September 8, 2010 by Dan White.

Here is a great article by my favorite writer on taxes.

What you can take from this, is being an incorporated small business requires a huge amount of legal and tax knowledge. Generally speaking, unless you have a bonified reason to incorporate, and are prepared to go down a complex path fraught with perils, do not incorporate.

The following is just one of hundreds of pitfalls of incorporations.

To learn more about how to deal with complex tax problems, go to www.taxauditsolutions.ca

Dan White

It does not pay to be late by Jamie Golombek, Financial Post Magazine · Tuesday, Sept. 7, 2010

If your business is incorporated and it’s owed a tax refund, you better be sure that your corporate tax return is filed on time. If it isn’t, you risk permanently forfeiting your money. That was the harsh lesson learned in Tax Court earlier this year in a case involving numbered company 3735851 Canada Inc.

Under the Income Tax Act, if a corporation has not filed a tax return within three years of the end of its taxation year, it is precluded from claiming a tax refund for that year. Why would a company file late? Sometimes, it’s due to simple oversight. Other times, it may be based on an assumption that no tax return was required if a refund was expected.

In the case of numbered company 3735851 Canada Inc., the firm successfully objected to a CRA assessment in court and was issued a “Notice of Reassessment,” resulting in a corporate tax refund of more than $25,000. Yet the CRA refused to process this refund because the company’s tax return for that year was not filed within three years of the deadline.

In an effort to get its refund, the company took the CRA to Tax Court, but the judge ruled that the court has no jurisdiction over refund issues since its mandate, under the Tax Act, is limited to considering the correctness of an assessment or reassessment. Since the company was successful in objecting to the original assessment, it had nothing to dispute. Therefore, the judge concluded that the court had no jurisdiction to order the CRA to issue the refund.

This recent case is not the first time that a taxpayer has been precluded by the CRA from collecting a refund by the three-year rule. In 1991, the Chief Justice of the Tax Court, who heard a similar case, was so frustrated by having to deny a taxpayer a refund due to this rule that he wrote: “I find it difficult to justify the fact that… in a so-called democratic society which purports to protect the civil liberties of its people a provision (such as this three-year rule) is still in force.”

As a result, the Act was amended shortly thereafter to allow individuals 10 years to request a refund. Yet the three-year rule still exists for corporations. In 1993, however, corporations were granted the option of applying a refund to an amount owing for a previous or subsequent year.

But if no amount is owing, then the refund may hang in limbo indefinitely, making this recent case an important reminder to corporate taxpayers to file on time.

Jamie Golombek is managing director, tax & estate planning at CIBC Private Wealth Management. E-mail: Jamie.Golombek@cibc.ca

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August 31, 2010 by Dan White.

Statute Barred Years
Important Information
3 Year Rule

This whole issue around statute barred years seems to confound a lot of people, including The Canada Revenue Agency.

Generally, CRA, often referred to as “The Minister” cannot reassess a taxation year after the normal reassessment period of three years has passed.

A tax year is considered as statute barred 3 full years after the date on your original notice of assessment issued from CRA, and not your reassessment dates.

Statute barred years should not be confused with the retention of records. Section 230 of the Income Tax Act requires that you retain all books and records until six years after the date the return is filed. You would need those records if a statute barred year was opened up.

Unlike Income Tax, the GST/HST is four years from the date the GST/HST Tax Returns were due to be filled.

For example: Income Tax returns are statute-barred three years after the earlier of the Notice of Assessment or a notice to you that states no taxes are payable. If you file your 2005 tax return and the Notice of Assessment is dated June 30, 2006, the government is not allowed to question your 2005 tax return after June 30, 2009.

Regarding proving “gross negligence,” as in the tax court case of Francisco v The Queen in 2003, the Tax Court of Canada found that the burden of proof shifted to the CRA on statute-barred years. In other words, if the government is going to go after a taxpayer, they need to prove their case rather than have the taxpayer defend against the CRA allegations.

In non-statute barred years, you simply have to be able to prove your income and expenses. However GAAP… (Generally accepted accounting principles) make audits a nightmare for Canadians. Very few businesses keep truly audit ready books.

There are two conditions that allow the opening of stature barred years by CRA. One is if the taxpayer foolishly signs a waiver of the time limit and the other is if the taxpayer made a misrepresentation attributable to neglect, carelessness or wilful default or fraud. One of those conditions would normally be referred to as constituting “Gross Negligence.”

The other reason would be the signing of a waiver. Taxpayers are often requested to provide a Waiver, allowing the Statute Bar period to be extended indefinitely. CRA threatens they will reassess unless the Waiver is signed. In almost every instance, they are going to reassess anyway - the Waiver just gives them more time to gather information to be used against you. The decision as to whether to provide a waiver or not should be made in consultation with your tax representative.

