February 26, 2010 by Dan White.

It appears that the contracts of service and for service, are becoming ever more important in making sure that your status surrounding your status in the eyes of various government agencies.

In this case because no services at all were being provided by workers on long term disability, CRA was wrong in claiming that CPP disability payments were taxable income.

CRA has really sunk to a low on this one. Let’s take someone who is unable to work, collects disability payments and tax them. Nice work CRA. I am glad your efforts failed.

For more information on tax problems go to Tax Audit Solutions www.taxauditsolutions.ca

Dan White

From Benefits Canada

Briefly: “Court of Appeal rules on LTD benefits” and more news

February 12, 2010

The Federal Court of Appeal has rendered a decision that will be of interest to employers that provide long-term disability (LTD) benefits to their employees through self-funded or administrative services only (ASO) arrangements, according to Hicks Morley’s FTR Now.

According to the Court’s decision in Toronto Transit Commission v. Minister of National Revenue (TTC), Canada Pension Plan (CPP) contributions are not required on LTD payments made under an ASO plan, even if it is determined that employment insurance (EI) premiums must be made.

The TTC case concerns an appeal of the assessment of the Minister of National Revenue that monthly ASO disability payments paid to two TTC employees constituted remuneration for pensionable employment and thus were subject to an employer’s CPP contribution pursuant to Subsection 9(1) of the CPP.

At the Tax Court of Canada, the TTC’s position was that the definition of employment under the CPP requires the performance of services. But, as the disabled employees performed no services, the LTD payments were not pensionable. The Tax Court concluded that CPP contributions are required to be deducted and remitted from LTD payments made from the TTC’s ASO plan.

Upon appeal by the TTC, the Federal Court of Appeal concluded that a payment has to be made in exchange for the actual performance of service under a contract of employment for it to constitute pensionable earnings, and there is no performance of services in the case of an employee who is in receipt of LTD payments.

As a result, the Federal Court of Appeal held that the TTC was not required to deduct CPP contributions from the LTD payments made under its ASO arrangement as the employees were not performing services during their period of disability.

Implications

The Hicks Morley bulletin explains that unless the decision is successfully appealed, the TTC case provides strong support for the position that CPP contributions are not required to be deducted and remitted on LTD payments made under an ASO plan, even if it is determined that EI premiums must be made.

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February 19, 2010 by Dan White.

As a follow up to my earlier blog this morning. Read the following and then ask yourself; Does CRA go too far?”

Dan White

To learn more about CRA abuse and what you can do, go to www.taxauditsolutions.ca

__________

Taxpayer ombudsman can’t fix everything at CRA

Paul Dube and his staff win some, lose some while taking on thousands of cases

By Don Cayo, Vancouver SunFebruary 19, 2010 2:06 AM

It has been five years since I wrote my first column in what has become an long-running, intermittent series on taxpayer complaints about the Canada Revenue Agency.

It’s two years this Sunday since lawyer Paul Dube was appointed by the federal government as Canada’s first taxpayers’ ombudsman with a mandate to do much the same thing, to expose and rectify those complaints.

I had some success with my first case: CRA backed down from a ruling that would have re-interpreted old rules and imposed a six-figure reassessment on three Vancouver fruit sellers. I’ve been as lucky with several cases since.

Nonetheless, I’m pleased to report that Dube and his staff are batting quite a lot better than me. They’ve taken on a few thousand cases, compared with my few dozen. They’ve righted a gratifying number of wrongs, although he doesn’t have a precise count.

Still, I’m left with the uncomfortable feeling the tools Dube has been given are no surer or sharper than mine. In the end, he and I can both only scold, me in print and he more privately, mandarin-to-mandarin, so to speak. Beyond that, all either of us can do is hope CRA will do the right thing.

Ultimately, despite what Dube describes as a “formidable” power to assume guilt and impose crippling penalties, there’s no affordable, effective check on when CRA acts capriciously or decides to dig in. He and I are in the same boat in that we can say CRA really should fix some mess or other, but we can’t say they must.

And Dube has no power to order a financial break for people who’ve been ill-treated.

This last point is important.

Dube told me when he was in the city this month that communication is the most common cause of problems he encounters. I sort of agree, only I call it a failure to communicate, when taxpayers can’t reach the people who are making life-altering decisions about their files, when CRA won’t answer valid questions for months or years, or when answers change every time a new guy is assigned to the file.

The recurring theme in the stories I hear is how fast CRA’s demands for money ratchet up while the bureaucracy’s collective thumbs are twiddling.

If Dube were to look into many of the cases that come across my desk and find that policies were ignored or misapplied, what good would it do? Because Dube doesn’t have the authority to adjust the amount said to be owing.

Nor does he have the power to do anything about policies that are wrong-headed, although he’s sometimes successful in pleading for a break when an across-the-board policy yields a patently unfair result as a result of unique circumstances.

The upshot, as was noted last fall by the headline on my 39th column on the CRA, is that the main option open to aggrieved taxpayers is to “pay up and shut up or pay up and beg.”

And, as if this level of uncertainty isn’t bad enough, it gets worse. A survey commissioned by Dube found that 42 per cent of Canadians fear repercussions if they complain about CRA.

So I’m pleased that he got the job and that he’s able to look into several hundred cases a month, and resolve many of them.

And I wish him well in his quest to become better-known to Canadians and increase this volume to whatever it needs to be.

Dube’s phone number is 1-866-586-3839. His office accepts only complaints about CRA service, although, he says, that is interpreted quite broadly.

dcayo@vancouversun.com

See Don Cayo’s blog on tax issues and one on globalization s at vancouversun.com/blogs

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February 19, 2010 by Dan White.

