April 28, 2010 by Dan White.

The Comox Valey Record posted a good article on the HST yesterday.
I like the article because it gives a good unbiased take on HST.
My recommendation is to accept HST as a good thing, and avoid potential tax problems by turning to audit ready bookkeeping.
Now more than ever, taxpayers need to keep good records.
To learn more about audit ready bookkeeping, go to www.taxauditsolutions.ca and click on ‘audit ready bookkeeping.’
Dan White

HST – facts about the tax

Comox Valley Record

Vancouver Island North

Published: April 27, 2010 3:00 PM

A caller to the Record newsroom made an interesting point about the effects of the harmonized sales tax.

He’s talked to some people who signed the FightHST petition being circulated around the province who believe the HST will result in taxes on absolutely every purchase made by British Columbians.

The HST is a 12-per-cent federal tax that combines the five-per-cent goods and services tax (GST) and the seven-per-cent provincial sales tax (PST), which the B.C. government is legislating out of existence.

While it seems like the GST applies to everything, some items are not taxed.

According to the Canada Revenue Agency, they include basic groceries such as milk, bread and vegetables; prescription drugs and drug-dispensing fees; medical devices such as hearing aids and artificial teeth; used residential housing; residential condo fees; most health, medical and dental services performed by licensed physicians or dentists for medical reasons; and child-care services for children 14 and younger.

Of course, the list of things the GST applies to is much, much longer.

Foes of the HST oppose it because 70 things exempt under the PST would be subject to a seven-per-cent tax, often on top of the five-per-cent GST.

That list includes restaurant meals, cable TV, new homes, non-prescription medications, telephone, some groceries, haircuts, used vehicles, magazines/newspapers, accommodation rentals, taxi fares, airline tickets and insurance.

In a total cart-before-the-horse move, the B.C. government is mounting a campaign to explain the HST, its benefits and how businesses benefiting from it will trickle their savings down to common folk.

Of course, these are the same BC Liberals who denied before the 2009 election that they were considering the HST before springing it on us soon after they were re-elected.

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April 22, 2010 by Dan White.

Death and Taxes.

I find it interesting that CRA sees itself as a fair and reasonable entity. Yet more and more silliness shows up via the internet.
Just as in China, web cams have changed the face and behavior of government workers, here in Canada the Internet does the job.
Keep reading as we are now going to increase our coverage of CRA goof ups.
For more info on tax problems and solutions got to www.taxauditsolutions.ca

The following case illustrates that CRA can and does make silly mistakes.

Dan White

N.S. man in a life-and-death struggle to convince taxman he’s alive

Ken MacKay may be angry and losing patience, but he’s definitely not dead.

Global News and Canwest News ServiceApril 21, 2010

Ken MacKay may be angry and losing patience, but he’s definitely not dead.

Ken MacKay may be angry and losing patience, but he’s definitely not dead.
Photograph by: Photodisc, Photodisc

HALIFAX Ken MacKay may be angry and losing patience, but he’s definitely not dead.

So imagine his surprise when he opened a letter from the Canada Revenue Agency declaring him officially deceased. It’s happened not once, but twice.

In January MacKay received a first letter from the tax agency telling him that he was no longer eligible for a GST rebate because he was dead.

“I was shocked, like I just couldn’t believe how anybody could make a mistake like that,” he said, adding he asked if the agency hadn’t mixed him up with his wife of 34 years, who died in October from a lung ailment.

“They told me no, that that didn’t happen, but indeed I’ve come to find out afterwards that that’s exactly what happened.”

He said he was later given the runaround, being passed from one government department to another.

When he told the bureaucrats he was alive and well, he was assured the matter would be straightened out. However he is still listed as dead on paper.

“It was pretty hard to take, especially the second time around,” he said of an April 1 followup letter from CRA again asserting his non-living status.

Mackay said he’s claiming on his income tax phone bills and other expenses he incurred while trying to prove he’s alive.

“If it happens a third time, then somebody will be held accountable,” he said.

It isn’t the first time this has happened in the province. Theresa Fraser, 76, who lives in Nova Scotia’s Pictou County, asked for an apology earlier this year after the federal government stopped delivering her cheques following a mix-up involving her name. She too, it turned out, had been mistaken for dead twice by the government.

Read more: http://www.montrealgazette.com/news/canada/life+death+struggle+convince+taxman+alive/2935250/story.html#ixzz0lrerOCZi

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April 22, 2010 by Dan White.

Capital or Business, Pre-planning is Critical.

