between the regulatory cracks and have been given freer rein to make marketing claims and obscure their fees and risks. A whole industry has been built around this regulatory arbitrage (playing one off against the other).

The HST will distort the industry more broadly, however, because some financial services are HST-able, while others are not (Note: The tax experts I consulted with are cringing at the simplification). The relative competitiveness of every product on the shelf will be affected, some good, some bad. The inequity lies in situations where there are products that are indistinguishable as to their objectives, risks and underlying investments that sit on opposite sides of the HST line.

Let me give you the early betting line on how it will play out, for both providers and clients.

Short-term vehicles like GICs and high-interest savings accounts will continue to be tax exempt. Money market and short-term bond funds on the other hand are taxable. Their attractiveness relative to banking products has always ebbed and flowed, depending on interest rates and the banks’ funding requirements. But the tax will tilt the balance toward the deposit-taking institutions. Because investors have options when it comes to their savings needs, they will not be hurt in this case.

Facilitating a transaction is exempt from tax, so any form of service that charges a commission, as opposed to a management fee, will fare better. Hiring an adviser to select and buy individual securities won’t incur tax, but getting professional help in another form – by buying a mutual fund – will.

The unfortunate consequence of different tax treatment for commissions versus fees is the likely reversal of a trend that has seen clients shifting to fee-based accounts. These accounts, which charge fees based on assets as opposed to transaction activity, better align the interests of advisers and clients. To be clear, the adviser is being paid for advice in both cases, whether it be a taxable fee or tax-exempt commission.

Structured products are not subject to HST. Compared to mutual and pooled funds, they will become more competitive. Again, for the client, any shift in this direction will be a step backwards. Structured “anything” is more expensive, complex and poorly understood. Firms selling exchange-traded funds (ETFs) have argued against HST on behalf of their clients, but from a competitive standpoint, they are huge winners in the HST realignment. Taxes on ETFs will go up, but due to their low fees, it won’t be much. The fee gap between ETFs and conventional funds will widen.

I’m mad because this additional tax on Canadians’ retirement goes against one of our country’s, and dare I say our government’s, highest priorities – getting Canadians to invest more for retirement. It hammers individuals who are investing on their own, and puts them at a bigger disadvantage compared with members of company pension plans. And its urgent and sloppy implementation negates years of efforts by the industry and regulators to improve how financial services are delivered.

Posted in HST Into, Tax Topics | Print | No Comments »

Bookkeeping goes to court…. businesses need to be “Audit Ready”

November 27, 2009 by Dan White.

The following case, points out how important it is do do the Tax Audit Solutions kind of bookkeeping. Audit Ready Books are prepared so the business owner or an auditor can completely understand the ebb and flow of money through cards, banks and cash payments. To avoid tax problems, audit ready bookkeeping is the answer.

To learn more about audit ready bookkeeping go to www.tax-audit-solutions.com and www.danwhite.ca

The story below is an interesting read.

Dan White

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Courtroom gasps over accused fraudster’s credit card debt
Published Friday November 27th, 2009

JEFF DUCHARME
TELEGRAPH-JOURNAL

SAINT JOHN - Linda Marie Burton and her husband Andrew had a combined yearly income of $80,000, but in 2006 paid $229,389 on four credit cards. The numbers brought a gasp from the public gallery and caused some jury members to shake their heads.

Mary Ellen Saunders/Telegraph-Journal
Linda Marie Burton, accused of ripping off the owner of Sharp’s Corner Drug Store in Sussex, leaves a Saint John courthouse earlier in her trial.

From 2003 to 2007, they paid at least $708,822 on the four credit cards, according to an RCMP investigator.

Burton is on trial accused of defrauding her former employer Beverly Sharp of $250,000 from 2003 to 2007. For 21 years, she worked as a clerk and bookkeeper at Sharp’s Corner Drug Store in Sussex.

Const. Mark Simon of the Hampton RCMP conducted the investigation and dug through thousands of cheques and invoices.

Crown prosecutor Patrick Wilbur asked Simon if the businesses could be providing the additional revenue.

“The business didn’t appear to be doing well,” said Simon, admitting he had no specific figures. “They didn’t appear to be generating a lot of money.”

At the heart of the trial are a number of invoices that were for work done on Burton’s properties and then doctored so they appeared to be work done on Sharp’s properties.

Defence attorney Patrick Hurley went on the attack saying all the numbers showed was that a “tremendous” amount of money had been paid on the accounts.

“What you’re leaving out is there may be another explanation,” Hurley said to the Mountie.

The records, countered Wilbur, came from the Canada Revenue Agency and tracked “legitimate” income.

Earlier in the day Sharp was recalled to the stand.

Under steady questioning by the defence, Sharp steadfastly denied a wedge had been driven between him and his brother over money. The brothers are co-owners of the store.

According to defence lawyer Hurley, in July 2007 Beverly Sharp had an emotional meeting with his former bookkeeper Linda Burton - a meeting that Sharp said never happened.

According to the defence, Sharp put his arm around Burton during the meeting and told her she was a great person and whatever happened, it was beyond his control. His eyes, said Hurley, then began to fill with tears as he told Burton he was too old and too weak to fight with his brother Harold Sharp anymore.

“I never put my arm around her and said that,” the 78-year-old Sharp said.

Flipping through a large black binder crammed with copies of invoices and cheques, Hurley told the court the changes to the invoices were made at Sharp’s request so he could claim the expenses on his income tax.

In 2007, the Canada Revenue Agency questioned the amount of the expenses and launched an audit.

The audit and other financial questions raised by Harold Sharp led to the fight between the two brothers, Hurley suggested.

Wilbur asked Beverly Sharp if he and his brother were battling over money.

“No. I have enough of my own money,” Sharp said.

On Wednesday, Sharp testified that he was leaving the store to his employees upon his death. His brother confirmed the handover in his testimony later in the day.

The 80-year-old Harold Sharp owns 48 per cent of the drug store. He said he first noticed the discrepancies in 2005. A store that normally produced a $200,000 profit a year had none that year. Harold Sharp then fired the accountant, hired another one and then when he was presented the evidence against Burton in 2007, he fired her too.

“I gave her an extra five or six weeks pay and kicked her out,” Harold Sharp said.

Posted in Tax Topics | Print | 2 Comments »

Are you being audited? Read this before calling anyone else but Tax Audit Solutions!

November 26, 2009 by Dan White.

Getting Audited by CRA is no laughing matter. If handled improperly, you could find yourself in a lot of trouble. Criminal charges, Reassessments, CRA collections, and bankruptcy happens to those who don’t understand the seriousness of getting things fixed now.

It does not matter what your problem is; Tax Audit Solutions is the absolute best value proposition on the market when it comes to handling tax problems.

It does not matter what your problem is because we have seen and handled them all. We can get you out of the Tax Tempest and back on track with your life. In most cases can do so without any serious penalties or criminal prosecution.
Having said that we can help you, the sooner we get started the less it will cost you and the less trouble you will have. There are strict deadlines for certain actions against the agency. Don’t wait until it is too late.

Don’t even think about trying to handle your tax problem on your own. CRA (A.K.A. Canada Revenue Agency) is not your friend. You cannot trust them, especially what they say on the phone. They will set you up and bowl you down. You won’t even see the ball coming until it is too late.

The job of the CRA is to get as much taxes, penalties and interest from you as they possibly can. They are trained professional economic hit men when it comes to collecting your money and if you don’t get good help, you will be road kill.

CRA likes to achieve compliance by fear, so as a way to accomplish this objective CRA as a regular routine, files criminal charges against everyday people, just for not filing their tax returns.

CRA’s aggressive collection tactics push thousands of people into bankruptcy.

CRA charges penalties and interest on tax debts which often triples in approximately three years.

The agency can seize assets, garnishee wages, put liens on homes, contact your clients, your family, your tenants, your boss and they regularly freeze bank accounts.

In order to fight CRA, you need professionals in your corner. You need someone who has been in the arena and has won their medals of valor. Fighting CRA requires some who is not worried what can happen to them personally if they irk the Dark Forces.

Aside from a professional representative in your corner, you need an accounting expert who is familiar with tax law and who clearly knows how to put your records together in a way to avoid having expenses disallowed, and so that they don’t trigger new questions from CRA and possibly an even greater debt problem than you already have.

Surviving an attack by the tax man is more about accounting, the rules and the game, rather than about the law. But knowing tax law is important too. The tax law while very complicated is not usually a big deal when dealing with CRA, the big deal is knowing how to construct records in such a way that the law protects the legitimate business deductions and that money that should not be taxable, does not become a sudden tax surprise.

Normally a tax problems narrows down to a few issues and how good the documentation is to support the taxpayer’s position. That is where Tax Audit Solutions is King of the Industry. No one does their job the way we do. We are very proud of how we create rock solid records with the right business statements and the right audit trails.

CRA cannot rail road us. Regardless of what type of tax problem you have, and we do handle them all, we will package arguments, your books and your records in a rock solid audit ready format.

While we are getting your books and records in proper shape, we will push CRA back into their corner. We don’t let them bully us into giving them an opening to disallow genuine expenses.

We ensure your Taxpayer rights and your Charter rights are respected.

You are under a tax attack and you need to understand that you are just one of thousands of Canadians every year who are under a financial siege from CRA. There are solutions to stop the tax trouble turmoil, but most accountants and lawyers are hesitant to rigorously defend you and have reasons to avoid a war on themselves by the tax man. Even lawyers fear being audited. When lawyers get audited they come to companies like Tax Audit Solutions.

A CRA attack is often more than a family can handle and hiring help is usually difficult for someone who cannot even pay their existing tax burden, let alone three time the original tax debt. Often, the worst problem is tax arrears, penalties and interest which often is more than the original debt.

You need to understand that no one wants to be behind in their taxes any more than you do. If a citizen does not pay their own taxes, it is likely they simply don’t have the money. I don’t know anyone with the money in the bank to pay their taxes who does not pay them. And the $64,000 question is, “if you cannot pay the tax how can you possibly pay the penalties and interest?”
I do know and understand how it feels to be under an assault by a government agency. I get emergency CRA calls from citizens across Canada, people in tears, people terrorized, unable to sleep at night, depressed to the point of their life being in tatters. We help them all.

Experiencing an aggressive audit is a case of being in serious trouble before it is determined whether you have done anything wrong or not. Allegations and CRA Assessments alone can ruin a business and its owner.

You can understand why people feel helpless when they don’t even know where to turn for help. Canadians need to know where and who to turn to in times of trouble.

This is no small issue. This is an assault on Canadian citizens who are already in trouble and unable to defend themselves. If they are lucky, they can pay our fees. We guarantee that we will save you more money in taxes than what our fees are.

Check out our Happy Clients and discover the sometimes astonishing turnarounds we have been able to achieve.

If you would like to share your own experiences, I would love to hear from you. In fact, I am always interested in feedback from customers, prospects, site visitors, or anyone with information regarding CRA and taxation. The more information we gather, the better a resource Tax Audit Solutions and this site becomes. You can email me at dw@911Taxes.com.

For more information and testimonials, go to www.danwhite.ca and www.tax-audit-solutions.com

Dan White

Posted in Tax Topics | Print | No Comments »

CRA versus the Cartoonist, Tax Problem Abuse by CRA backfires.

November 26, 2009 by Dan White.

Cartoonist Donato, wins his day in court.

It is too bad that so many Canadians just fold from the pressure of CRA tax abuse. Andy fights and wins.

Congratulations Mr. Donato!

If you know anyone who has these kind of tax problems, send them to www.tax-audit-solution.com where they can get affordable help.

Dan White

The following article appeared in the Globe and Mail and was written by Paul Waldie

Paul Waldie

From Thursday’s Globe and Mail Published on Thursday, Nov. 26, 2009 12:00AM EST Last updated on Thursday, Nov. 26, 2009 10:29AM EST

Andy Donato has been skewering politicians, bureaucrats and public figures for nearly 40 years in his editorial cartoons in the Sun newspaper chain. But for the past seven years, Mr. Donato has been waging a personal battle with the government, and federal tax officials in particular.

The dispute centres around 710 cartoons Mr. Donato donated to Touro College in New York and Ontario’s Brock University in 1999 and 2001. The contributions were valued at close to $500,000 in total and Mr. Donato claimed a charitable tax credit on his taxes.