TaxMan drives TaxPayer Crazy. TaxPayer flies plane into TaxMan’s Offices.

We have seen a lot of client’s feeling suicidal over the TaxMan and we have seen TaxPayers be very angry. But yesterday Joseph Stack took the final sacrifice for his country. He gave his life to tell his story.

It is extremely unfortunate that this has happened. I am sure that the IRS has a code of conduct similar to the CRA code and the TaxPayers Bill of Rights. Perhaps the TaxMan was thinking they had unrestricted powers. We have had CRA collections officers telling us that they did. When they say such things we know it is either ignorance of the law, CRA policy, The TaxPayer’s Bill of Rights, or the Canadian Charter of Rights. The TaxMan does NOT have unrestricted power.

There is no excuse for murder. Especially when it was not even likely the IRS personnel who drove Mr. Stack over the edge of sanity were even part of the disaster. My heart goes out to Joseph Stack and his friends and family. Joseph was obviously driven out of his sane mind. When you go out of your mind, revenge is bitter sweet. This is a sad day for North America.

I would hope that this event would cause the mutual friends “IRS and CRA” to reconsider their behavior.

I can tell you from a lot of personal experience. Some CRA staff are beyond mean. Some staff are obnoxious, bullying and bald faced liars.

CRA staff need to take this as a warning. Joseph Stack is not the only person in North America at their wits end and ready to end a life, usually it is their own.

We spend a lot of time with our clients getting them emotionally stabilized… we usually strongly urge them to not talk to the TaxMan. Instead we look after it all. We cannot be intimidated, but the individual uninformed of their rights TaxPayers certainly can be intimidated.

Let this stand as a warning to the TaxMan; The next time you abuse a TaxPayer, ask “Am I going to far?” Then govern yourself accordingly.

Dan White
__________

http://www.foxnews.com/story/0,2933,586581,00.html

Fox News, announces Pilot Crashes Into Texas Building in Apparent Anti-IRS Suicide

Thursday, February 18, 2010

AP/Courtesy of Pam Parker

Joseph Stack

Joseph Stack

A pilot furious with the Internal Revenue Service crashed his small plane into an Austin, Texas, office building where nearly 200 federal tax employees work on Thursday, igniting a raging fire that sent massive plumes of thick, black smoke rising from the seven-story structure.

Austin Police Chief Art Acevedo said the incident was a single act by a sole individual, who appeared to be targeting the federal building. He refused to classify it as terrorism.

“I call it a cowardly, criminal act and there was no excuse for it,” Acevedo said at a news conference.

The FBI identified the pliot as Joseph Stack, a 53-year-old software engineer. Stack was confirmed dead, but his body has not yet been recovered.

At least one person who worked in the building was unaccounted for and two people were hospitalized, thirteen others were treated and released said Austin Fire Department Division Chief Dawn Clopton.

Emergency crews found two bodies in the building late Thursday evening, but wouldn’t identify them.

Texas Republican Congressman Michael McCaul told reported the incident was, “not tied to overseas terror organizations.”

A U.S. law official said investigators were looking at a lengthy, anti-government “manifesto” Stack is believed to have written on his Web site. The message outlines problems with the IRS and says violence “is the only answer.”

Click here to read the “manifesto” that was published on Stack’s Web site.

About 190 IRS employees work at 9420 Research Boulevard, the building that Stack crashed into. IRS spokesman Richard C. Sanford said the agency is trying to account for all of its workers.

IRS Agent William Winnie said he was on the third floor of the building when he saw a light-colored, single engine plane coming toward the building, TheStatesman.com reported.

“It looked like it was coming right in my window,” Winnie said, according to the Web site.
Related Stories

* Friends Didn’t See Texas Pilot’s Passion for Tax Feud
* Troubling Portrait Emerges of Pilot Who Crashed Into Texas Building
* Glass Worker Turns Hero After Plane Crashes Into Texas Building
* Chilling Eye-Witness Accounts of Texas Plane Crash
* RAW DATA: Joseph Stack Suicide Manifesto

SLIDESHOW: Small Plane Crashes Into Austin Office Building

He said the plane veered down and smashed into the lower floors. “I didn’t lose my footing, but it was enough to knock people who were sitting to the floor,” he said.

In what appears to have been his suicide note, Stack is believed to have written:

“If you’re reading this, you’re no doubt asking yourself, “Why did this have to happen?’ The simple truth is that it is complicated and has been coming for a long time…

“Violence not only is the answer, it is the only answer…

“I saw it written once that the definition of insanity is repeating the same process over and over and expecting the outcome to suddenly be different. I am finally ready to stop this insanity. Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well,” the note, dated Thursday, reads.

IRS Commissioner Doug Shulman said he was shocked by the “tragic events,” but did not directly address Stack’s rant against the government agency.

“This incident is of deep concern to me,” the statement read. “We are working with law-enforcement agencies to fully investigate the events that led up to this plane crash.”

Stack took off in a Piper Cherokee from Georgetown Municipal Airport in Texas at 9:40 a.m. Federal Aviation Administration spokesman Lynn Lunsford said he didn’t file a flight plan. The plane crashed into the building in Austin about 20 minutes later.

Click here for chilling eye-witness accounts of Texas plane crash.

The Department of Homeland Security said it did not believe the crash was an act of terrorism. President Obama was briefed on the incident. As a precaution, the Colorado-based North American Aerospace Defense Command launched two F-16 aircraft from Houston’s Ellington Field, and was conducting an air patrol over the crash area.

Patrick Beach, who once played in a band with Stack, described him as a mild-mannered guy who was a stereotypical software guy.

“I talked to alot of people who knew him better than I did, and no one saw anything like this coming,” Beach told Fox News.