For those of you who do investing, you need to consider if you should be in the business as an active trader or as an investor, you need to consider all elements, including that the statistics point out that more people lose money investing than who makes money.

If you have an audit tax problem, regarding your investments, check out audits at www.taxauditsolutions.com

Read on and see what Tim Cestnick of the Globe and Mail has to say.

Dan White

Tax Matters
The tie goes to the taxpayer

Tim Cestnick

Published on Thursday, Apr. 22, 2010 6:55AM EDT Last updated on Thursday, Apr. 22, 2010 6:59AM EDT

Last year my son, Win, played organized baseball for the first time. He’s a good athlete who played on the select team for the town of Huntsville in Muskoka, Ont. We’re not from Huntsville, but our kids spend much of their time in that neck of the woods in the summer. Hunstville Minor Baseball is always looking for kids who may be spending time there in the summer and who may be interested in playing competitive baseball for a brief season.

Win learned a lot about the game last year. He even learned that there’s a rule in the game that a “tie goes to the runner.” You gotta love being the runner in those situations.

So, what are the chances that there’s an equivalent rule in the land of tax law that says a tie goes to the taxpayer? Not very good. Until now.

Some recent court decisions could work in your favour when it comes to claiming losses from your investment portfolio. Let me explain.

The Issue

Let me start with a question: When you report your losses from your portfolio, are you going to report them on your tax return as capital losses, or business losses? There’s a big difference. Capital losses in a particular tax year can be applied to reduce any capital gains you might have in that same year. If you haven’t got capital gains, the capital losses can be carried back up to three years to apply against capital gains in the past, or carried forward indefinitely until you generate capital gains to offset the losses.

That’s all well and good, but business losses offer more flexibility. You see, business losses (otherwise referred to as losses from an “adventure in the nature of trade”) can be applied to reduce capital gains or any other type of income. So, these losses could, for example, reduce your taxable employment income or other investment income.

The real issue is this: Are your investment losses going be treated on “capital account” (as capital losses) or “income account” (as business losses). You’ll likely prefer losses on income account due to that flexibility of applying the losses against any type of income.

The Cases

Now, the courts have established principles that the Canada Revenue Agency (CRA) is obligated to consider when looking at your investment transactions and determining whether your losses should be capital losses or business losses. Good thing, because our tax law isn’t clear on this issue. The factors to be considered include: (1) the number of transactions; (2) the intention of the purchaser when buying the securities (did you intend to buy and hold them to earn income, or simply flip them for a profit?); (3) the length of time that the securities are held; (4) the quality of the securities; (5) the time devoted to stock market transactions (is this your full-time job or a hobby?); (6) the extent of borrowing; and (7) the taxpayer’s expertise or special knowledge in the securities market.

There’s no one factor that will decide the matter. The courts, and CRA, should look to your whole course of conduct if they are going to challenge what you’ve filed on your tax return.

So, what about the recent court decisions? In the cases 1338664 Ontario Limited (2008 TCC 350) and Empire Paving Limited (2008 TCC 355), the judge applied a “tie goes to the taxpayer” principle. That is to say, where it’s not clear whether your trading activity should be on capital account or income account, because there are factors that could suggest either treatment, CRA should side with your chosen tax filing position.

The Tax Court judge was referencing a statement made by Mr. Justice James Estey of the Supreme Court of Canada in the case Johns-Manville Canada Inc. (85 DTC 5373 (SCC)) where he said: “Such a determination is, furthermore, consistent with another basic concept in tax law that where the taxing statute is not explicit, reasonable uncertainty or factual ambiguity resulting from lack of explicitness in the statute should be resolved in favour of the taxpayer.” You gotta love being the taxpayer.

The Moral

Don’t be reckless here. If you want to claim your losses on income account (as business losses), be sure to consider the factors I’ve mentioned and try to weigh them in your favour. And be consistent. Don’t try to claim your losses as business losses and profits as capital gains. That won’t fly. CRA will want to treat your gains on account of income (not capital gains) as well in that case. And be consistent from one year to the next.

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April 15, 2010 by Dan White.

 Here is a funny CRA case. It reminds me of a case where CRA refused to issue a refund due to “Missing Information.” They could not tell me what information was missing, and could not issue the refund due to the file to memo that stated that there was information missing.

After me convincing them that they had no choice, I finally got my cheque.

Sometimes bureaucracy can be hilarious, frustrating, and perplexing.