In 2002, officials from the Canada Revenue Agency went after him.

First, the CRA disallowed some of the credits, alleging Mr. Donato improperly made some of the donations through his wife. When Mr. Donato resolved that issue through the courts, the CRA took him to task again, alleging he owed capital gains taxes on the gifts. At one point, the CRA was seeking more than $100,000.

Mr. Donato fought back. He filed a tax appeal and took the case to the Tax Court of Canada. In a ruling made public this week, the court dismissed the bulk of the CRA’s case.

“It was almost like a persecution,” Mr. Donato said yesterday from his home in Toronto. “What bothered me was I was the only cartoonist in the country that they went after. [Several other] cartoonists have been donating to universities for years, and getting tax receipts, and they haven’t been touched. I was the only one they went after and that pissed me off. … They just kept up. They wouldn’t let up.”

Mr. Donato said he was particularly upset because he had planned to make more donations to universities but stopped because of the dispute. He has been especially proud of the gift to Brock because the university uses his work in several courses, including art classes and political science studies.

“I wanted to keep donating to Brock because they put them to good use,” he said, noting that he has donated cartoons to other universities, including Ryerson University, and to the National Archives of Canada.

“Now that this is over, I’m going to look into it again because I really would like to donate to universities rather than the archives. The archives have a huge collection of mine now.”

He has also cautioned other cartoonists about his plight. “I gave them a warning about what not to do,” he said. This case “has got to haunt every cartoonist.”

Mr. Donato has been drawing editorial cartoons for nearly 50 years and has won numerous awards. He started at the Toronto Telegram in 1961 after working as a layout artist at Eaton’s department store. When that paper closed in 1971, he helped launch the Toronto Sun. He took a buyout from the Sun in 1997 but continues to draw for the chain, with his trademark bird signature, under a contract that pays him roughly $400 per piece.

He said many editorial cartoonists began donating their work years ago because there is virtually no market for the drawings after they have been published. “You don’t sell any,” he said. “The odd time, you get a request for one. The first time you draw a politician, they want the cartoon and that’s it. They sit around, what are you going to do with them?”

When asked if the CRA might have gone after him because he has been too hard on politicians, Mr. Donato laughed and said: “I don’t think I’ve been that bad.”

His contract with the Sun expires next year but he hopes to renew it and keep going. For how long? “As long as I can,” he said. “There’s so much going on.”

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CRA is evading truth about Swiss Banking

November 24, 2009 by Dan White.

I am going on a bit of a rant here…

Holy Stink Batman! CRA is in a cover up and are in danger of a huge embarrassment!

So… Project Jade…. CRA does not us to even know the name…. and CRA appears to be breaking the law by improperly conducting audits…. and we don’t have information that shows CRA actually has the names of tax evaders who are coming out of the dark and doing voluntary disclosures.

What I wonder about is…. how is it ok for the government of Canada to break the law while chasing law breakers… is this not the pot calling the kettle black? Should our government not be above lies, misrepresentations, and breaking the law of the land. Should they not need to respect the Canadian Charter of Rights?

Canadians are getting fed up with this attitude of CRA that they are above the law and that Canadians are just a bunch of tax evaders and need to be punished.

This is not about taxation, this is about crime and punishment. In this case both sides are muddied.

Canadians are getting mad as hell, and there will be a bit blow up in the coming year.

It is going too be a roller coaster.

To find out more about what you can do to keep out of hot water and tax problems, go to www.danwhite.ca and www.tax-audit-solutions.com

I love the article written by Diane Frances of the Financial Post.

Dan White

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Probing the Liechtenstein connection

What is the CRA’s Project Jade, Senator wonders

Diane Francis, Financial Post Published: Tuesday, November 24, 2009

Story tools presented by

Christian Hartmann, Reuters Files

What is “Project Jade”? That’s what Canadian Senator Percy Downe would like to know. So would Canada’s taxpayers.

In December 2008, Senator Downe made a request, under Ottawa’s Access to Information Act, about possible tax evasion by Canadians in Liechtenstein. That was after stories broke in the international media that a whistleblower in that secrecy and tax haven had sold information to various tax departments in the United States, Australia and others about their tax evaders.

When asked in the House of Commons, the Canadian government’s reply was that Canada does not pay for such information.

Senator Downe made his request for information to make sure that even if the Canada Revenue Agency (CRA) doesn’t pay, they were getting the information anyway and investigating to determine if tax evasion was being committed.

It appears they were probing last year. But the Senator said the information was delayed in getting to him, is scant on detail and out of date. He has complained and made another request for information.

“Given their failure to trumpet the successful recovery of money owed to Canada, I can only conclude that the failure to answer questions on this topic means they have sat on their arse and are trying to recover only after you and others started to give media coverage to tax evasion,” wrote the Senator this week.

The Senator’s request asked for:

-The number of Canadians identified as having undeclared accounts in Liechtenstein.

-The number of Canadians with Liechtenstein accounts who have voluntarily disclosed with the CRA and also the number who have settled with tax authorities.

-The number of Canadians with Liechtenstein accounts who have been charged with tax evasion.

-The amount of money that CRA has recovered as a result of investigating these undeclared bank accounts in Liechtenstein.

The CRA disclosed to the Senator, in internal briefing notes, that it estimates about $100-million in Liechtenstein bank accounts relate to Canadian citizens and that the “CRA anticipates that it will reassess approximately $17-million in taxes, interest and penalties as a result of its examinations.”

An email exchange, included in the package, discusses how Canada won’t join a media advisory with the United States, U.K. and others, due to the use of the word “investigate.” A memo to an MP for media response purposely softens the language to “examination” instead of “investigations.”

Senator Downe said the documents he was sent are out of date, due to delays in the government’s response, which were blamed on “complexities.” But the nugget was the blacking out of the name of the CRA project, except in one instance where it was missed and referred to as “Project Jade.”

“I have sent another request and filed a complaint with the access to information office. They may be able to generate more information,” Senator Downe wrote in a recent letter sent from his Charlottetown office.

The Senator is not satisfied. “A number of items caught my attention. [How they] refused to use the stronger language in the media and is this an indication of their passive attitude on prosecution? What is Project Jade, which they forgot to block out in one spot?” he said.

“Why did they refuse to release information, using the personal safety of employees as the reason? If they were active on this file, why are they not communicating that to taxpayers?”

Indeed.

dfrancis@nationalpost.com

Read more: http://www.nationalpost.com/opinion/columnists/story.html?id=7fdbbee6-1bac-45ef-be3c-9f385dc66e06#ixzz0XmCMVoHJ
The New Financial Post Stock Market Challenge starts in October. You could WIN your share of $60,000 in prizing. Register NOW

Posted in Tax Topics | Print | No Comments »

FINTRAC’s 2009 Annual Report

November 20, 2009 by Dan White.

Big Brother is watching us. For Canadians, our privacy is invaded to a point of sillyness. This is not about terrorism, this is all about money.

Terrorism, was used as justification, and now the door is open. I can tell you that everyone who plays games with money, is going to have tax problems. CRA is the catch basin for all of this. Just look at the last word of this article.

It will be good for Tax Audit Solutions, as a provider of corporate governance and audit ready bookkeeping.

The power of the computers and the internet works both for and against us.

Dan White

www.tax-audit-solutions.com

FINTRAC’s 2009 Annual Report
By admin | November 19th, 2009
« Canadian MSB Agrees to Pay Over USD 19 Million to Manhattan U.S. Attorney’s Office
FINTRAC Told to Cut Back on Gathering of Personal Information »

Released November 17, 2009, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) annual report highlights that more financial intelligence is being produced now than at any time in the organization’s past.

During the 2008-2009 fiscal year, FINTRAC reported making 556 case disclosures to various federal, provincial and municipal police agencies, the Canada Revenue Agency, Canada Border Services Agency, the Canadian Security Intelligence Service and to foreign financial intelligence units. That figure represents nearly three times the volume of disclosures made in their preceding fiscal year. Gone is the focus in previous annual reports on the dollar value of its disclosures.

Of the 556 case disclosures made:

* 474 were for suspected money laundering,
* 52 were for suspected terrorist activity financing and/or threats to the security of Canada, and,
* 30 were for both suspected money laundering and suspected terrorist activity financing and/or threats to the security of Canada.

Still, about 60% of FINTRAC’s cases are originated by Voluntary Information Reports (VIRs) – requests from law enforcement for assistance with their cases. Only 13% of the 556 cases were originated by Suspicious Transaction Reports (STRs) sent by entities subject to the requirement to report.

152 of the cases were disclosed to the Canada Revenue Agency to assist in the collection of taxes on criminal profits. FINTRAC reports that these efforts resulted in $4 million in additional tax assessments.

FINTRAC discloses financial intelligence to law enforcement and other security agencies when it feels there are reasonable grounds to suspect that the information they are providing could aid in the investigation of money laundering and terrorist financing activities.

FINTRAC’s compliance efforts have also escalated – with 455 examinations conducted on its own in the year (compared with 277 in the prior year), and 176 conducted by other regulators on its behalf (compared with 257 in the prior year). FINTRAC continued to rely on questionnaires as part of its compliance efforts, with more than 700 sent out this year, and an increased number expected next year for new reporting entity sectors: including dealers in precious metals and stones, and real estate developers.

As a consequence of its compliance examinations, FINTRAC referred 19 cases of serious and persistent cases of suspected non-compliance disclosures to law enforcement (it did so 5 times in its 2007/2008 fiscal year, and 12 times in the preceding year).

FINTRAC’s progress in financial intelligence and compliance has been recognized by the Financial Action Task Force (FATF) in its follow-up assessments to 2008 mutual evaluation report on Canada.
This entry was posted in AML Compliance and tagged compliance examinations, disclosures, FINTRAC, money laundering and tax.

Posted in Rants, Tax Topics | Print | No Comments »

Updates on class action law suit about CRA Abuse and the Tax Man Documentary

November 19, 2009 by Dan White.

I have been following this class action suit and also an in dialog with Ian Jaminson about the Tax Man movie. This is going to be pretty interesting to see what is going to happen.

I am privy to inside information on some other things that will bring light to CRA abuse in Canada.

I am currently doing an article on what you can expect in the next round of assult by CRA. There level of agression would indicate that the crunch is on for auditors to collect as much as they possibly can.

I am also writing an update on the pros and cons of HST.

Be sure to watch my blogs.

Best Regards

Dan White

www.taxauditsolutions.ca

The following article is from i-NewsWire as posted by Valerie Hall. It is a very interesting read.

Canadians Wake Up to Injustice and Stand Up For Their Human Rights: Landmark Proposed Class Suit Against CRA
Posted October 27th, 2009 by ctfb111
in

The Canada Revenue Agency acts like a private police organization while it usurps democratic rights and freedoms. CRA criminal investigators now have badges and it’s only a matter of time before they carry weapons and are armed like the IRS. They will eventually convince the federal government that providing them with their own weapons will save taxpayers money. CRA now routinely hires RCMP and other police forces to back them up during their audits as well as search and seizure operations.

The CRA forces Citizens and businesses into bankruptcy. Widespread corruption and incompetence of the CRA cause Canadian families to lose their homes, businesses and income. The unrelenting financial terror of the CRA and it’s financial consequences has resulted in broken families and suicides. The CRA directs distressed or suicidal callers to the Salvation Army’s Suicide prevention services.

The grounds for the proposed Landmark Class Suit against the CRA and the Minister of National Revenue, include extortion, breach of trust, abuse of process, negligence, fraud, discrimination, harassment, intentional infliction of emotional distress, breach of privacy, breech of confidential relationship, invasion of privacy, arbitrary targeting of taxpayers and abuse of power. Canadian Citizens and Small Business Owners are asking financial compensation from the Court for all the damage done to them by the unjust actions of the CRA.

We are witnessing the day by day erosion of democratic rights and freedoms in Canada. Canada is a democracy in name only and not in fact, for some but not for all. Privacy and civil liberties activists are objecting and protesting each time a democratic right disappears. The Supreme Court of Canada unanimously passed a “proceeds of crime legislation” that will allow the police in any province to seize all financial assets they choose of any individual or business “accused” or suspected on the “balance of probabilities” of any crime. This type of law which has a standard that is not as high as the “criminal test of proof beyond a reasonable doubt”, has been misused in other countries such as the United States.