The toughest part about this, Beach said, was how this guy, who loved his wife and step-child, could be the same person who wanted to “commit mass murder.”

Billy Eli, a band member of Stack’s, has known the man for about five years and said he never suspected Stack had any political feelings.

“The Joe I knew was mostly apolitical,” he told Fox News. “I never heard him talk politics, or take a stand left or right. As far as I know he didn’t have a party affiliation.”

Stuart Newberg, who was in the area right before the crash, said the plane was flying low and fast when it plowed into the building, according to The Statesman.com.

“It was flying low and fast and I did a double take,” Newberg said, according to the Web site.

“I thought it was a play remote control plane. Then I saw the smoke.”

He told the paper he thought the plane seemed “very controlled.”

In a neighborhood about six miles from the crash site, a home listed as belonging to Stack was on fire earlier Thursday. Two law enforcement officials said Stack apparently set fire to his home before embarking on his suicide mission.

MyFoxAustin.com said firefighters reported that the entire house was on fire, including the fence, when they arrived on the scene.

Neighbors said they heard a loud explosion in the house Thursday morning right before it became engulfed in flames.

MyFoxAustin.com reported that a 12-year-old girl and a woman were rescued by a neighbor from the $236,000 home. The station reported that the girl is believed to be Stack’s stepdaughter. Other media reports indicated that these individuals may have alerted authorities to Stack’s actions.

A neighbor told MyFoxAustin.com that Stack was an experienced pilot who owned his own plane.

The Austin American-Statesman newspaper reported several “walking wounded” at the scene of the crash. Paramedics set up a triage center at the scene.

Early reports that the building housed the FBI field office in Austin turned out not to be true. An FBI spokesman told Fox News that the FBI office in Austin is near where the plane crashed, but not in the same building. There are some federal offices in the building, though authorities couldn’t identify which ones.

The NTSB was sending staff out of Dallas and Washington to the scene.

Witnesses were asked to contact the Austin Police Department at 210-650-6196 with any information that might be useful in the investigation.

According to California Secretary of State records, Stack had a troubled business history, twice starting software companies in California that ultimately were suspended by the state’s Franchise Tax Board.

In 1985, he incorporated Prowess Engineering Inc. in Corona. It was suspended two years later. He started Software Systems Service Corp. in Lincoln in 1995 and that entity was suspended in 2001. Stack listed himself as chief executive officer of both companies.

Click here for more from MyFoxAustin.com.

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February 18, 2010 by Dan White.

Old Lace, Investments and Insurance can be a complicated unkindness.

The following article demonstrates how innocent investments made from following licensed advisers, can become a complicated tax mess.

To learn more on solving tax problems, please go to www.taxauditsolutions.ca

Dan White
________

Ottawa mum on taxing insurers’ fund guarantees

Published On Thu Feb 18 2010

By James Daw Personal Finance Columnist

Nearly 200 funds carrying Canadian life insurer guarantees are worth less than a decade ago.

So thousands of investors may soon be eligible to collect top-up payments to cover a loss of capital.

Yet, after all this time, it remains unresolved how those top-up payments should be taxed, if at all.

There were 199 so-called segregated funds – insurers’ alternative to mutual funds – that were worth less on Jan. 31 than a decade earlier, says researcher David O’Leary of Morningstar Canada.

Investors’ losses, including deductions for annual fees, ranged from an average of 0.1 per cent per year to 19.4 per cent per year in the case of the TransAmerica IMS Information Technology Fund.

The heaviest losses were for fund units purchased shortly before 2000, when the technology stock bubble burst.

TransAmerica used to tell policyholders and agents its top-ups would be tax-free, says Arthur Robson, of Future Planning Insurance Agency Ltd. in Pickering.

Then, a couple of years ago, TransAmerica came around to the expectation of other insurers: That top-ups would be considered a capital gain.

Some insurers have been reporting capital gains to the estates of deceased investors, to the dismay and confusion of heirs.

Consumers think of death benefits from life insurers as being tax-free. A top-up to restore lost capital does not seem like a gain.

Nevertheless, if the top-ups are a capital gain, then investors would have had a loss to offset the gain. So it should be a wash.

The tax question is irrelevant for funds held inside a registered retirement savings plan. Every dollar will eventually be taxed like salary or interest income.

But many other investors have been left in suspense.

“The tax treatment of the top-up is not certain at this time,” Manulife Financial warns investors, urging them to seek tax advice.

It’s not for lack of asking that insurers, and investors, are in the dark. Insurers have asked the Department of Finance to clarify tax legislation. But nothing has happened yet.

“We brought this to finance more than a dozen years ago,” says Ron Sanderson, director of policyholder taxation and pensions at the Canadian Life and Health Insurance Association. “It doesn’t seem to be a high priority with them.”

Yet, stakes are higher after changes in industry offerings and two stock market crashes in a decade.

Sanderson says insurers used to only offer top-up payments at the time of a death or the end of a contract, and only for losses of more than 25 per cent.

It was only after about 1990 that insurers started offering to cover losses after 10 years. Later in the ’90s some guaranteed a 100-per-cent return of capital. More recently some have offered, for an additional fee, to guarantee a minimum annual income.

Sanderson sees why consumers might expect a tax-free payment. They paid extra fees each year for a form of life insurance.

Yet, he says, finance officials led insurers to believe six years ago that they felt the top-ups should be treated as a capital gain. To be safe, some insurers have even reported top-ups as ordinary income, which cannot be offset by a capital loss.

Whether or not insurers report a top-up as a capital gain, all would have reported capital losses as they occurred, Sanderson notes.

Some investors may have reported these losses on earlier tax returns. This should make it relatively easy to use net losses to offset a net gain and avoid taxes on half of any top-up payment.