To learn more about CRA behavior and what to do about it to solve your tax problems,

go to  CRA Tax Audits    http://taxauditsolutions.ca/cms/index.php/cra-tax-audits/

Dan White

Revenue Canada Strikes Again! By Scooter Clark

This situation would be rather funny if I hadn’t just spent four hours trying to document and resolve it.

I was speaking to the Canada Revenue Agency earlier today, and they told me that they owed me $362.91 because I had paid them too much a few months ago. I was quite pleased to hear that, of course. However, the guy on the phone then went on to say, “but we aren’t able to give it back to you unless you’re able to explain why you gave it to us in the first place.”

WTF?? I thought he was joking at first. He wasn’t. Actually, once I talked to him some more, it made sense - it was the “current source deductions” department, which handles money that employers have to contribute into the EI and CPP programs, and since the funds are held in trust they can’t just arbitrarily issue a refund cheque without detailed corroborating evidence.

So anyway, the long and short of the story is that I’ve spent the past four hours trying to properly document my answer, which essentially COULD have been reduced to this short paragraph:

“You sent me a notice on October 26th saying that I owed you $362.91 (with no accompanying explanation), and I was stupid enough to think that you might have been correct, so I paid it. That’s why you’ve been overpaid by $362.91.”

The only hard part was trying to say that diplomatically. Luckily, I managed to write a fourteen hundred word letter to explain the situation in excruciating detail, along with five pages of spreadsheets and printouts, so hopefully it will take them just as long to sort out as it took me to put everything together.

posted by Jonathan (Scooter) Clark @ 4/14/2010 06:19:00 PM

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April 15, 2010 by Dan White.

HST is mostly good for business.

I continue to like the HST, and I do believe that in general businesses will be much better off. If business is better off, then by default so too are employees. Sure it is going to hurt in some ways. But… Not needing to deal with the PST Tax Department is a huge bonus. Getting back the PST component of the taxes as an Input Tax Credit is great. Not needing to file PST Tax Returns is a time and work saver.

My stern warning is: CRA is resisting any Input Tax Refunds that do not match your tax returns and what they think is right, they will audit to make sure, prior to issuing any cheques.

What this means is that more than ever audit ready bookkeeping is going to become a necessary practive if the businesses of this land hope to get their ITC’s.

We have changed the name LazyBooks to ARBooks…. pronounced R Books. There was a re-engineering required and we are now past the point we were when things got off track. We are looking at this summer for the Beta Versions of AR Books to be available. Audit Ready Bookkeeping that runs in any web browser, is going to change how accounting in Canada is going to be done.

Doing audit ready books will keep the stress out of audits and solve a lot of potential tax problems. ARBooks is cearly the tax solution needed for protection against the taxman.

Be sure to go to AUDIT READY BOOKKEEPING AT   http://taxauditsolutions.ca/cms/index.php/audit-ready-bookkeeping/

Dan White

Refundable tax will make HST work

By Michael Hamer, Times Colonist April 15, 2010

Re: “If the HST will help you, please tell us about it,” letter, April 13.

As a business person, I’m assuming that you are registered with the Canada Revenue Agency to collect the GST. And that you are aware of the refundable nature of GST input tax credits (GST paid on various expenditures for your business).

Now look at all your current expenses and highlight the PST on those bills, including B.C. Hydro, telephone, vehicle repairs, office and material supplies, asset purchases, etc.

All of this PST has been non-refundable and factors into your “narrow profit margins.” Starting July 1, when the GST and PST are rolled into the HST, all those PST amounts become refundable input tax credits.

Furthermore, for any expenses that currently only have GST on them (for example, your external accountant’s bill, your Times Colonist subscription) the HST increase will also be refundable and not a tax that needs to be absorbed.

In fact, I believe you will find that your expenses will drop, due to the refunding of the equivalent PST, and that your profit margin will rise. You could win more customers by passing along these savings to the consumer through lower prices.

Of course, all bets are off if you are one of the minority of businesses that can’t charge GST on their sales or services (doctor’s offices, residential rental companies, for example). In this case, you will see an increase in your costs as the HST becomes applied to currently exempt PST items. In which case I wish you good luck.

Michael Hamer

Courtenay
© Copyright (c) The Victoria Times Colonist

Read more: http://www.timescolonist.com/news/Refundable+will+make+work/2909363/story.html#ixzz0lBIarSjN

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April 15, 2010 by Dan White.