Canada rejected more than half of the 68 United Nations recommendations other countries say will improve Canadian human rights standards.The Public Service Alliance filed a Charter of Rights Challenge in court over the erosion of workers’ and women’s constitutional rights. The claimants allege that Harper government hid regressive laws in the budget. Canadian women’s rights groups and Unions have sent a human rights complaint in a communication to the United Nations Commission on the Status of Women regarding Canada’s current practice of systematic discrimination against women.

The Federal Government of Canada is trying to pass a law giving police expanded powers to obtain certain e-mail subscriber identifying data such as name, postal/email/IP address, telephone number, cell phone identifier without a search warrant or court order or any reasonable grounds to suspect criminal activity. The Federal Court of Appeal has already given the taxman approval to collect the names and sales figures for eBay’s top national sellers of $1000 or more in monthly sales although the computers are in the United States.

Unfortunately the Federal Government has a poor record for keeping immigrants families together as demonstrated recently by the shabby treatment of Mikhail Lennikov. Recently the Sheikh and Chaudhry families originally from Pakistan were deported by armed CBSA agents. The federal government and it’s agent the CRA continue to discriminate and target immigrants such as the farm workers.

The CRA commits criminal acts with impunity. Soon the police and Canadian Security Intelligence Service (CSIS) will have all the power they need to “legally” abuse Canadians in exactly the same manner as the CRA already abuses those they target “outside the law”. Equal rights under the law and due process of the law are becoming a thing of the past while Canadians are sleeping.

As a result of these drastic life changing consequences of inequality and injustice in Canada, the targeted Citizens and business owners are losing faith in the Government of Canada and the Justice System.

The Government of Canada must be held accountable for the targeting, abuse and loss of human rights and democratic freedoms of ordinary Canadians and small business owners caused by the unjust actions of the CRA.

The Taxpayers Ombudsman and the Auditor General are not doing enough to ensure that Democracy, Human Rights and Equal Treatment for everyone in Canada is a fact and not just a theoretical concept available for some but not for all.

It is the duty of the CRA as a private agency representing the Government of Canada, to serve Canadian citizens and businesses not to enslave or destroy them.

The CRA routinely and arbitrarily targets individual citizens and businesses in all regions of Canada, violating the Canadian Charter of Rights and Freedoms, the Canadian Human Rights Act, the Canadian Bill of Rights, the Statutes of Limitations, Contract Law and the Income Tax Act itself including the Taxpayers Bill of Rights.

Every Citizen and Small Business Owner who is targeted by the CRA loses their human rights and democratic rights and freedoms which are in theory guaranteed by the Canadian Charter of Rights and Freedoms.

The Canadian Justice system is not accessible to every ordinary Citizen and business owner. Justice is only available to those who have sufficient wealth to pay for it.

The Ministry of Justice is more concerned with protecting the CRA than with ensuring that justice is served in Canada. The federal Ministry of “Justice” is actually trying to prevent the fair compensation of targeted Citizens and Businesses for the abuse they have suffered from the actions of the Canada Revenue Agency (CRA).

The CRA gets away with abusing targeted Canadian Citizens and businesses because of the complacency of the Canadian public and major media in Canada.

The CRA counts on the complacency of most Federal MP’s who are primarily concerned with staying elected and earning a government pension rather than sticking their necks out and fighting for the rights of the ordinary Canadian Citizens and Small Business owners.

The CRA counts on targeted Citizens and Business owners being too worn out emotionally and financially, too intimidated or embarrassed to go public concerning this blatant abuse and stripping away of their democratic rights and freedoms.

The CRA counts on the high cost of legal action making the Justice system of Canada inaccessible to the targeted individuals and small business owners.

Canadian citizens’ and businesses’ bank accounts are seized and the CRA issues liens on personal, business property, and insurance policies. These liens are often based on improper certificates - RTP- Requirements To Pay instead of proper Court Orders or Judgments of the Court. The democratic rights and freedoms of targeted Canadian Citizens and businesses are effectively canceled since they are denied due process of the law.

Blatant intimidation tactics of the CRA cause financial hardship, damage to human dignity and psychological suffering to the members of the Proposed Suit.

It is unconscionable that the CRA enables the intentional arrogance and misconduct of the tax agents who act as if they are not accountable to the law in the process of carrying out their duties.

Completely ignoring taxpayers rights as well financial resources, the CRA reassess tax returns, threatens to take legal action if the taxpayer does not comply with the demands for private information, payment of arbitrary fines, interest and alleged taxes using a process of blackmail and extortion which is similar to tactics used by communist and fascist regimes.

Tax agents bully, harass, intimidate, and illegally demand financial information from Canadian taxpayers.The CRA issues illegal garnishment orders based on Statutes without proper Court Orders or registered letters or registered certificates signed by the Minister of National Revenue.

These are in fact just an RTP and are improperly, illegibly signed by anonymous CRA officials with no identifying information: lacking printed name, title and no witness. Therefore they are not even a legal document and are invalid.

The Minister of Revenue orders the garnishment at the highest rate, in order that the income of taxpayers is seized as quickly as possible with blatant disregard for the resulting human suffering. The CRA garnishes income from any source including family benefits, disability allowances, pensions,business income, investments.

All taxpayers objections are ignored and swept aside with invalid excuses in a pathetic attempt to terrorize people and hide the gross incompetence of the CRA and its practices of Statute driven extortion. This ruthless intimidation is intended to pressure the taxpayer to enter into a contract with the Minister of National Revenue to pay the alleged amount demanded.

Demanding the taxpayers financial information ignores Sections 7 and 8 of the Canadian Charter of Rights and Freedoms and effectively cancels the rights to privacy, silence and protection against self-incrimination.

On February 11, 2009, Louise Dickson of the Victoria Times Colonist described the Charter of Rights Victory in Court against the CRA by Hal Neumann and his wife Maureen Rivers. This precedent setting case, “Jury awards B.C. man $1.3M for taxman’s raid”, resulted in the Supreme Court Jury of B.C. ruling that the CRA invasion and search of a citizens home violated the privacy protection in Section 7 and the right to be secure against unreasonable search or seizure in Section 8 of the Charter of Rights and Freedoms.

Victoria lawyer Steven Kelliher asked the jury to give a message to the CRA — “The CRA don’t rule us. They have an obligation to respect our fundamental rights. They serve us. They don’t prey on us.” The verdict of the jury substantiates the following statement: “Gestapo tactics of the Revenue Agency Brought to Light”.

The Minister of Justice and CRA are appealing the $1.3 M compensation awarded by the jury because it is greater than all the previous Court awards given to victims of CRA search and seizure. The request for an apology from the Minister of National Revenue is also being appealed. Hal Neumann, a Saanich businessman, was granted access to the award by the B.C. Court of Appeal on May 25, 2009 until the appeal is heard.

As reported by Cheryl Chan in The Province on April 24, 2009, the Minister of National Revenue and CRA are refusing to compensate a former B.C.business owner Irvin Leroux for loss of his home, business and income caused by the abusive and incompetent actions of the CRA who targeted him.

On Thursday, April 23, 2009, Kathy Tomlinson of CBC News interviewed Jill Moore and Irvin Leroux involved in a tax fight with the CRA over a million-dollar tax bill not owed — and won —. However, the CRA and the Government of Canada did not compensate them for their financial loss and other damages caused by the abuse by the CRA.

Glen McGregor of the Ottawa Citizen reports that Tory MP Dick Harris who tried to help Leroux, compared the private federal tax collectors, the CRA to terrorists.

Wally Oppal, former Attorney General of B.C did not respond to the Notice of Claim for the Statement of Claim- File No. S-116959 in New Westminster, B.C, which objects to a “bogus” notice of liens that the CRA used to change the title of a Canadian citizen’s properties.

Donors owe millions in taxes and numerous charities lose revenues after CRA revokes charitable status from one charity after another. John Nicol of CBC News reported that Lawyer David Thompson of Scarfone Hawkins LLP who filed a Class Suit against Banyan Tree Foundation said that the CRA should also take some responsibility.

Bud Webster a former foster parent from Victoria, so broke and depressed he wanted to kill himself. Webster gave up foster parenting and launched a lawsuit against the province of B.C., because the CRA illegally taxed his income and caused him to incur $100,000 in legal bills and unbearable stress. Webster said that raising troubled youth was easier than fighting CRA. He won the fight on behalf of other foster parents so they no longer have to endure abuse by the CRA.

Ontario foster parents Tom and Helen Brouwer also gave up foster parenting, after they were billed for $100,000 in back taxes. It took six years before Revenue Canada admitted it made a mistake. At the time, in 2003, the agency pledged to make sure foster parents across Canada would be treated fairly and equitably.

Accountant Dave Hansen told Go Public reporter Kathy Tomlinson that the Canada Revenue Agency is ‘incompetent’ in carpenter Dennis Collins’s case. The honest carpenter was reassessed $ 500,000 taxes plus $67,000 GST after all his expenses were disallowed and tax information was sent to his wrong address due to CRA errors.

Unfair tax laws requiring taxes to be paid on the stock value at time of purchase, will result in bankruptcies of thousands of Canadians who own worthless stock options from their employers, purchased before the market fell.

The greed and incompetence exhibited by the CRA makes one wonder whether it is the CRA who is in charge instead of their employer the Federal Government of Canada.

http://www.cbc.ca/bc/features/gopublic/2009/04/who…

According to Kim Bolan as reported in the Vancouver Sun on July 21, 2008, the CRA withdrew demands for detailed financial information about earnings and assets of Hells Angels, including any - hidden - outside the country because it violated the Income Tax Act and the Charter of Rights and Freedoms.

Vancouver lawyer David J. Martin, wanted a declaration that the CRA was guilty of illegal conduct by targeting the plaintiffs through an initiative known as - Project MOGAL, - or the - Hells Angel Project - HA - . The CRA gave private financial information to third parties, including the police.

The CRA withdrew the letters of requirement in a precedent setting - out-of-court - agreement made on the same date as the Federal Court challenge was to be heard a year ago in the spring .

The Canada Revenue Agency is out of control and acting like an agency in a fascist or communist dictatorship removing the democratic rights of Canadian Citizens and businesses in a systematic process of statute driven extortion.

The Provinces are allegedly in collusion with the CRA and cooperate to register invalid notices of garnishment based on RTP- CRA requirements to pay which do not constitute judgments of the Court and are not a legal instrument.

Wally Oppal, former Attorney General of B.C did not respond to the Notice of Claim for the Statement of Claim- File No. S-116959 in New Westminster, B.C, which objects to such a “bogus” notice of liens used to change the title of a Canadian citizen’s properties.

The Minister of National Revenue continues to ignore the human consequences of the unjust actions of his agency the CRA and removes the individuals power to self govern his life, and live independently in safety, freedom, and protected from unlawful seizure of personal and business assets. By these improper acts and omissions the CRA with the aid of the Provinces deprives Canadian citizens of equal rights under the law and due process of the law.

Ian Jamieson is producing a feature film documentary exposing the CRA, ” The Tax Man ” is expected to be approximately 120 minutes running time. This new film will give Canadians a unique opportunity to give the CRA a strong message. People will be able to speak their minds about how they feel about the abuse the CRA has inflicted upon them. Documentary Film provides a valuable way to get the critical message across to the public and the politicians about the reality of the devastating human costs of taxpayer abuse. No financing for the film comes from any government agency, directly or indirectly.

“The Tax Man” will be seen by millions of people over many years. They have been already been overwhelmed by large numbers of stories of abuse by the CRA from across Canada. There are a lot of people who are terrified of appearing on camera because of fear of reprisals. However, there are many more, who are saying enough is enough and they are going to appear on film.

The film is currently in production and will be filmed across the country. In October they are starting to film taxpayers and lawyers in Victoria. Interviews will be organized for those interested in appearing in the film.

The film is planned to be ready for the festival circuit, Cannes, Sundance, MIP, TIFF and numerous other festivals as of April, May of next year. The release of the film in theaters will probably be closer to Christmas 2010. There will be a simultaneous release of the high definition DVD version. The film will be distributed world wide.