Regardless, the Canada Revenue Agency should have records after receiving copies of annual T3 tax slips from insurers.

Accountant Nancy Belo Gomes of KPMG points out the Tax Court of Canada agreed with taxpayer Don G. Burleigh in 2004 that a net capital loss need not be reported until it is used to offset a capital gain.

jdaw@thestar.ca

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February 17, 2010 by Dan White.

This article just came to my attention.

Although it is not really news as it is a couple of years old…. and CRA behaviour has gotten worse… this really is a great article.

For more information on tax problems go to www.taxauditsolutions.ca

Dan White

Taxman’s skewed appraisals add up to abuse

What is “fair market value” for a property? Is it what a buyer actually pays in an arm’s-length deal? Or what somebody thinks a different buyer might have paid in different circumstances?

BY THE VANCOUVER SUN MAY 13, 2008

What is “fair market value” for a property? Is it what a buyer actually pays in an arm’s-length deal? Or what somebody thinks a different buyer might have paid in different circumstances?

And what if there is no buyer — a property changing hands through inheritance, for example? Is it worth the amount for which it’s currently assessed? Or what somebody decides, months later, it should have been back when the transfer takes place?

If you’re naive enough to think common sense and fair play might apply — of course it’s the price they paid, of course it’s the current assessment — then you aren’t a taxman. Our government bullies, federal and provincial, pay no heed to such constraints.

Two horror stories landed on my desk within hours of each other last week detailing how tax collectors — one representing Ottawa, and one in Victoria — put the screws to taxpayers in shockingly similar ways.

The first involves Canada Revenue Agency. The story is told to me by businessman Leonard Schein, but, judging from what CRA has told him, it’s happening to a lot of others as well.

Schein bought a pre-sale condo in a new Yaletown building from Concorde Pacific in 2001 for $330,000. When it was ready for occupancy three years later, he paid about $23,000 in GST on the full price, as he was required to do. As a rental unit costing less than $450,000, it was eligible for a partial rebate, so he applied for and got a cheque for $8,401.76.

He kept his end of the bargain, renting out the suite ever since. But CRA is welshing, in its brutally, heavy-handed way.

Two weeks ago, Schein got a call from CRA telling him that he — and many others — have to send the money back. The reason? They (gasp!) got a good deal when the bought their property. CRA believes it was actually worth more than $450,000, so it won’t grant the rebate.

A few days later, he got the bill. It’s for the original $8,401.76, plus $842.77 in “late remitting penalty” (even though they sent him the rebate cheque in the first place) and $1,410.96 in interest — a whopping $10,655.49 in all.

Now Concorde Pacific didn’t get where it is — to build and sell more than 10,000 units in Vancouver — by under-pricing its products. And it pre-sells almost all of them because that’s how new towers are financed.

Pre-sale buyers tend to do well in Vancouver’s sharply rising housing market, but that doesn’t mean they pay too little. It means they also took a risk — they’d have lost their shirts if, for example, they’d bought a pre-sale two years ago in a American city. And they’ve tied up big downpayments for two or three years before taking occupancy.

So the price they paid is the price the unit is worth under such circumstances.

But try telling that to the heavy-handed taxman. Schein recently bought a second rental unit in another new building for $358,000, and CRA rejected his application for a partial rebate out of hand. The arrogant taxman simply deemed this to also be too good a deal — a property actually worth more than $450,000.

When Schein sells his condos, the market at the time will establish their worth — it will be whatever he can get. It looks like that will be more, probably much more, than he paid. If so, the sales will trigger capital-gains liabilities.

That’s as it should be. In the meantime, the regulations that allow CRA to shake down Schein and others like him should be reassessed and repealed. CRA may require the ability to deem the value of properties in cases where non-arm’s-length vendors play games to create tax advantages. But they shouldn’t be using this power to second-guess the market and extort money from people who get what they pay for, and pay for what they get.

Mind you, it seems the provincial Revenue Department is just as bad. Beth Dierks of Dierks Equipment Sales Ltd. in east Vancouver tells me that she and two siblings are being similarly jerked around over an inheritance.

Their father died late in 2006, and his will was probated by mid-2007. Dierks, her brother and her sister re-mortgaged a building they jointly inherited in order to pay the property transfer tax and the capital-gains tax.

The property, in the family for 40 years, was assessed at $400,000 when their dad died, but that had risen to $600,000 by the time the will was probated, and their tax payments were based on the higher figure.

But now, Victoria is hounding them for another big payment based on yet another assessment — $918,000 — that didn’t come out until early this year.

The province claims that’s what the building was worth back when the probate was done.

But if any business on earth failed to adjust its prices when the time was optimum, it certainly couldn’t expect to go back and do it later. If you snooze, you lose. It’s not fair to change the rules when the game’s already in play.

So here’s an offer for federal Revenue Minister Gordon O’Connor and provincial Revenue Minister Rick Thorpe, whose departments are responsible for these taxpayer abuses: The first to call and say you’ve fixed the respective injustice will get a tip of the hat — maybe even a headline — in a forthcoming column.

dcayo@png.canwest.com

Visit Don Cayo’s blog at www. vancouversun.com/blogs

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February 16, 2010 by Dan White.

There are a number of different types of TaxReps;

It is very important to match the right TaxRep to the right tax problem. So review the following with just thought to what is right for you.

A TaxRep can come from any one of the following areas.