CRA Horror Story.
This is a classic example of just how the system can be used against a taxpayer. There is no quarter, no care and no fairness when CRA gets dirty. They don’t care that Gary Hennessey was an innocent victim, they don’t care that they bankrupt him. A guiding principle of CRA is fairness.  I never realized that the word “fairness” in itself is an oxymoron.

Perhaps the definition of the word “oxymoron” means stupid as an ox. (ox moron?)

There is just one solution to dealing with CRA. Get yourself a dam good TaxRepresentative and make sure your books and records are all audit ready. Make sure you do Risk Management, and most inportantly, don’t think that just because you think you have nothing to hide, does not mean you won’t end up as road kill, “Mac Truck vs Small Furry Creature.”

In order to not be a victim of the system, you need to be like a roadside bomb when CRA comes calling. If you don’t blow up at their first transgression, you have just signed up for what could be your economic death.

To learn more about CRA, go to www.taxauditsolutions.ca

To learn more about what  can go wrong, go wrong, go wrong…. read on….

Dan White

Forty boxes of evidence
Defence looking for Crown to turn over documents in tax case

DAVE BARTLETT
The Telegram

Gary Hennessey (right) speaks with his lawyer Robert Anstey outside provincial court Wednesday morning. - Photo by Dave Bartlett/The Telegram
Gary Hennessey (right) speaks with his lawyer Robert Anstey outside provincial court Wednesday morning. - Photo by Dave Bartlett/The Telegram

A St. John’s man caught in a dispute between the Canada Revenue Agency (CRA) and Eastern Health made his first court appearance Wednesday to face four tax-related charges.

Last month Gary Hennessey told his story to The Telegram.

He was forced to close his payroll business in August 2007, he said, and later declared bankruptcy because of the dispute, which eventually led to the charges.

Hennessey was formally charged in provincial court Wednesday with tax evasion, fraud over $5,000 and two counts of making false statements on his tax returns.

In court, Hennessey’s lawyer, Robert Anstey, asked Crown prosecutor Neil Smith to return 40 banker’s boxes of records the CRA seized from Hennessey about 18 months ago.

Anstey is also looking for records from CRA and from Eastern Health.

Smith said a full package of evidence is being prepared for Anstey.

Considering the amount of material Anstey has to review to mount a defence, he asked Judge Lois Skanes to put the matter off until September.

But Skanes suggested a court date be set for June 15, to update the court on Anstey’s progress.

She said that would give the Crown time to turn over the documents Anstey has requested and for him to figure out how much more time he will need to go through all of the paperwork.

Anstey was also hoping the court would ask Eastern Health to turn over relevant documents and had subpoenaed two of the health authority’s employees to be in court.

But Skanes said that will also have to wait until June, and Anstey would have to file a formal application with the courts to get those documents.

Afterwards Anstey spoke to The Telegram. He said if CRA - with all its staff and legal resources - has had the 40 boxes of evidence for about 18 months and still took 14 months to lay charges, he’s going to need an adequate amount of time to prepare Hennessey’s defence.

“We’re hoping that these documents that are going to be produced … will show that my client is caught up in the middle of this,” said Anstey. “The charges are against him, but he’s, I’ll call it, the proverbial scapegoat.”

Anstey said Eastern Health will provide him with the documents, but only after the court directs it to release the information.

“It’s unfortunate for Mr. Hennessey,” Anstey said.

“What it’s done to him and his family over the years is basically cruel and unusual punishment. He’s lost everything and now he’s fighting to clear his name.”

Anstey hopes the documents will help do that.

The original Telegram stories outlined how Hennessey used to do the payroll for hundreds of home care workers on behalf of their clients, and how Eastern Health had failed to tell him that some of those clients had outstanding balances owing to CRA before he was hired to cut their cheques. As a result, CRA is holding him accountable for the arrears.

Eastern Health and CRA tried to settle the matter in 2006, but when talks failed, the CRA set its sights back on Hennessey, saying he owed CRA hundreds of thousands of dollars in unpaid remittances, interest and penalties.

CRA laid the charges in January of this year. Before that, Hennessey launched a complaint with the province’s office of the citizens’ representative to see if it could help him resolve the issue.

Barry Fleming’s report backed up much of Hennessey’s story, but also laid some of the blame on him. Fleming wrote Hennessey “lacked business acumen” and his record-keeping was deficient.

But Fleming’s report also states Hennessey tried to co-operate with both agencies and there’s no evidence he misappropriated any funds.

“The actions of the CRA with respect to its dealings with Mr. Hennessey border on the unconscionable,” Fleming stated, adding Hennessey was an “easy target” for the CRA.

dbartlett@thetelegram.com

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April 8, 2010 by Dan White.