For more information or to join the Proposed Class Suit Against CRA contact Canadian Taxpayers Fight Back: classactioncra@gmail.com

Documentary film ” The Tax Man ” being produced by Ian Jamieson. theproducer@thetaxmanmovie.com
http://community.icontact.com/p/cantaxpayer/newsle…

Revenue officials appeal ‘earth-shattering’ $1.3-million lawsuit: copy of Neumann article in a blog
http://www.sectorprivate.com/2009/03/jury-awards-1…

Taxpayer abuse is the CRA’s mess to clean up
http://www.canada.com/vancouversun/columnists/stor…

CRA refers people who are suicidal due to abuse by CRA, to the Salvation Army
http://salvationist.ca/2009/03/the-silent-ministry…

CRA is getting more and more tarnished in the eyes of Canadians.

November 18, 2009 by Dan White.

It gets harder and harder to support our government, when they can not conduct themselves in an ethical way. The CRA is an Agency and they act the representative of the Minister. So when we are dealing with CRA tax problems, we are dealing with the government of Canada.

Don’t take my word for it that the government is causing tax problems for Canadians, read what Peter has to say below.

If you want more info… go to www.tax-audit-solutions.com

Dan White

News Canada
Alleged misconduct dogs Revenue staff

By PETER ZIMONJIC, NATIONAL BUREAU

Last Updated: 18th November 2009, 4:18am

The civil servants tasked with ensuring Canadians pay their taxes are being investigated by their own department for everything from accessing child porn at work to bribery, harassment and fraud.

Documents released through Access to Information reveal hundreds of these investigations have been carried out on Canada Revenue Agency staff over a three-year period after evidence of misconduct emerged.

“All CRA employees are subject to a strict standard of conduct, which is clearly defined in the agency’s code of ethics and conduct,” said Philippe Brideau, CRA spokesman.

“The CRA does not tolerate behaviour that contravenes this code and takes appropriate disciplinary action up to and including termination, to enforce our strict standards of conduct for employees.”

COMPUTER MISUSE

The most regular offence seems to be the misuse of CRA computers for sending e-mail and surfing the Internet. The CRA conducted 91 investigations into these offences in 2005-06, 102 in 2006-07 and 98 in 2007-08.

The second highest offence is the unauthorized accessing of personal tax information by CRA staff, of which there are between 23 and 33 cases a year going back to 2005-06.

The documents, obtained by Ottawa researcher Ken Rubin, don’t say why staff were accessing the private information of taxpayers, but they do reveal several more serious offences.

Between 2005-06 and 2007-08, the CRA investigated 17 allegations of security breaches by CRA staff and 14 cases where CRA staff falsified, forged or suppressed documents.

The CRA also investigated 15 cases of fraud, an offence that includes employees approving unwarranted tax refunds and benefits.

More alarmingly, there have been three cases of “criminal activity on an electronic network.” That can include accessing child pornography or using CRA computers to sell contraband tobacco.

STOLEN LAPTOPS

Over the same time period there were 12 investigations of employees for the suspected theft of money, computers or memory sticks from CRA offices.

One laptop can contain tens of thousands of individuals’ tax records, prompting questions about the safety of personal information.

“All CRA laptops are protected using CRA-approved encryption and CRA systems are designed to record employees’ accesses to taxpayer information,” Brideau said.

The same documents also reveal 26 investigations into staff for the improper disclosure of taxpayer information to those not authorized to receive it.

The CRA employs almost 45,000 people.

PETER.ZIMONJIC@SUNMEDIA.CA

Posted in Tax Topics | Print | No Comments »

Mandatory Internet Filing for T2 Returns for Corporations with over 1 Million Gross Revenue

November 12, 2009 by Dan White.

Welcome to the world of CRA going more and more electronic.

We enter a new level of working electronically.

Mandatory Internet Filing for T2 Returns is now a reality for next year.

I think that there will be some tax preparation companies, who will opt out of doing taxes for companies doing over the one million dollar threshold.

While it is a pretty convenient way to file taxes, I am concerned that for the first few years it could be very problematic.

Even though I am known as a pretty hip technology guy, I am still not into e-filing of any kind. Perhaps I know too much.

In any case, accounting is going to take on a new meaning for businesses. Audit Ready accounting will be come the norm.

Audits will be more electronically generated than ever before.

The concept of bookkeeping being less than a daily activity, done to audit ready standards, will go the way of the do do bird.

So to learn more about T2 Corporate Electdronic filing… read on:

Dan White

The following data is taken from the CRA website.

As announced in the 2009 Budget Statement, beginning with tax years ending after 2009, corporations with gross revenues in excess of $1 million will be required to Internet file their T2 Corporation Income Tax Return using CRA approved commercial software. The following exceptions apply:

* Insurance Corporations;
* Non-resident corporations;
* Corporations reporting in functional currency; and,
* Corporations that are exempt from tax payable under section 149 of the Income Tax Act.

About the Corporation Internet Filing service

Corporation Internet Filing allows corporations that meet the eligibility criteria to file their 2002 or subsequent year corporation income tax returns directly to the CRA through the Internet using a Web Access Code or EFILE On-Line number and password.

Corporations can also use My Business Account to file their 2002 or subsequent year corporation income tax return directly to the CRA through the Internet. Visit www.cra.gc.ca/mybusinessaccount to find out more about this service.
Who can use Corporation Internet Filing?

You can use this service to file your 2002 or subsequent year corporation income tax return if your corporation meets the following eligibility criteria:

* is a resident of Canada, or
* is an eligible non-resident corporation, see Restrictions for eligibility criteria; and
* is not an insurance company.

If your corporation meets these eligibility criteria, and you wish to use the Internet to file your return, contact the Corporation Internet Filing Help Desk at 1-800-959-2803 or for non-resident corporations, at 819-536-2360 or 204-984-3594 during our Help Desk hours of service to obtain a Web Access Code or get more information.

If you are a tax professional and wish to use the Internet to file your client’s corporation income tax return, you can use the EFILE On-Line service to obtain an EFILE On-Line number and password. If you are already registered to file individual income tax returns over the Internet, you are automatically registered to transmit corporation income tax returns, using the same EFILE On-Line number and password.

Check Restrictions for information on returns that cannot use this filing service.

Beginning with tax years ending after 2009, corporations with gross revenues in excess of $1 million will be required to Internet file their T2 Corporation Income Tax Return using CRA approved commercial software. The following exceptions apply:

* Insurance Corporations;
* Non-resident corporations;
* Corporations reporting in functional currency; and,
* Corporations that are exempt from tax payable under section 149 of the Income Tax Act.

Why use Corporation Internet Filing?

The Corporation Internet Filing initiative is part of the Government Online Initiative to deliver more services electronically. It provides you with an easy-to-use, convenient, secure, and confidential option for filing your corporation income tax return. As a result, the CRA will benefit from reduced processing costs. In support of sustainable development, a paper copy of your return should not be submitted.

Corporation Internet Filing streamlines the tax filing process, provides the filer with an immediate confirmation of receipt, and results in faster refunds.
How do you use Corporation Internet Filing?

Check Before you start for information on what you have to do before transmitting your corporation income tax return.
Is there a cost for Corporation Internet Filing?

You’ll have to use CRA-certified software. You might have to purchase a tax preparation software package, but the Corporation Internet Filing service is free.

Reasons to consider Corporate On Line filing.

* Immediate confirmation: You will receive immediate confirmation that we received your return (legal proof for your records)
* Faster processing: You will receive your Notice of Assessment more quickly than with a paper filed return
* Faster refunds: Receive your refunds more quickly than with paper-based filing (especially when combined with direct deposit)
* Reduced paperwork: Help the environment by reducing paper consumption
* Costs savings: Save on printing and mailing costs

Restrictions

You cannot use the Corporation Internet Filing service to send your tax return if you do not meet the eligibility criteria listed in Who can use Corporation Internet Filing?

You can file only one tax return at a time.
You cannot use Corporation Internet Filing to send:

* an amended return;
* a return for any year prior to the 2002 taxation year;
* a return with a taxation year greater than 371 days.

You cannot use the Corporation Internet Filing service to change the corporation’s:

* name;
* head office or mailing addresses;
* direct deposit information (including new requests).

For information on changing your name, address, or about direct deposit, contact the Business Window in your tax services office toll free at 1-800-959-5525 (English) or 1-800-959-7775 (French).
Non-resident corporations can use the Corporation Internet Filing service for 2006 and subsequent TYEs when any of the following conditions apply

* claiming an exemption under an income tax treaty;
* earning income from a business carried on in Canada through a branch office.

There are some restrictions for the eligible non-resident corporations. When filing your return, if your corporation does not meet the eligibility criteria, you will receive a message explaining the restriction and the resolution.

To file your return through the Corporation Internet Filing service, you have to agree to certain terms and conditions. You should review these terms and conditions in Ready to file? before completing your return. If you agree to these terms and conditions, you’ll have to enter the following information for authentication purposes:

* Business Number;
* Taxation Year End;
* Corporation’s assigned Web Access Code or EFILE On-Line number and password;
* Path and name of the file containing your electronic corporation income tax return (”.cor” file extension).

The Business Number, Taxation Year End, and Web Access Code or EFILE On-Line number and password are the three pieces of identification information that make up your electronic signature.

After you enter this information, you have to read and agree to a declaration certifying that the attached electronic return is correct, complete, and accurate, and confirming that you did not change the corporation’s name, addresses or direct deposit information on the return. You then select the appropriate link to indicate whether you are ready to file the tax return. If you decide to file, be sure to wait a minute or two while your file is loaded.

We will do a preliminary check of your return. If your return meets the basic requirements, you’ll receive your confirmation number. This means that your tax return has been accepted for processing. Keep this confirmation number for your records.

If there are any problems with the electronic tax return you tried to send us, we’ll send you an explanation of errors or corrections needed. This means your tax return was not accepted for processing. You should save, print, or make note of all messages we send. Before trying to retransmit the return, you must change the electronic version of the tax return by making the appropriate corrections according to the error messages you received. For information on making changes to an electronic tax return, see Correcting your electronic tax return.

A filing date is established upon successful validation of the electronic signature. The filing date will remain in effect as long as errors are corrected and the filer retransmits the return within five business days (excluding statutory holidays). If successful validation occurs after the five business days, the filing date is the date that the confirmation number is issued.

If your return has been accepted for processing, do not submit a paper copy of the return. After we have processed your return, we may have to contact you to obtain supporting documents, so remember to keep your receipts and information slips for at least six years. This is part of the same verification process that applies to all tax returns, whether paper or electronic.

Posted in Tax Topics | Print | No Comments »

The Real Side of Voluntary Disclosures. (The Tax Amnesty Program)

November 10, 2009 by Dan White.

Voluntary Disclosure Program. (Tax Amnesty) “Hereafter referred to as “VD”

This “White Paper” on the Voluntary Disclosure (Tax Amnesty) Program is written for the purpose of informing Canadians of the inherent risks by participating in by doing a Voluntary Disclosure and to let Canadians know exactly what they are signing up for, so that taxpayers can make the most informed decision. To do the VD or not to do the VD. That is the question.
A voluntary disclosure, also known as tax amnesty or tax pardon, is a method to allow you to deal with unfilled Canadian income tax or GST returns, or unreported income, with the possibility, not a certainty of avoiding penalties or income tax evasion charges. While Tax Evasion is a criminal offense, actual criminal prosecution is not likely.

Doing a Voluntary Disclosure is a mission critical action, and if is to be done at all, needs to be done properly. How you morph from a tax cheater to an audit ready business person is going to be up to you. But I suggest that in many cases a VD is not the right answer.
The Voluntary Disclosure Program is designed to collect tax that it may not otherwise get. This program allows CRA to collect tax on money that the odds say they won’t get otherwise.

According to CRA; the purpose of the Canada Customs and Revenue Agency’s (CCRA) Voluntary Disclosures Program (VDP) is to promote voluntary compliance with the accounting and payment of duty and tax provisions under the Customs Act, Customs Tariff, Income Tax Act, and Excise Tax Act. The VDP encourages clients to come forward and correct deficiencies to comply with their legal obligations. It is a fairness program that is aimed at providing clients with an opportunity to correct past omissions, thus rendering themselves compliant.

One must understand that the Canada Revenue Agency is there to collect money. That is just a fact. The purpose of the amnesty program is exactly that “For CRA to collect money.” No more and no less. If the program did not collect more tax than not having the program, there would be no Tax Amnesty program at all.
The program gets tax payers to come forward to declare their tax owing. The benefit of this for the tax payer is so that they can reduce their stress by coming clean. The program allows for this, but it is not the only way to come clean and there may be better and safer ways to come clean.