1. A Lawyer
2. An Accountant
3. A Tax Consultant
4. An Expert Witness.

The practice of law is very broad and you need a specialist in Tax Litigation. If you pick a Lawyer as a TaxRep, it could be your best choice, depending on your situation. If your situation is one where you know your activities involve a criminal element, and the Lawyer is a litigator, who is fully abreast of CRA procedures, then this is where you need to lean. It is normally the most expensive option. A tax litigation Lawyer is your best bet for client material privilege as well as client-solicitor privilege. Privilege is normally not of particular concern if you are not likely going to court.

Accounting is also a broad field, and you will require an accountant who is familiar with Taxes. Not all accountants specialize in taxation. If you are not engaged in a criminal activity, and you just need to get your tax returns caught up, a licensed accountant is a good idea. The chances of you getting audited are low if a licensed accountant does your tax returns. Accountant’s licenses are vulnerable, so they tend to be very conservative in their approach to doing tax returns. As a result a good accountant’s work will reduce your chances of being audited. If you are audited any good accountant can easily explain how they came up with the numbers on your tax returns. Accountants are normally considerably less expensive than Lawyers. However accountants have a monkey on their back when it comes to fighting with CRA. If you are in for a fight, an accountant may not be your best bet.

Tax Consultants can be any combination of 1, 2 and 4. With Tax Consultants you need to be especially concerned with their experience and track record. The concern is that the consultant may not have any credentials. The opposite side of that coin is that they also can be more aggressive in dealing with CRA… because they don’t have a license to lose. You need to make sure that you know that the consultant deals with CRA on a daily basis and has been doing so for a long time.

An Expert Witness, can be any combination of 1,2 or 3. An expert witness can be hired to present the material you have in court. What this means is that if you decide to defend yourself in General procedures in tax court, you can rely on your Expert Witness to testify as to the reasons, evidence, tax laws and cases relied on. While this is not as good as hiring a Lawyer it is an excellent option if you simply cannot afford a Lawyer. Your Expert Witness can also act as a Material Witness. This would apply when they are involved in the actual activities surrounding your tax problems. Lawyers often bring in such witnesses to support their case… Usually it would be as a Material Witness, however if an inexperienced Lawyer wanted to enhance their case, they too would bring in the Expert Witness.

Depending on your particular situation will dictate which is your better choice.

Tax Audit Solutions is a TaxRep (Tax Representative) we deal right across the board in all kinds of tax problems. If a lawyer is needed, we bring one in. We consult with Accountants who are outstanding in their fields. We do both Material and Expert Witness roles. We are fully familiar with CRA and their rules, procedures and their tactics. We always start off on a friendly note with CRA, but if necessary, we are aggressive, we fear no evil. We have tons of experience from dealing with CRA every day. We are in constant contact with various experts across the country. We believe that if you have a tax problem where a lot of money is on the line, we are your best choice for representation in defending you against the TaxMan.

To learn more about Tax Representation go to www.taxauditsolutions.ca

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February 16, 2010 by Dan White.

 Due to dealing with CRA on a daily basis, and further, being we are the ones who are approached by Canadians who have been mistreated, we naturally don’t see the ombudsman’s report as any kind of a surprise.

To be fair to CRA… no one ever comes to us about them being treated well, so we often forget that there are a lot of reasonable CRA staff out there.

We just get exposed to the darker side of CRA.

The folowing artice demonstrates the point. You do not get 5,000 complaint inquirieys becuase there is no abuse out there. On the contrary the abuse is real and Canadians across the land are surrering from CRA abuse.

To learn more about what to do in cases of CRA abuse, please go to www.taxauditsolutions.ca

Dan White

______

Canada’s tax ombudsman investigated 532 complaints last year: Report

By Allison Cross, Canwest News ServiceDecember 17, 2009

OTTAWA — A report produced by Canada’s independent tax ombudsman has found some problems with the way the Canada Revenue Agency hands out tax benefits and treats its taxpayers.

The report says investigations by the ombudsman led to CRA apologizing to taxpayers; the government releasing seized bank accounts; changes in CRA procedure and the payment of benefits or refunds.

Eighty-four cases were carried over into the next fiscal year and 422 files were closed without an investigation.

“When you have large systems in place, sometimes general rules are universally applied (and) rules don’t lead to the desired result in every case,” said ombudsman J. Paul Dube, during a media teleconference Tuesday. “So that’s what we’re there to do. Intervene in those cases.”

The office of Canada’s independent taxpayers’ ombudsman received nearly 5,000 inquiries and investigated 532 individual complaints related to service provided by CRA over the last fiscal year, Dube said.

A resolved case included in the report involved a single mother living on minimum wage, who applied for an increase in her Canada Child Tax Benefit and other family allowance supplements, after she separated from her common-law husband. When CRA did not accept proof she provided of her new marital status and asked for a repayment of $4,200, the ombudsman intervened and CRA eventually issued her a payment of $1,500.

“Canadians are entitled to professional service and fair treatment, and . . . (access) to an independent and impartial ombudsman when they feel they have not received the service and treatment to which they are entitled,” Dube said.

The proper distribution of the Canada Child Tax Benefit, the right to clear, complete, accurate, and timely information, the right to fair treatment and the right to professional service are among the systemic problems identified in the report.

In February 2008, Dube was appointed to the position of Canada’s taxpayers’ ombudsman, the first of its kind in Canada, in order to keep tabs on the CRA and report his findings to Revenue Minister Jean-Pierre Blackburn.

The report has been introduced in Parliament and similar undertakings are to be produced annually.

Future reports will include more detailed examinations into systemic problems at CRA, and will propose possible solutions, the report says.

“Fair treatment and professional service are central to our government’s ability to sustain Canada’s prosperity,” said Blackburn in a news release. “The taxpayers’ ombudsman provides an added measure of assurance that the Canada Revenue Agency treats all taxpayers with fairness and respect, in accordance with the taxpayer bill of rights.”