David Little versus The CRA Goliath,

This is an interesting situation.

I have do admire the guy, that he will go to jail rather than to break his principles.

However I also have to wonder just how it all makes sense.

I doubt that there are very many people in Canada who think the tax system, is fair, uncomplicated, or believes that the government spends our money all that wisely. CRA is at an all time low in the opinions of the average small business in Canada, but one needs to pick the best way to fight their battles.

IIn David Little’s case his solution to protesting the government funding of abortions, seems like a hard way to figuratively kill a cat. Because there are more than one ways to skin a cat, Mr. Little could have considered other less punative options.

I wonder if David Little considered other creative ways to not have his tax dollars go things he is opposed to.

For instance he could donate 75% of his net income to his church or other charity of his choice. That would leave only 25% of his net income as taxable. Of that 25% he could spend it on medical help or countless other things that would bring his income down to what he will get in jail. Zero.

Or he could just not earn money at all and then there would be no money to go where he wants it not.

So somehow, in spite of the fact that I admire his conviction to his principles, I think his family just might like to see him home instead of in jail.

So I guess we all have our tax issues, and tax problems, and our tax solutions. I guess we should all do what we believe is right in the best way we can. So lets all send David love and good wishes for the next journey.

His next step will be more problematic. He ignored a judges direct order to file his taxes.  It is not wise to ignore a judges orders. The judicial system has no choice but to deal severely with such judicial disrespect.

Perhaps his goal of getting public attention will be worth it, but somehow, I don’t think abortion is on the minds of many people when we are really busy just making a living.

My best advice would be to remember that politics and religion don’t mix. CRA is politics and religious beliefs are as diverse as politics.

I guess if you consider Gandhi’s approach to bringing change to India, and compare that to David Little’s approach to changing CRA, you would see that there was a much greater population base to stir up to support his cause.

I wish he had applied his conviction to bringing justice to the tax system itself. Of that he could get the popular support he needs and it would not be hard to make room for religious diversity. The tax system itself has outgrown its ability to be fair. It is time for change.

To get more ideas on dealing with CRA, go to www.taxauditsolutions.ca

Dan White

New Brunswick anti-abortion activist jailed for refusing to file tax returns

By: Kevin Bissett, THE CANADIAN PRESS

8/04/2010 3:54 PM |

FREDERICTON - An anti-abortion crusader in New Brunswick has been sentenced to 66 days in jail for refusing to pay fines stemming from a 2007 conviction for failing to file his tax returns.

David Little said in provincial court Thursday that he will never file another tax return as long as there is tax-funded abortion in Canada, and won’t pay the $3,000 in fines for failing to file returns for 2000, 2001, and 2002.

“Let us not waste time any more. … Put me in jail,” he told Judge Leslie Jackson.

In January, the Supreme Court of Canada refused to hear Little’s appeal of the conviction, which he argued violated his religious beliefs under the Charter of Rights and Freedoms.

The 66-year-old Roman Catholic, who is married and has eight children, said he is willing to spend the rest of his life behind bars if necessary.

“I don’t want to co-operate with an entity that takes my money and pays gynecological assassins to kill my brothers and sisters,” he said in an interview prior to sentencing.

“I’m prepared to die in jail, if necessary. I can no longer cope with the hypocrisy of praying for life … and paying for death.”

Little now faces a new charge for failing to comply with a judge’s order to file his returns for the three years in question.

Little, who represented himself in court, said he has not filed a tax return since 1999.

He asked for a delay to the start of his incarceration, but the judge refused, ordering him into custody immediately.

Jackson did agree to send him to a detention centre in Moncton so he will be closer to his wife and children now living in Prince Edward Island.

Little is to return to court in Fredericton on Aug. 10 on the new charge.

Outside the court, federal prosecutor Keith Ward refused to speculate if Little could face charges for not filing returns for 2003 to the present. He said that would be up to the Canada Revenue Agency to decide.

Little had a number of supporters in court, including Bishop Faber MacDonald, the bishop emeritus for Saint John diocese.

MacDonald said outside court that he expects the jail sentence will result in more supporters for Little’s cause.

“I think after a few days, after people read this story, it would be very easy to motivate them to action,” he said.

When asked if he thought other Catholics should refuse to file their taxes in protest of abortion, MacDonald replied: “Yes.”

MacDonald, though, acknowledged he has filed his own return. *** Dan’s note… You really have to wonder/ ////”"”"????????……

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