The VD program appears to be ad hoc and maybe it seems that way because it looks like who you are determines how you are treated. In 2008, former Prime Minister Brian Mulroney disclosed that he declared receipt of C$225,000 in cash payments from a German arms dealer six years after the fact and paid taxes on only 50% of the amount. There were no penalties nor was any interest charged to Mulroney.

Doing a disclosure can have serious financial side affects. Always remember that before going to the wolves’ den, make sure you are completely audit ready. If you are not, then you are making a very foolish tactical blunder.
I can not stress enough how important it is that the VD be done completely, correctly and has disclosed any possible information that could invalidate your disclosure. CRA will look very closely for a reason to disqualify you from any protection offered by the VD.
While there is the possibility that doing the program will avoid penalties, which may or may not be true, depending on your particular circumstances. Even if your application is accepted by CRA, you may still ending up paying penalties, and there are other risks involved by you submitting all your financial information to CRA via a voluntary disclosure. Anything that can be used against you, will be used against you. You could find yourself in a 6 year audit.

You need to consider carefully the source of information that you are using to make important decisions. Always remember to consider vested interests when you are taking advice. Be conscious that if the entity or person giving you the advice stands to benefit by you following their advice, then you need to satisfy yourself that the advice is complete and adequate for you to make the appropriate financial decision. For instance; lawyers provide a useful services for those that need a lawyer, and will tell you that you do need one. Just remember that they too have a vested interest in telling you that you need a lawyer to do a voluntary disclosure, so that they can get your business. It clearly is in the interest of Lawyers to tell you to use their client privilege to protect you. This may or may not be needed, it depends on the circumstances. I do strongly recommend getting professional advice. I do not recommend going to CRA for the advice as it is biased.

This is true in terms of my own interest in giving you my advice. So I will be open here about my vested interest in giving you this advice. I too am hoping to get your business. It is my optimistic expectation that by sharing this information, it will cause you to consider our services to handle your tax and accounting issues. What we offer may be more in alignment with your individual needs.
While we can assist you with a Voluntary Disclosure, it is quite possible that we would advise you against doing it, in terms of risk management or that perhaps in your case the Voluntary Disclosure is not the best and safest way to disclose information to CRA.
CRA advises taxpayers to make a voluntary disclosure about unreported income based on that they advertise that they will not penalize you. You can not count on avoiding penalization. You must approach CRA before any investigation is commenced. You also must be sure that you present the information properly. If you err in how you do this, you could find yourself in a worse predicament than if you did not do the VD at all. In this case VD would stand for voluntary disaster. CRA is not your friend and you must never forget that. You are dealing with a government agency whose mandate is to collect as much tax as possible.

VD generates extra tax income for CRA because it causes people to come out of the woodwork who may never get caught and pay their taxes. I agree that this idea is good and proper, but I don’t like the idea of conveying that this is risk free way to come clean.
Lets look at what constitutes the requirement to have a successful VD.
A VD must fill four conditions:
1.    The disclosure must be voluntary.
2.    It must be complete.
3.    It must involve a potential penalty.
4.    It must include information that is as least one year past due. In some cases less than one year could be accepted, unless the sole reason is to avoid late filing penalties.

It does not matter how many years are involved, when you file a VD.
Tax returns have to be filed for every year you had a net income regardless of how many years are involved.
There are new CRA administrative policy with respect to the voluntary disclosure program, relating to ‘‘No Name’’ disclosures
There is a new CRA administrative policy with respect to the voluntary disclosure program, relating to ‘‘No Name’’ disclosures. A No Name disclosure is not a valid disclosure until such time as the taxpayer is named. If a No Name disclosure is made and an enforcement action is taken before the taxpayer’s name is disclosed to the CRA, the disclosure will not be treated as a voluntary disclosure, even if the person’s name is disclosed within 90 days of the filing of the No Name disclosure.

It is important to realize what exactly is forgiven in a VD. The tax owing and the interest on that tax owing will still be payable. There may not be penalties charged, if everything checks out, but you will still pay a tax price. The best case scenario you can reasonably expect is to only owe tax and interest on the extra net income.

The worst that can happen to you is that because you were under some kind of investigation, or crime, by ANY other authority… eg… civil litigation etc. Anywhere where CRA has information exchange agreements. (The Workers Safety Insurance Board is one such entity. If you are subject to some enforcement procedure by WSIB then you will be denied the protection of a VD. Then not only will you have you made yourself vulnerable to the full CRA blast, but you will have opened up yourself to a complete audit for the entire and duration of the tax years in question.

In some cases if you submit the fact that you are in another enforcement process, and CRA accepts that, then you may be ok with the VD. This will be so if you provided that you first submit your VD first on a “No Names” basis and once the application is accepted only then can you do a VD on a “Names” basis. In this process in this circumstance, you would need a lawyer.

In the case of Karia v. Minister of National Revenue, CRA accepted the no names VD and then changed their mind. In this case the Federal Court ruled CRA wrong. The bad thing here is that most people will not go to court over tax matters.

A big lesson learned here, is as in all dealings with CRA, only what is in writing will save your assets in the end.

The real lesson here is to keep remembering, that CRA is not your friend and they will look to ways to collect more money than you volunteer to disclose. They will look for reasons to deny things they previously agreed to. This is especially true when it comes to verbal information. CRA’s standard response to what they say is; that if it is not in writing than it has no merit.

You can be sure that CRA will be looking for reasons to deny your VD, before and after the submission of your VD. To that statement I will stake my life.

CRA has the authority to reject part or all of your VD protection, in part or in full and at any time.

CRA also has the authority under the new rules to forgive interest on the penalties, although, I would not hold my breath that it will happen to you. I think it is just fly bait.

All it takes for CRA to revoke the protection of your VD is one tiny little reason and you could have a major financial concern on your hands. Even if there are no skeletons in your closets, you could still be subject to an audit. And if you are found in someway to be grossly negligent, or missed any other income, or claimed any bogus expenses, your VD will be voided.

The VD program has been rife with inequities and ad hoc policy throughout its 38-year history. For starters, the 50 per cent discount was available only in Quebec—a vagary the CRA’s spokespeople could not explain when contacted. After the Mulroney VD, the agency abruptly ended this and Sauvé told reporters at the Mulroney inquiry, in the interest of creating “consistency across Canada,” this 50% discount would be discontinued.

It is interesting to note that the World Bank has voiced doubts about the benefits of tax amnesty programs in general, warning they encourage evasion by sending the message that enforcement measures are weak. “Unless an excellent and inarguable reason can be found for an amnesty,” the bank advises governments on its website, “don’t declare one.”

You can take what you want from that statement.

A VD application can be submitted to CRA by an individual even if the individual is a shareholder or director of a corporation and the corporation is the subject of a request to file returns or an audit.

The Voluntary Disclosure program moved from Appeals to Audit, effective back on April 1, 2006. The VD program was moved from Appeals to Audit and new personnel took over. This move is pretty indicative of what the VD program is all about. It certainly streamlines the collection of money by CRA. Just look at the message it sends in terms of the mandate of the VD program. The audit departments mandate is to get as much tax as you can, and the VD is to forgive as much as possible. That is a conflict of interest or no interest in fairness as the case may be.

A VD allows CRA to have access a statute barred year which would normally prevent them from looking into. CRA being able to open numerous statute barred years is outrageous and a reason to second guess anyone coming clean if the results are going to be unmanageable and could lead to bankruptcy. CRA officials involved in a file can audit a normally stature barred year even without any basis for the audit other than the fact of someone signing the voluntary disclosure. Any mistake you may have made can make opening a stature barred year possible. CRA considers the disclosure to be an admission of misrepresentation due to the enumerated grounds, so you better be aware.

CRA has used the fact of the disclosure to open, audit and assess statute barred years on Canadians doing VDs, under the authority of subparagraph 152(4)(a)(i), which states that the Minister may assess tax, interest or penalties, after the taxpayer’s normal reassessment period in respect of the year only if the taxpayer :

(i) has made any misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in filing the return or in supplying any information under this Act.
When you do a VD… this is a serious risk. If CRA audits you as a result of your VD, and they find that you made any misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in filing the return or in supplying any information under this Act. THEN THE SHIT HITS THE FAN AND IT IS YOU WHO IS LEFT SPINNING.

In my opinion the CRA Audit section certainly has no business using the disclosure as a basis to assess statute barred years. And, if the VDP is designed to induce taxpayers to come forward and to become compliant, one is hard-pressed to understand how such an outrageous action is going to enhance the success of the VD program.

Some other pertinent details regarding VD if you are considering coming in from the cold.
The taxpayer is now expected to make a full disclosure without any idea of how many years might be required to be filed. And, of course, once the disclosure is made, the taxpayer runs the risk of having it invalidated, by not filing for additional years that were not originally contemplated in the VD.

In the case of blatant and serious tax evasion, for large amounts of money, and the penalties are going to bankrupt you then you are going to need to get the ball rolling with a good accountant and probably a good tax lawyer. Some times on rare occasions CRA might want to make an example of an errant taxpayer, but generally they just want their money.

You will need to disclose ALL your world wide assets. If you have more than $100,000 (at cost) in foreign assets you are required to declare the assets on your income tax return and file a form T1135. Foreign assets are assets in any country other than Canada. Not declaring this on your VD will void the protection, but not the resultant audit.

If you have unreported income such as income from eBay sales, unclaimed barter income, unreported cash payments, phony expense claims, it could invalidate your VD.
Coming out of the darkness of unreported income is not as simple as suddenly switching to an accurate tax return. A sudden change in a financial figure on your returns is a red flag that could cause an audit.
A VD does not mean that you won’t be audited; it just means that you may not have to pay penalties and interest on the penalties. On the other hand, you could still end up paying the full shot.
So if you do a VD, for sure you will need to cough up money. If you don’t do a VD, there is a good chance you will never get caught. We are not suggesting you don’t come clean, just be sure to come clean in the best way.
Once thing I could suggest that you could consider would be to simply file a T1A Tax adjustment to your tax years in question. Then deal with the matter the normal way instead of doing the VD and exposing yourself backwards and losing the 3 year statute barred protection against audits.

If you do decide to simply file an adjustment, let’s look at the normal sequence of events in normal circumstances. This is what we see as a sequence of events in regards to CRA and the cases that go through our hands.
1.    The client gets audited.
2.    Expenses are disputed.
3.    Income is adjusted.
4.    Penalties and interest amounting to three times the tax savings created in the incorrectly filed tax return.
5.    A 30 day letter goes out to the client and their representative, outlining what the auditor proposes to assess.
6.    Unless there is a big reason for the auditor to change directions, the assessment goes out.
7.    From there on what happens depends on the circumstances. That is why you need professional help. Do not be lulled into thinking that your matter is simply a matter of being open and honest with CRA. How things go will depend on individual circumstances.

From a logistics point of view when you look at this situation, an audit from simply adjusting your previously filed tax returns could be seen as a good thing for you, as it allows you to come clean and know you can pretty much count on the results. This is a possibilities evaluation that needs to be considered before you proceed.

My personal take on this matter is; CRA is getting better and better at catching tax cheaters, so give that up being a tax evader in today’s technology world “is A Good Idea” because tax evasion is not a good idea, it is a dangerous idea.
Going forward, there is no choice in this matter. CRA is getting on the ball and 1984 Orwellian is not just around the corner. Major changes are now actually in the works and planning for the next wave of CRA tax payer abuse will be coming soon.

If you want to learn more about audits and audit ready bookkeeping visit www.tax-audit-solutions.com

Dan White

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The Best Tax Solution Savings Accounts

November 7, 2009 by Dan White.

This is the best article I have seen on Tax Free Savings Accounts.
I like them and think they are a lot better solution to savings and tax reduction than RRSPs. This article covers the topic very well
Dan White
www.danwhite.ca and www. tax-audit-solutions.com
____________________________

Learning module: A closer look at Tax-Free Savings Accounts
Roberta Wilton / November 06, 2009

Fall has always been the traditional time for Canadians to turn their attention to making their RRSP contributions. Since 1957, RRSPs have been the simple way for Canadians to save for their retirement and for many, the only way to receive a break on their taxes. However, the RRSPs lock on tax-advantaged savings ended at the beginning of this year with the introduction of the Tax-Free Savings Account (TFSA).