The CRA processes approximately 24 million individual tax returns each year, in addition to 1.6 million corporate returns.

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February 15, 2010 by Dan White.

There are some serious questions that need answering, for making a decision of what to do about your tax problem.
Should you handle this yourself, hire a Licensed Accountant, hire a Tax lawyer, or should you hire a Professional Tax Representative?
There is a time and place for hiring professionals. Your job is to match your needs with the right professional.

There are no doubts in my mind as to the abilities of various professionals to do a good job. The hard part is picking the right help for the situation.

Lawyers often get a bad rap. When a lawyer is needed, they  are mercenaries. That is a good thing. That is just what you need, “a hired gun” to defend your legal rights.

Licenses Accountants often get unjustly blamed for tax problems. Accountants have a license to worry about, they often refer to CRA as a monkey on their back preventing them from being aggressive with CRA in dealing with your best interests.
If all you need is to file your tax returns, as in a demand to file, you should simply hire a good tax accountant. This issue does not require a lawyer. The lawyer just has to hire an accountant to do the work and this will cost you needless extra dollars.

Lawyers and accountants specialize in many different areas. You need to make sure they have EXPERIENCE in dealing with cases such as yours.

If you are going to hire a tax lawyer, I would suggest that you hire a tax litigator. Hiring a tax lawyer who is not a litigator to talk to CRA is a questionable expense at best.

If you are considering client privilege, make sure the lawyer understands the finite difference between solicitor-client privilege and litigation privilege.

The distinction between the two privileges in straightforward terms. Solicitor-client privilege protects a client from having to disclose confidential communications passing with counsel in the course of obtaining legal advice.

Solicitor-client privilege is protected because citizens must have “full and ready access to legal advice” if they are to know and exercise their legal rights and obligations. If a client knows that communications with counsel will be strictly confidential, he or she is more likely to be candid in discussing legal matters, and the advice is more likely to be accurate and helpful. It is for this reason that the privilege is jealously guarded by the courts, and will only be overcome in exceptional circumstances.

As for litigation privilege,  it encompasses materials or communications created for the dominant purpose of litigation. Unlike solicitor-client privilege, it need not involve confidential communications and only exists in the context of litigation. Its rationale is also different: the underlying policy is to ensure that a party to litigation can investigate and prepare without having the fruits of these labours revealed to the other side. As Ontario Court of Appeal Justice Robert Sharpe aptly stated in an article written before his appointment to the bench, “litigation privilege aims to facilitate a process (namely, the adversary process), while solicitor-client privilege aims to protect a relationship (namely, the confidential relationship between a lawyer and client).”

So what does the above mean? What it means is that if you go to a lawyer for advice and you get that lawyer to represent you, then the verbal communication/relationship is protected under client-solicitor privileged.
If you don’t hire the lawyer to litigate, I see no advantage to having the privilege.

If you are not hiring the lawyer to litigate for you, the information documentation itself may by vulnerable unless it is to be used in litigation, if some other party needs the information to defend themselves.

In other words, a taxpayer in trouble, needs to know what they need and not blindly think that just any tax professional is the right choice.

Tax Representatives specialize in helping people with CRA tax problems. I believe that a Tax Representative is always where you start. Just make sure that the representative has a lot of experience.

A skilled Tax Representative can save you a ton of money and can handle everything from dealing with CRA to negotiate, to remove liens and garnishees, handle any audits, notices of objection, appeals.

A skilled Tax Representative can even serve as a Material or Expert witness to support you in tax court.

If a lawyer is going to be needed, then your Tax Representative will be the first one to suggest you hire one.

Client confidentiality is not an issue until you are ready to go to CRA or to tax court, and then only if it is clear that you are going to need a lawyer or that CRA will see this as an issue that they wish to pursue. Should CRA pursue you, then you may need a lawyer.
Can a Tax Representative be forced to testify against you? The answer is yes. However any good representative who sees that you are at a serious risk, will simply recommend a lawyer prior to CRA being contacted. The purpose will be for legal advice in preparation for litigation. The lawyer can then retain the representative to work under them to prepare all the accounting records, which will be protected under litigation privilege.

Your job is to decide what is the best and most appropriate help for your particular situation. Let’s look at the types of problems you may have; Unreported income; This is not necessarily a serious issue if the amounts are small. In many cases the best risk management is to simply file a T1 A adjustment. If the amounts in question are large, then you do need professional help. Have your Tax Representative who is a risk manager, assess the risk and advise you which direction to take.

Requests to file and demands to file (unfiled tax returns) are routine issues and just need to be handled by a highly competent tax accountant. Filing of these types of returns do not usually require a lawyer or even a Tax Representative unless you have some serious issues going on.

Collections definitely require a skilled and experienced Tax Representative, it is not a matter of law, it is a matter of procedures.
Audits are a mission critical situation, where only fools tred fearlessly into dangerous waters. Audits are not legal proceedings, they are simply a legal process of determining the amount tax owing. However an audit is where CRA gets a ton of money from Canadians who think that they have nothing to hide, hence nothing to fear. When the audit is over, then they know what they did not know that they should have feared. An audit is most often a very expensive activity for the taxpayer and a very financially rewarding activity for the TaxMan.

Unpayable tax bills simply require a skilled negotiation, by someone who is a risk manager and is very knowledgeable about what and how to go about the negotiations.

Sometimes an unmanageable tax bill is a matter of bankruptcy, but make sure you get high end tax and risk management advice to see if the problem can be fixed by going to a trustee. By the way a trustee is a Charted Accountant who specializes in bankruptcies. They are usually experts in their fields. Having said that, as in any field, it is a good idea to ask for a referral from someone who knows the business.

Let’s face some facts to consider.
CRA usually just wants your money. You usually don’t need a lawyer to handle your case unless you are charged with tax evasion.
***** again…I am not knocking lawyers and accountants, I am just saying hire what is the best risk and value proposition for your particular case.
Even if you are charged with tax evasion, you still need your records put in the proper order. Lawyers are trained to deal with the law. So it is a good idea to have your ducks in order before going to see your lawyer, who will be able to analyze the situation in much less time by having the pertinent facts properly presented to them.

Hiring a licensed accountant to ensure your taxes are done right in the first place is a good idea. However it may not be such a good idea if you are already in trouble. If you are in danger of an audit, then you need someone like a Tax Representative who knows audit ready bookkeeping. QuickBooks and the like is NOT audit ready bookkeeping. It is anything but audit ready.

Not many licensed accountants have been trained in forensic or audit ready record keeping. So just picking an accountant may be a disaster in your case. You need to find out for sure what exactly is their experience in dealing  with CRA battles.

CRA wants to see your records so that they can eliminate any deductions they can for whatever reason they can come up with. Most accountants are not trained to do audit ready bookkeeping, and the accounting software out there is not set up to do audit ready bookkeeping.

Do you need to settle your problems from a legal safety zone? The answer to that question is clearly; “Not likely.” If you are not charged with a crime, then you are strictly in the zone of needing to prevent problems. Going and doing a confession to CRA is likely very risky for people with tax problems. You need to consider other right answers before blundering down that path.
And for heaven’s sake: ASK the lawyer “Are they a Tax Litigator.”

Remember that you should not use canons to shoot a cat. You just need to stay out of the mouse trap. If your case is simply one of avoiding trapping yourself, get the right help. Overkill can be as bad as under kill. Pick your right help for you; Lawyer, Accountant or Tax Representative.

This page is mandatory reading if you are in trouble with the TaxMan. Do not proceed with getting help until you have read and digested the information. It could make all the difference in the world to your outcome.

For more information go to www.taxauditsolutions.ca

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February 13, 2010 by Dan White.

This article by Jamie Golombek, is a very good description of how CRA sees swimming pools (and likely therapeutic hot-tubs).
I am going to have to check into the law on this one. I can see that it can’t be a medical expenses, but  It seems to me that if someone needs to have a pool or a hot tub, in order to be able to do physical work in a business, then it should be able to be claimed as a business expense.

So in order to not cause any tax problems, I will research this one.

In order to have a hope on the claiming such expenses there needs to be a very good record kept with the appropriate audit trail. Also I would think that only claiming the business percentage of use of the item would make it infinitely more credible.

To learn more about audit ready bookkeeping, go to www.taxauditsolutions.ca

Dan White

Pool is not a medical expense

Jamie Golombek, Financial Post  Published: Saturday, February 13, 2010
Related Topics

With tax season just weeks away, now may be a good time to start gathering all those receipts from 2009 so that you are not caught scrambling at the last minute, especially when it comes to collecting medical expense receipts.

The tax rules permit you to claim a non-refundable credit for “eligible medical expenses” you incurred either for yourself, your partner or your kids under age 18.

To qualify, the service or item must be listed as an “eligible” medical expense under the Income Tax Act. Medical devices must be prescribed by a medical practitioner.

Earlier this year, the Canada Revenue Agency formally responded to a couple of taxpayer requests dealing with eligibilty of certain expenses for the medical expense tax credit (METC).

In the first case, a taxpayer asked whether the cost of installing an indoor swimming pool could qualify as a medical expense. The taxpayer’s physician “prescribed the swimming pool” for the purpose of alleviating chronic pain and the taxpayer indicated that there would be “little to no other personal use of the swimming pool” by the individual’s family.

Under the rules, in order to claim the METC for a mobility device, it must be “exclusively designed to assist an individual in walking where the individual has a mobility impairment.” Since a swimming pool is not considered to be a device exclusively designed to assist an individual in walking, the CRA concluded that it doesn’t qualify for the credit.

The Tax Act also allows certain renovation expenses to qualify for the medical expense credit if they permit an individual with a severe impairment to be mobile within their home. But two conditions must be satisfied: First, the renovations must not generally increase the value of the home; and second, they must not be renovations that would normally be incurred by someone without a mobility impairment.

Since an indoor swimming pool may increase the value of the home and swimming pools are normally built by individuals “for general health, fitness and entertainment reasons,” the cost of such an installation would not qualify for the METC.

In another case, a taxpayer described that he was diagnosed by his doctor as having hypertension and high blood pressure. His doctor recommended that he undertake a supervised exercise regime with a personal trainer twice per week. The taxpayer wanted to know if he could claim the personal training sessions as a medical expense eligible for the credit. But medical expenses only include payments made to a medical practitioner, who is defined as a person authorized to practice a medical service “according to the laws of the jurisdiction in which the service is rendered.”

The CRA responded that it was “unaware of any provincial legislation that authorizes and regulates personal trainers” and as a result, the payments do not qualify for the medical expense tax credit.

Jamie.Golombek@cibc.com-Jamie Golombek, CA, CPA, CFP, CLU, TEP is the managing director, tax and estate planning, with CIBC Private Wealth Management in Toronto.

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February 10, 2010 by Dan White.

Harmonizing local business with tax

Susan Bussieres, senior resource officer from Canada Revenue Agency (CRA) recently held a meeting in Burns Lake in order to present information to local business owners about the proposed Harmonized Sales Tax (HST).

In B.C. the HST would be taxed at a rate of 12 per cent, and in Ontario it will be 13% consisting of seven and eight per cent federal taxes and five per cent provincial taxes.

The HST is planned to be implemented in B.C. and Ont. on July 1 2010.