The TFSA has been called one of the most exciting financial planning and wealth management tools for Canadians since the RRSP. Given this lofty praise, it is essential for financial planners to understand the rules, regulations and benefits surrounding this new investment tool. To assist advisors, CSI has introduced a continuing education program that focuses on Tax-Free Savings Accounts called Understanding TFSAs.

What is a TFSA?
At its core, it is a savings account, but with a twist: Income earned within a TFSA will not be taxed throughout the holder’s lifetime. Unlike an RRSP, contributions are not tax deductible, but with a TFSA, there are no restrictions on the timing or amount of withdrawals, and the money that is taken out can be used for any purpose.

A TFSA is a good way to save for anything from tuition fees to a new house, and it is ideal to hold as an emergency fund. The appeal of the TFSA, besides the tax-free growth, is its flexibility. According to Understanding TFSAs, “…it can be of benefit through an individual’s entire adult life cycle.”

The Rules
The basic rules are straightforward. Any resident of Canada 18 or over can open a TFSA, and you do not have to earn any income to be able to contribute. Funds can come from a number of sources including gifts, inheritance, employment income and a tax refund. As of today, contributions are limited to $5,000 a year; however, after 2009, the amount will be indexed to inflation and rounded to the nearest $500. As for unused contribution room, according to Understanding TFSAs, “…whenever you don’t make the full annual contribution, you can carry forward that contribution room and use it any time in the future.”

Withdrawals from a TFSA can be made at any time, with no limits on the amounts or restrictions on use. Money taken out of a TFSA may be re-contributed (or replaced) in the next calendar year but does not have to be replaced, and the amount withdrawn will be added on to your contribution room for the following year. Also, there’s no deadline for re-contributing amounts withdrawn. This differs from an RRSP where money taken out under the Home Buyers’ Plan (HBP) or the Lifelong Learning Plan (LLP) must be repaid within a certain time period or else the amounts withdrawn become fully taxable.

There is a penalty for over-contribution (i.e., if you contribute more than your contribution room allows) of 1% of the excess contribution every month. On October 16, 2009, the federal government proposed amendments to the TFSA, under which any income reasonably attributable to deliberate overcontributions will be taxed at 100%.

Some other important rules from Understanding TFSAs:

• There is no penalty or tax on the money you withdraw from a TFSA.
• The money you contribute to a TFSA is not tax-deductible.
• There is no tax payable on the income earned in the TFSA, whether it be interest, dividends or capital gains.
• You can invest the amounts in a TFSA in a wide variety of products such as GICs, savings accounts, stocks, bonds or mutual funds.
• To be considered a TFSA, it must be registered with the Minister of National Revenue after it is set up. (The holder does this through the financial institution that issues the TFSA.) The deadline for registration is the last day of February in the year following the year in which it was set up.
• It must be one of the following types: a deposit, an annuity contract, or an arrangement in trust.
• Only the holder may make contributions, except in the case of an employer’s group plan. In that case, the employer is allowed to make contributions on behalf of the holder. (Those contributions are considered income for tax purposes.)

What can go in a TFSA?
Like RRSPs, there is a long list of “qualified investments” for a TFSA. Cash deposits, GICs, mutual funds, bonds and stocks are just some. For a full list of what qualifies and what does not, check with Canada Revenue Agency or CSI’s Understanding TFSAs.

Taxes and TFSA
Administration and investment counseling fees related to a TFSA are not tax-deductible. As well, interest on money borrowed to make TFSA contributions is not tax-deductible. Transferring previously owned stocks and bonds into a TFSA, a contribution in kind, may result in capital gains or losses because, under the regulations, one is deemed to have sold the investments at fair market value when they are transferred into the TFSA. While a resulting capital gain will be treated at tax time like any other capital gain, a resulting capital loss will not be deductible.

TFSAs and RRSPs side by side
While some Canadians will have enough money to both max out their RRSP contributions and put money in a TFSA, many more will not afford to do both. Each offers relative advantages, and in particular, the tax advantages offered by an RRSP or a TFSA will depend on the planholder’s income tax rate at the time of making the contributions and what it will be after retirement.

If a person expects their income tax rate to be higher when they are working than when they retire (taxed higher when making RRSP contributions than when making withdrawals in retirement), then they are better off with an RRSP.

In another scenario, a TFSA may be the better choice. An individual with a modest income and in a low tax bracket when making their RRSP contributions may find themselves in a higher tax bracket after retirement when they have to start withdrawing from an RRSP. People in that situation will be better off with a TFSA, where they will save more by not being taxed on their withdrawals than they would save on tax-deductible contributions to an RRSP.

However, the ideal case, for those who can afford it, is to have both. Understanding TFSAs states, “…the ideal solution is to have both an RRSP and a TFSA. The tax refund resulting from the RRSP contribution can be put into a TFSA, where there will be less temptation to spend it.”

TFSAs will continue to grow in popularity with investors and present a great opportunity for financial planners. As we look at 2010, successful advisors will know the rules, regulations, and advantages and disadvantages of TFSAs as well as they know the rules concerning RRSPs.

Below is a chart from Understanding TFSAs that sums up the basic differences between TFSAs and RRSPs.

Dr. Roberta Wilton is president and CEO of CSI, director of the CSI Research Foundation, vice-chair of the International Forum for Investor Education and member of the Advisor Council of the Learning Partnership in Toronto.

Posted in Tax Topics, TFSA TaxFreeSavingsAccount | Print | No Comments »

CRA does gross negligance

November 7, 2009 by Dan White.

Sometimes it is not just Canadians who have tax problems. It seems that the Canada Revenue Agency, could use some good tax information protection solutions.

The thought that strikes me is along the lines of “sweep your own porch before you complain about how dirty some one else s porch is.

When CRA is so busy complaining about Canadian’s “Gross Negligence” perhaps they should look how grossly negligent they are. Not that two wrongs make a right, but it sure shows that CRA has no right to act all pious and mighty.

Today with the power of the internet, CRA is headed for trouble. There are a lot of us who are now watching and recording.

Trouble is brewing in CRA paradise, Canadians sense of fairness is being meddled with.

Dan White
www.tax-audit-solutions and www.danwhite.ca

Here is a good article on the subject, byPeter Zimonjic
Feds paid out more than $750K to avoid class action lawsuit

By Peter Zimonjic, SUN MEDIA

Last Updated: 6th November 2009, 7:11pm

The federal government paid out more than $750,000 to avoid a class action lawsuit after personal information was stolen from a Canada Revenue Agency office.

The theft of six computers from the Tax Services Office in Laval, Que., on September 4, 2003 jeopardized the personal information of 120,000 people.

“The purpose of the settlement was to compensate for the inconvenience caused to the class action members who took certain steps to limit the risk of their information being used without their consent,” said Philippe Brideau, spokesman for the Canada Revenue Agency.

The out-of-court settlement saw 1,401 people awarded $150 and another 2,708 awarded $200 each as compensation for time spent contacting Equifax or Trans Union to have notes placed on their credit record indicating their personal information had been compromised.

The total payout cost the taxpayer $751,750.

In 2008, an audit of security of CRA offices slammed the agency for repeatedly failing to maintain adequate security at seven offices in Quebec and Ontario.

The audit found combination locks, keys and access cards were not adequately secured, doors were not locked properly and electronic alarm systems were defective, unarmed or missing.

peter.zimonjic@sunmedia.ca

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We have entered a new tax crisis, for Canadians. Canadians need to take action now.

November 6, 2009 by Dan White.

We have entered a new tax crisis, for Canadians. Canadians need to take action now.

I am commenting on two areas, one area is what you can do personally to deal with this assult and the other is an article pasted below about a class action suit against the CRA. It is a great read about CRA tax problems.

Never before have we seen such agressive behavour by the tax department. In Canada there is a need for solutions because there is a tax abuse volcano boiling.

Having a class action lawsuit is a long term solution. Bringing the matter to the attention of the media is for the long term good of the Canadian Taxpayer. In the mean time, we have to ask what needs to be done ‘right now.’ Because we are dealing with a serious assult by CRA on small business in Canada. This means your likelyhood of being in trouble is at an all time high.

In our handling of CRA tax proplems, for clients looking for solutions to their tax problems with CRA. We are experiencing a particularly agressive approach on Canadians by CRA. What we are experiening in many cases is auditors and appeals officers who are not taking the time to properly review details.

CRA auditors are just deynying expenes, ignoring details and bulllying their way to collection of money from the tax payers. When appeals are being filed, the appeals officers are just rubber stamping and standing by the original auditors findings. Things are just being rubber stamped. CRA workers must be under heavy pressure from above. The CRA mandate must be, “collect as much as you can.”

CRA auditors are recognized by two things. Number of files processed and amount of tax money collected. That mandate is in direct conflict of interest in being fair and reasonable.

Because there are less Canadians making profits, that means that CRA must collect more money from somewhere. And right now that somewhere does not seem to matter where and if it is fair, reasonable or accurate, it just does not seem to matter to CRA. What does matter to CRA is get as much as you can in the least amount of time possible.

What happens with most Canadians, it is cheaper and less stressful to just pay the tax, much the same as money paid to the mob for protection. It becomes a cost of doing business in Canada… CRA needs to be paid off as a business expense. Canadians are just folding and paying the “tax and the juice.” This makes sense when it would cost more to fight than what the amount of juice is required to be paid.

So now the only solution to this problem, is to keep audit ready books, with audit reading meaning bookkeeping complete with proper audit trail of source documents. The audit will happen and with perfect records that will be the end of it.

If the bookeeping is not audit ready, then expenses will be denied. The notices of objection will not be properly handled and the notice of objection will fail in many cases. The objection will be rubber stamped to confirm the original assessment. They the next step will be to file an appeal to the Tax Court of Canada. The appeal will go to the Department of Justice. At the DOJ will be the first time that the documentation will be properly looked at.

Now that takes us to an interesting situation. There will be a huge amount of taxpayers will fold at this step and will have to pay the juice. For all those who appeal tax court they will be part of an overwhelming number of appeals.

By the sheer volume of appeals it will cause an unmanageable bottle neck of cases at the DOJ. This will cause a new kind of tax problem. “Too many cases to process.” “A large number of case losses in court.” “Negative reaction by the judges to the cases that should not be in tax court.”

What I predict is that when cases go to the Dept of Justice, the DOJ will review them on the bases of which cases they will recommend that CRA drop. CRA knows better than to incur the wrath of the judges over bogus denyals of tax legitimate expense deductions.

Because of this new CRA behaviour, Canadians will have to adapt or pay the juice.

We are recommending that if you need to transition to proper bookkeeping, now is the time. If you are being audited, then you need to be sure that you have proper bookkeeping submitted to the auditor. Failing having a perfect set of books, you will be bumped to the next level of CRA abuse.

If you go through this audit process and have perfect books and records submitted to CRA, that will be the first step of having you removed from the CRA list of who is a good prospect to audit.

After that, with proper audit trail bookkeeping, you will never need to worry about audits again.

As a result of these changes in CRA behaviour, we no longer have any bookkeeping outsource to virtual bookkeepers, we now do it all in house under review of our tax experts.

As is the evolution of the natural species it is adapt or perish. All Canadians need to adapt to this new world order.

The other factor to consider is that having audit ready books is a good idea anyway, if you want to run a succesful business.

Stay tuned, we are close to launching our on line bookkeeping software that will run in any web browser.

Here is the data on the class action suit below. It is a very interesting read about CRA abuse and why you need the services of Tax Audit Solutions.

Dan White
www.tax-audit-solutions.com
________

just rubber stamping notices of ojections

Canadian Minister of National Revenue - Canadian Revenue Agency Complaints - CRA is Abusing, Bullying and Harassing ario
Canada

Canadian Taxpayers Fight Back with a Proposed Landmark CRA Class Action Lawsuit
By: Valerie Hall (Bigg News)
Sunday, Jan 4 2009, 1:05am

The Canada Revenue Agency is out of control and acting like an agency in a fascist dictatorship usurping individual democratic rights. The grounds for the proposed Class Action against the Canadian Minister of National Revenue include fraud, discrimination, harassment, intentional infliction of emotional distress, abuse of process, breach of trust, breach of privacy, negligence, breech of confidential relationship, invasion of privacy, arbitrary targeting of taxpayers and abuse of power.