According to the CRA, the HST once introduced, would apply to most transactions that become due, or are paid without having become due on or after July 1, 2010.

The HST would also apply to any memberships that become due or are paid on or after July 1, 2010, however CRA notes that HST would not apply to the transaction if more than 90 per cent of the membership period is before July 2010.

For example, selling year long memberships; On Jan. 2 2010 a yearly gym membership is sold which will expire on December 21, 2010. The HST will not apply to the sale of this membership because the membership fee becomes due before May 2010.

But continuous services such as cellular phone services, natural gas and cable television services will be subject to the proposed HST.

HST could also possibly apply to returns and exchanges purchased before the HST comes into effect but returned after the introduction of the HST.

Generally the HST will apply to the sale of goods when the goods are delivered and when ownership of the goods is transferred to the purchaser on or after July 1, 2010.

Zero rated taxable supplies [goods that do not attract HST] include prescription drugs, medical devices, basic groceries, some agriculture and fishing supplies and exports.

According to the CRA point of sale rebates for the provincial part of the HST (seven/eight per cent) would be introduced for children’s clothing and footwear, children’s car seats and booster seats, children’s diapers, books, including audio books, feminine hygiene products and motor fuel. [The retailer would automatically provide the purchaser with a point of sale rebate by only collecting only the five per cent federal component as they do now].

For further information about the HST go to www.cra.gc.ca/harmonization-

HST has a potential for a lot of tax problems, to ensure you stay on the right side of the line, learn about LazyBooks, audit ready bookkeeping system.

For more information on audit ready accounting go to http://taxauditsolutions.ca

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February 10, 2010 by Dan White.

This is a very interesting case of an ingenious tax fraud scheme, where the tax preparer and the taxpayers all got caught.

While the scheme is really quite intelligent, there was obviously one major flaw. The tax preparer did not do risk management.
Le’s look at what is wrong here.

There had to be at least ten taxpayers involved. All likely had spouses. All likely had friends that they bragged to.

The chance of not offending anyone who could become an informer, is quite low.

So the obvious answer is.

Taxes101. don’t do tax evasion.

For more information on CRA audit procedures, please go to http://taxauditsolutions.ca

Best Regards

Dan White

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Tax preparer found guilty of tax evasion

LAVAL, QC, Feb. 10 /CNW Telbec/ - Martine Laprise, a Saint-Sauveur tax preparer, pleaded guilty yesterday to tax evasion charges at the Saint-Jérôme courthouse. She was fined $41,252, which represents 50 % of the federal tax she tried to evade.

The Canada Revenue Agency (CRA) investigation revealed that, for the 2002 to 2005 tax years, Ms. Laprise voluntarily contravened the Income Tax Act by providing third parties with a total of $518,197 in false child care receipts. This scheme enabled the third parties to fraudulently reduce their income taxes by $82,505. In addition to the fine imposed by the Court, the taxpayers involved will have to pay the full amount of taxes owing plus related interest and any penalties that apply.

The investigation also revealed that Ms. Laprise hired fictitious caregivers, who declared income equal to the amounts on the receipts issued in order to avoid raising suspicions from the tax authorities. Expenses were also claimed against this income, which allowed the parties to avoid paying income tax.

The taxpayer is responsible for the information on his or her income tax return, even if the return was prepared by someone else. Any fraudulent activity can be anonymously reported to the Enforcement Division of the tax services office nearest you.

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February 9, 2010 by Dan White.

 If you are in trouble with CRA, and have not obtained a skilled Tax Representative, you could have a serious problem. Here is important information to keep in mind if the TaxMan comes to your door.

Dan White

For more info go to http://taxauditsolutions.ca

___________

From the Great White North news

Tax Debt And Distraint

Distraint is the process of seizing a person’s possessions to sell at auction, in order to clear outstanding tax debt. The taxman has the legal right to take this action without a court order, but a certain procedure needs to be followed to stay within the law.
Warning Letter

Firstly, a letter will be sent to the debtor warning that distraint action is about to begin. This will be followed by a visit to the debtor’s home or premises by a tax collector, in order to assess what assets and possessions of value may be taken. This visit must take place between sunrise and sunset on any day except Sundays and public holidays, and while no appointment needs to be made or time of visit announced in advance, the collector can only make a ‘peaceful entry’ to your home. In other words, if you refuse entry, the collector will need to apply for a court order before going any further.
Seizure of Possessions

During the visit, a list of seizable items and their value will be made. Most of your personal possessions are able to be taken, but there are several exemptions. Firstly, any item essential for your work or trade cannot be taken if this would impair you ability to carry on working. Clothes are exempt, as are perishable foods and the basics of living - a chair and table, along with basic cooking equipment, and a bed are the often cited examples of such basics.

Finally, any item which is jointly owned or wholly owned by someone else is ineligable for seizure.
Last Chance Before Seizure

Once this list has been drawn up, you will normally be given a period of 5 days in which to either clear your debt or reach a repayment agreement. If this is not done, then the taxman has the right to seize the goods and sell them at auction, often for a fraction of their true value, meaning that even after distraint your debt might not be fully cleared.
What To Do If You Receive A Distraint Notice

If you receive a letter warning of distraint, it’s vital to get in touch with your tax office as soon as possible. In many cases, the whole process can be avoided by reaching an agreement to repay over a mutually acceptable period. In fact, only about one in a thousand distraint warnings actually result in the sale of goods.

If you find the whole issue seriously worrying, then consult with a tax debt specialist or charity such as Citizens’ Advice, who will have had plenty of experience in the area of tax debt and will be able to ensure that even if distraint can’t be avoided, at least it will be carried out in a fair and reasonable manner.

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