The Canadian taxpayers allege that the Canadian Minister of National Revenue and the CRA are routinely and arbitrarily targeting individual taxpayers, violating the Canadian Charter of Rights and Freedoms, the Canadian Human Rights Act, the Canadian Bill of Rights, the Statute of Limitations, Contract Law and the Income Tax Act itself including the Taxpayers Bill of Rights.

The CRA takes power over the individual taxpayers life and finances. The Minister of National Revenue continues to ignore the human consequences of the unjust actions of his agency the CRA and removes the individuals power to self govern his life, and live independently in safety, freedom, and protected from unlawful seizure of personal assets.

The grounds for the proposed Class Action against the Canadian Minister of National Revenue include fraud, discrimination, harassment, intentional infliction of emotional distress, abuse of process, breach of trust, breach of privacy, negligence, breech of confidential relationship, invasion of privacy, arbitrary targeting of taxpayers and abuse of power.

The Minister of National Revenue and the Canada Revenue Agency allegedly bully, harass, intimidate, and illegally demand financial information from Canadian taxpayers.The CRA issues illegal wage garnishment orders based on Statutes without proper Court Orders or registered letters.

The actions of the Minister of National Revenue cause financial hardship, damage to human dignity and psychological suffering to the members of the Class Action. The intentional arrogance and misconduct of the tax agents in the process of carrying out their duties is unethical and unacceptable. The CRA and their representatives act as if they are not accountable to the law.

Routinely, the Minister of National Revenue discriminates against targeted individual taxpayers and orders the CRA to issue illegal wage garnishment orders based on Statutes without proper Court Orders or registered letters and improperly illegibly signed by anonymous CRA officials with no identifying information and no witness.

The garnishment is ordered at the highest rate, in order that the income of taxpayers is seized as quickly as possible with blatant disregard for the resulting human suffering.

The purpose of all this ruthless intimidation is to pressure the taxpayer to enter into a contract with the Minister of Revenue to pay the alleged amount demanded.

The handwriting is illegible on the garnishment orders and the CRA officials name and title are not printed on the orders. For this reason they are not a legal document and are therefore invalid.

The Canadian Minister of National Revenue by demanding the taxpayers financial information ignores Sections 7 and 8 of the Canadian Charter of Rights and Freedoms and effectively cancels the rights to privacy, silence and protection against self-incrimination.

According to Kim Bolan as reported in the Vancouver Sun on July 21, 2008, - B.C. Hells Angels, associates, wives and girlfriends- got the CRA to withdraw demands for detailed financial information about their earnings and assets, including any - hidden - outside the country because it violated the Income Tax Act and the Charter of Rights and Freedoms. In the statement of claim filed by Vancouver lawyer David Martin, Brian Airth as well as others linked to Hells Angels wanted a declaration that the CRA was guilty of illegal conduct by targeting the plaintiffs through an initiative variously known as - Project MOGAL, - or the - Hells Angel Project - HA - . The CRA gave private financial information to third parties, including the police. The CRA withdrew the letters of requirement in a precedent setting - out-of-court - agreement made on the same date as the Federal Court challenge was to be heard last spring . The result was that the Airth case was
withdrawn.

The Canada Revenue Agency is out of control and acting like an agency in a fascist dictatorship usurping individual democratic rights.

If you are interested in more information or would like to join the proposed Canadian CRA Class Action Lawsuit, refer to the references below:

mailto:classactioncra@gmail.com

http://canada.com/vancouversun/news/archives/search_resu …

http://communities.canada.com/vancouversun/blogs/realsco …

http://74.125.95.132/search?q=cache:jTzWk38KRaEJ:www.nat …

http://www.canada.com/vancouversun/news/business/story.html?id=d85dff61-df9d-48ea-9f85-613e0e826d19&p=2

http://groups.google.fr/group/man.general/browse_thread/thread/d12c270af0e591f5#

http://www.canada.com/vancouversun/columnists/story.html?id=c0b128a4-b7f5-4461-b651-b1180c22a34f&p=2

Additional Information:
Contact: Valerie Hall
mailto:classactioncra@gmail.com

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The soltution to CRA tax problems, is causing Canadians to become non residents.

November 5, 2009 by Dan White.

This is the best article on the situation of becoming a non resident of Canada that I have ever seen. If high taxes and an over aggressive Canada Revenue Agency is causing you tax problems, then read this article by Beth Marlin and David Lesperance, as a possible solution for your situation.

______________Dan White

Flight of Canada’s ‘golden geese’
Wealthy baby boomers ready to fly off to other countries in retirement to escape high taxes
BETH MARLIN SPECIAL TO THE STAR
Published On Thu Nov 05 2009

SOURCE: David Lesperance, Lesperance & Associates.

Ever daydream about retiring somewhere far, far away?

There’s only one attribute separating most empty nesters from those who live out their dreams, says David Lesperance, who specializes in the global relocation of high net-worth individuals.

“It’s a failure of imagination,” says the 48-year-old Hamilton lawyer, who says the cost of living is much more affordable in many other countries.

Six years from now, Lesperance plans to take flight, after draining the last bottle in his wine cellar and handing over the keys to his house to his son. And then he plans to declare his non-resident status when he files his final tax return to the Canada Revenue Agency.

“Is Revenue Canada contemplating the departure of David Lesperance from the tax regime? No,” he says. “But guess what, I’m gone.”

Lesperance predicts many wealthy North American baby boomers, who are set to start retiring in droves by 2011, will be giving up permanent resident status in Canada and the United States, with a significant impact on the tax base of both countries. He calls the phenomenon “the flight of the golden geese.”

Harsh climate is not the only reason North Americans are looking abroad, he says.

Canada’s progressive tax system is much like the United States, where he says the top 10 per cent – the golden geese – pay 93 per cent of the country’s total tax revenue. But now, he says, “the golden geese are leaving.”

That will leave social programs underfunded for those who remain, he predicts.

For the golden geese, any perceived financial risk of moving abroad has evaporated as the subprime mortgage crisis has revealed the North American economy to be just as vulnerable as anywhere else.

So, if financial risk exists everywhere, why not live in the country of your dreams?

While many retirees go abroad for part of the year, others decide to reduce their expenditures by becoming non-resident, for tax purposes.

To become a non-resident of Canada – so that you are not longer liable to report and pay income tax to the Canada Revnue Agency – you must first be recognized by another country as a resident.

Proving you are non-resident of Canada would usually involve selling your property here.

“You would have trouble proving you are non-resident if you have property, a spouse or dependent children living in Canada, a car or furniture, a bank account or if you maintain provincial health insurance coverage or if you maintain an Ontario driver’s license,” Lesperance says.

“As a tax lawyer, I advise that the cleanest break you can make is to get rid of everything in Canada, but you have to acquire them somewhere else. You can keep your RRSP, but we don’t recommend keeping residences, driver’s licenses or vehicles here,” he says, noting that such things as golf club memberships should also be terminated.

Even if you do not maintain residential ties to Canada, you may still be found to be a resident for tax purposes if you spend more than 183 days a year in the country, according to CRA’s website.

Since becoming a non-resident of Canada triggers a one-time capital gains tax on your major assets – other than for your family home – the Toronto Stock Exchange’s current low levels may make this an opportune time for many to pay this so-called departure tax.

According to Service Canada’s website, “Deemed disposition is triggered by your declaration that you have left the country, which you make on your final income tax return, filed by April 30 of the year following your departure. Those with assets valued at more than $25,000 must file a special form with their return.”

If you keep your RRSP, you will be subject to a withholding tax equal to the tax in your adopted country, usually about 25 per cent. Your CPP, while it can be collected abroad, will be subject to the same withholding tax.

Non-resident status doesn’t require you to give up your Canadian citizenship or passport, so you will always have a right to return to Canada and re-qualify for provincial health care coverage. However, the same is not true for landed immigrants, who should seek Canadian citizenship before they leave, Lesperance warns.

“You should get proper legal counsel on this,” he says. “Your decision may affect not only your future, but your children’s and grandchildren’s.”

Lesperance warns that if you move to a country other than the 75 nations with which Canada has a tax treaty, you may be subject to double taxation.

It is also important for retirees to look at the estate and gift taxes in the adoptive country.

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Condos make a good home, but as an investment, it is questionable.

November 2, 2009 by Dan White.

Condos are not always the right answer. And Landlords will soon be dealing with tax problems.

This is an excellent article, writen by Roma Luciw,

Roma also correctly makes note of the risks of buying a condo to rent out. This is a potential hazard that CRA will look to exploit. Most landlords will fold rather than fight, and there will be a lot of condos put up for sale as a result of future CRA attacks. This is going to put downward pressure on condos.

Canada Revenue Agency is causing tax liability problems all over the place and now have targeted landlords who repeatedly claim rental losses and deduct them against their regular income to reduce their income tax bill, So unless you are putting down a large deposit and getting a small mortgage, a rental condo should not be claimed as a tax loss, unless you have some pretty good documentation to prove eventual profit probability.

Dan White

Roma Luciw

Globe and Mail Update Published on Monday, Nov. 02, 2009 6:29AM EST Last updated on Monday, Nov. 02, 2009 7:21AM EST

Condominiums seem like an attractive real estate option, but buyers who don’t do their homework could quickly find themselves stuck with a volatile investment and buried under mounting maintenance and unexpected costs.

“Too many Canadians are being seduced by the pretty pictures and stories of easy lifestyle and they end up buying into a building that is a time bomb of costs …,” says Kurt Rosentreter, a senior financial adviser at Manulife Securities Inc.

In a controversial newsletter, Mr. Rosentreter lays out his position on how, from a financial perspective, condos often don’t make good sense. He argues that far from being less expensive than a regular house, urban condos with high property taxes and steep monthly maintenance costs, not to mention unforeseen expenses such as fixing a broken pool valve, can carve a surprisingly big chunk from a person’s budget.

Condo shoppers generally fall into three categories: young professionals looking for a cheaper entry-point into the red-hot Canadian housing market; retirees aiming to downsize from a big family home; and established investors who want to buy a unit and rent it out for profit.

“ Too many Canadians are being seduced by the pretty pictures and stories of easy lifestyle and they end up buying into a building that is a time bomb of costs. ”— Manulife’s Kurt Rosentreter

Although first-time, urbon condo buyers are lured by short work commutes, minimal upkeep and amenities such as pools and exercise rooms, many still see a condo as a stepping stone to owning a house later in life, when they have a family, says Mr. Rosentreter.

The problem is that most young people don’t have enough of a down payment – they should have saved at least 10 per cent – and haven’t left themselves enough wiggle room in their cash flow to cover bills and unanticipated costs and to also live the life they desire, he said.

In addition, condo owners should not assume they will be able to sell their unit at a profit. Mr. Rosentreter believes that the “sheer number of new condos being built almost guarantees that in the event of a market correction, the condos will fall faster and deeper” than a townhome or a bricks-and-mortar house.

“I tell all my young professional clients that they should not buy a condo unless they plan to own it for 10 years and have solid, sustainable cash flow,” he said.

John Pasalis, the broker owner of Toronto-based Realosophy Realty Inc., says it depends on location. “Condos do appreciate and, depending on which neighbourhood you buy, it can be a great investment.”

Adrian Mastracci, portfolio manager with KCM Wealth Management Inc. in Vancouver, says real estate is always a risky venture when taken with a short-term view. “You might not be able to sell it when you want to for what you want.”

However, in big cities such as Vancouver and Toronto, skyrocketing housing prices have left people with little choice but to enter the real estate market through the condo segment, he says.

“ Generally people buy a condo because of a lifestyle it gives them but you can not buy it on emotion alone –you need the numbers to work too. ”— Portfolio manager Adrian Mastracci

The allure of condo living is another major driver in the decision-making process. “Generally people buy a condo because of a lifestyle it gives them but you can not buy it on emotion alone –you need the numbers to work too,” Mr. Mastracci said.

For retirees on a fixed income, the numbers often don’t add up for condo life, Mr. Rosentreter says. While the idea of moving into a smaller space where you don’t have to shovel the driveway or clean the eaves troughs is appealing, retirees should think twice about committing their limited pension dollars to a rising array of maintenance and other costs that are needed to operate a multimillion-dollar building.

He cites an example of one client whose maintenance fees rose 15 per cent over the last five years to $900 a month – as much as it could be rented for. Another client was hit with a special one-time assessment bill of $12,500 as her share of fixing a crack in the underground parking garage.

Making a rental income from condos is also getting tougher, since Canada Revenue Agency is cracking down on landlords who repeatedly claim rental losses and deduct them against their regular income to trim their income tax bill, Mr. Rosentreter said. So unless you are putting down a large deposit and getting a small mortgage, a rental condo should not be claimed as a tax loss.

Condo buyers who rent out their unit and are not making 10 per cent or more might be better off with other forms of real estate investments, he added.

Before buying a condo unit, make sure that you, your lawyer and your accountant carefully review the building’s status certificate to ensure it is being run well and is in good financial health. Find out how much is in the building’s reserve fund; managed properly, the fund should have the money to cover major expenses such as cracked parking garages.

Roma Luciw is a writer and web editor of the Globeinvestor.com personal finance site. Please send any comments and story ideas to rluciw@globeandmail.ca.

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About Turning your Hobby into a Business?

November 1, 2009 by Dan White.

COURT TRANSCRIPT IS INCLUDED AT THE BOTTOM OF THIS ARTICLE.

About Turning your Hobby into a Business? You can do it, but you better make it real!

Turning your hobby into a business, is a great idea for a lot of reasons. However the one thing that can not be forgotten is what I have been saying for years. And that is you have to make it “Real.” Making it real means just that. You have to become a real business and keep proper business records.
Yes, business start up losses can be used to offset other income but, you can not use this to generate continual tax losses.

As a backgrounder, the tax rules say that you must have a “reasonable expectation of profit” to be carrying on a business. Therefore, if you operate a money-losing venture and can’t expect to make a profit, your endeavour is no longer a business. If you choose to continue to lose money with no hope of making a profit, the taxman would say you’re indulging in a hobby or some personal calling and losses from that pursuit are not tax deductible. I would agree with that statement.

Say you decided there was a market for snowmobile rentals in your area. And say your first three years of operating this untested venture produced repeated tax losses. In this case, you would have set yourself up for losing your past three years deductions. CRA would rationally take the position that a reasonable person would have shuttered the business after losing money for a few years.

If you believe that this is going to turn around, you better make sure that you keep professional books and records. The CRA would take the postion that you have no reasonable expectation of profit if you don’t keep proper books; have no business plan and have no clue how you expect to make a profit. If so, CRA would generally disallow all or at least everything but the first two years’ losses. The reason being that it should have been abundantly clear after the first few years of losses you had no reasonable expectation of profit.

The following tax court case illustrates how the reasonable expectation of profit principle works.

In Graham vs. The Queen, Oct. 22, 2008, Tax Court of Canada, the taxpayer had claimed business losses as a solo performing musician of $12,000 in 2003, $11,000 in 2004 and $9,000 in 2005. He was full-time employee at a bank during those years. His revenue came from performing gigs at Legion halls. Prior to 2002, he played as a member of a band which generated losses in most years and very modest profits in a few. As a solo performer, he received $350 to $500 per gig and performed up to five gigs a year. The CRA disallowed his losses on the basis the taxpayer had no reasonable expectation of profit and therefore his musical pursuits did not constitute a business. The taxpayer challenged the CRA’s decision.

The judge had to decide whether the taxpayer’s musical activities constitute a business pursued for profit in a commercial manner or whether it was a hobby. Considering the taxpayer didn’t track his profit or losses; couldn’t say how often he needed to perform to break even; kept sloppy bookkeeping; the judge disallowed the taxpayer’s losses on the basis there was no business pursued by the taxpayer in a commercial manner.

Thinking of going into business? If you have a legitimate business, don’t be intimidated by the reasonable expectation of profit test even if you suffer losses during the start-up period. There is no hard and fast rule as to what a reasonable start up period is.

The simple answer is, yes you can have start up losses if you have a real business, and it takes eight years before a Cristmas tree farm can show a profit. A real business keeps audit ready books and pevents tax problems of which he will need a professional solutions provider.

And remember the tax court is the final judgement and Justrice Boyle, is clear…. “you better keep good records and be able to prove that you really are a business. He will disalllow all the expenses.If you keep your books and records ready in a fashion that would convince Justice Boyle that you are a business, then you will truly be able to sleep at night.

Then of course, there is the point, that if you don’t keep good records than you are not a very good business person, and will pay the price sooner or later.

To learn more about audit ready bookkeeping go to http://www.tax-audit-solutions.com/services.htm and see “Audit Ready Bookkeeping.”

__________

COURT RULING FOLLOWS HERE;

Docket: 2008-710(IT)I

BETWEEN:

EDDIE GRAHAM,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Appeal heard on October 6, 2008, at Toronto, Ontario.

Before: The Honourable Justice Patrick Boyle

Appearances:

For the Appellant:

The Appellant himself

Counsel for the Respondent:

Laurent Bartleman

Rishma Bhimji (Student-at-Law)

____________________________________________________________________

JUDGMENT

The appeal from the assessments made under the Income Tax Act for the 2003, 2004 and 2005 taxation years is dismissed.

Signed at Winnipeg, Manitoba, this 22nd day of October 2008.

“Patrick Boyle”

Boyle, J.

Citation: 2008 TCC 580

Date: 20081022

Docket: 2008-710(IT)I

BETWEEN:

EDDIE GRAHAM,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

Boyle, J.

[1] The business losses claimed by Mr. Graham in the years 2003 through 2005 from his musical performance and disc jockey business have been denied by the Canada Revenue Agency on the basis that his musical activities and pursuits did not constitute a business.

I. Facts

[2] Mr. Graham was a full-time employee of a major Canadian bank in the years in question.

[3] Mr. Graham has a long background in music and had played in a large and successful, and occasionally modestly profitable, band in the 80’s and 90’s. When that band broke up, he decided to start a solo musical performance career involving both disc jockey work and performing. He testified that between 1998 and 2002, after the band broke up and before beginning his solo endeavours, he had taken a break from his musical pursuits. For the years in question, he registered his business as a sole proprietorship, obtained a business licence, had a business phone and business cards. He wanted to market himself to the numerous Legion halls so he attended at a couple of them and even joined one Legion.

[4] In each of the years 2003, 2004 and 2005 Mr. Graham reported net losses from his business. His modest revenues declined each year reflecting his declining number of performances from five gigs to no more than two performances. He said he stopped pursuing his music business, even though his intention and expectation was that it would become profitable, once it was challenged by Revenue Canada. He explained this was because he was discouraged and frustrated and viewed it as pointless.

[5] Mr. Graham explained that his revenues and fortunes were adversely affected by the SARS outbreak in Toronto that had an impact on the hospitality business. As well, in 2004 he had injured a middle finger which required it to be in a splint for six months such that he could neither play the guitar nor lug the heavy sound equipment needed to perform.

[6] Some of the equipment, such as the sound boards and similar mixing equipment and perhaps even the speakers, appear to be of professional quality and, according to Mr. Graham, would not be expected to be owned by people pursuing music on their own outside of a business. Mr. Graham appears to have been a capable and qualified performer who was accomplished and who rehearsed regularly throughout the period in question.

[7] On the financial side, Mr. Graham said the amount he received per performance was targeted to be in the $350 to $500 range, but could be as little as $200 per performance depending upon the success of the performance and the venue. He did not track his profits and losses personally. He did not ever consider how often he needed to perform in order to break even financially; he said he did not look at his activities that way.

[8] With respect to the expenses claimed by him in calculating his losses, he had claimed approximately $12,000 in 2003, $11,000 in 2004 and $9,000 in 2005 of business-related expenses in each of those years. In his testimony, he acknowledged that upon reviewing the receipts he had given to the CRA auditor, which should have been the same as the receipts given to his accountant, only approximately $2,300 of expenses was incurred each year. He said he did not know why his accountant would claim expenses that could not properly be claimed. In fairness, the evidence on this point left me unclear on whether only approximately $2,300 of expenses were evidenced by receipts, or only $2,300 was deductible in any event

II. Analysis

[9] In circumstances such as these, I must first decide whether Mr. Graham’s musical activity constituted a business pursued for profit in a commercial manner or whether it was a personal endeavour in the nature of a hobby or the like. This approach is mandated by the Supreme Court’s 2002 decision in Stewart v. Her Majesty the Queen, 2002 D.T.C. 6969. In Stewart, the Supreme Court highlights some of the criteria, indicia of commerciality, and badges of trade that should be considered.

[10] In the circumstances, Mr. Graham has been unable to provide sufficient credible evidence to establish on a balance of probabilities that his musical pursuits were a business pursued for profit in a commercial manner. My concerns with the evidence presented are:

(i) he testified that between 1998 and 2001 he took a break from his music business. However, in his 2007 letter to the Chief of Appeals, he describes himself expressly as carrying on the music business in those years successfully and without incurring a loss. He was unable to sensibly explain the difference between these positions;

(ii) if Mr. Graham intended to make a profit and believed that he could and would make a profit from his musical pursuits, it does not make any sense that he would discontinue his business when prior years’ losses were challenged by CRA. He could not explain this sensibly either;

(iii) there is insufficient evidence of a business-like approach to pursuing performance contracts. The only evidence was that he pursued several Legion halls. There was no evidence that, when market conditions changed due to SARS, he adapted his marketing or business strategy in order to keep it going in a successful direction;

(iv) his solo musical venture has never been profitable. His prior work with the band generated losses in most years and very modest profits in a couple of years. Indeed, its most successful year was 10 years prior to his solo pursuits and his profits were in the $2,000 range. The profitable years were in the years 1989 to 1993;

(v) while Mr. Graham did own expensive equipment that may well have been beyond what an amateur would be expected to own, his continued ownership of it in the years in question was consistent with him having hung on to quality equipment previously purchased for his band work in the years long before those in question;

(vi) I am troubled by his explanation that he never considered how many performances he needed to get in order to be profitable and begin making money from the venture. It is one thing not to have a formal written business plan in cases such as these; it is another to maintain one both believed and intended the pursuits to be profitable without ever considering the revenues needed to cover the expenses being incurred; and

(vii) I am not satisfied with Mr. Graham’s explanation of how his accountant appeared to have claimed a large number of expenses that should not have been claimed. I was not given sufficient details to decide whether that explanation was reasonable or credible.

[11] Mr. Graham’s appeal is dismissed.

Signed at Winnipeg, Manitoba, this 22nd day of October 2008.

“Patrick Boyle”

Boyle, J.

CITATION: 2008 TCC 580

COURT FILE NO.: 2008-710(IT)I

STYLE OF CAUSE: EDDIE GRAHAM v. HER MAJESTY THE QUEEN

PLACE OF HEARING: Toronto, Ontario

DATE OF HEARING: October 6, 2008

REASONS FOR JUDGMENT BY: The Honourable Justice Patrick Boyle

DATE OF JUDGMENT: October 22nd, 2008

APPEARANCES:

For the Appellant:

The Appellant himself

Counsel for the Respondent:

Laurent Bartleman

Rishma Bhimji (Student-at-Law)

COUNSEL OF RECORD:

For the Appellant:

Name:

Firm:

For the Respondent: John H. Sims, Q.C.

Deputy Attorney General of Canada

Ottawa, Canada

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Blogroll

Archive for November 2009

Why the Income Tax Act is failing us

Regarding the HST and how things shake down for investments.

Bookkeeping goes to court…. businesses need to be “Audit Ready”

Are you being audited? Read this before calling anyone else but Tax Audit Solutions!

CRA versus the Cartoonist, Tax Problem Abuse by CRA backfires.

CRA is evading truth about Swiss Banking

FINTRAC’s 2009 Annual Report

Updates on class action law suit about CRA Abuse and the Tax Man Documentary

CRA is getting more and more tarnished in the eyes of Canadians.

Mandatory Internet Filing for T2 Returns for Corporations with over 1 Million Gross Revenue

The Real Side of Voluntary Disclosures. (The Tax Amnesty Program)

The Best Tax Solution Savings Accounts

CRA does gross negligance

We have entered a new tax crisis, for Canadians. Canadians need to take action now.

The soltution to CRA tax problems, is causing Canadians to become non residents.

Condos make a good home, but as an investment, it is questionable.

About Turning your Hobby into a Business?