Note that the minister has to provide you with the proper prescribed form in order for you to sign off on your rights of preventing an audit of statute barred years. A good general rule is go get solid professional advice before signing any CRA forms.

Waivers are open-ended and remain in effect until the Taxpayer revokes it in writing. There is a notation on the top of the Waiver provided by CRA, that CRA will not accept waivers if you try to write in a time limit. They give the Agency a great advantage by allowing them as long as they want to find new reasons to reassess you. If you have already signed and returned a Waiver, you should consider sending in a Revocation of Waiver, which will take effect 6 months from the date you deliver it to CRA and reestablishes the years as statute barred. If you are doing a revoking, make sure you use the prescribed form as required by the income tax act.

If one of those two aforementioned conditions applies, the Minister could reassess the taxation year at any time after the normal reassessment period, but only in respect of the particular subject matter of the waiver or misrepresentation. It is a critical point of law to note that the assessment going back into statute barred years only applies to the particular subject matter.

If the Minister reassesses a taxation year after the normal reassessment period, the Minister has the onus of establishing the right to do so, by proving that the taxpayer either waived the time limit or was grossly negligent in order for the Minister to justify a late reassessment.

Proving Gross Negligence is very hard to do, so one should not roll over easily and accept gross negligence penalties from CRA. When CRA attempts to levy said penalties, one should be fight this with full vigor.

It is important to know that Gross Negligence is not just making a mistake on your tax return. Gross Negligence is much more than a simple error or omission. In this regard, any error in a return is considered to be “misrepresentation”. It is a separate question to determine whether the “misrepresentation” was merely an innocent mistake or was attributable to neglect, carelessness or wilful default or fraud.  If you had clean hands and honestly believed your tax return was correct, at the time of signing and sending the return into CRA, then there is a very slim chance that CRA could make their claim of gross negligence stick.

One needs to consider risk management when doing a loss carry back on a tax return. The normal reassessment period for a taxation year will be extended from three to six years if the taxpayer claims the benefit of a loss carry-back from a subsequent taxation year. However the access is limited to the particular subject matter and not the rest of your tax return. Keep in mind, that you may not want CRA looking at your past tax returns.

If the tax years in question are not statute barred, The Minister may at any time make an assessment, reassessment or additional assessment of tax for a taxation year, and charge; interest or penalties.

Where a taxpayer or CRA wish to open up a statute barred year for their own particular reasons, the following tax court case is critical to understand.

Chief Justice Gerald J. Rip of the Tax Court of Canada invoked Ralph Waldo Emerson when summing up a case he decided last month(Leola Purdy, Sons Ltd. v The Queen, 2009 TCC 21) – “A foolish consistency is the hobgoblin of little minds.”

The dispute, which began as a classic question of income vs. capital gains treatment, became a lot more interesting when a secondary issue arose: whether you can carry forward a loss, which was not originally reported, from a tax year that is otherwise “statute-barred.”

In 2005, the CRA reassessed Leola and found the $1.2 million capital gain in 2002 should have been reported as income since it constituted a business activity. As a result, instead of it being half taxable, it became 100% taxable.

While the judge agreed that “1998 is a lost cause” since it had already been assessed and the assessment was now statute-barred, an error made in correctly assessing the true nature of Leola’s trading activity in 1998 had an impact on the corporation’s 2002 taxation year.

Allowing the non-capital loss carry forward, the judge wrote, “Nobody is saying that a statute barred year can be reassessed. The tax the taxpayer has been assessed for the statute-barred year cannot be changed. But it’s valid and binding only for the year assessed. If an error was made in the assessment of the statute-barred year, which affects another year, the (CRA) in assessing the other year, must follow the Act and if there was an error in law in a previous year, including a statute-barred year, that error ought to be corrected.”

So all in all, what all businesses in Canada need to fully realize: You have to keep audit ready records. Failing to do so caused headaches. Our society is one where there is no pity for the entrepreneur who fails to keep good books and records. The government agencies live to feast on the bank accounts of those who would not head this advice.

For more tax information go to www.taxauditsolutions.ca

Dan White

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August 26, 2010 by Dan White.

The tax system in Canada is a way to complicated. It is so convoluted that CRA, accountants, lawyers and tax representatives do not agree on the interpretations of an act that has grown over thousands of pages and millions of words. We need changes made. I have taken on the process of introducing a simplification process.

Not only that but I am starting a petition that will give Canadians a chance to vote for change. For more see the www.taxauditsolutions.ca web site.

The following is a series of DRAFT suggestions on how the SIMPLIFIED income Tax Act (ITA) should read.

Please use the comment form at the side bottom of this page to comment and or to make suggestions.

FLAT TAX:  While a flat tax is a great idea and we already have the mechanism in place to deliver this across CANADA… by way of the HST…. it would be reasonably easy to implement this and abolish the entire Income Tax Act and the Excise Tax Act.

HOWEVER: There are a way too many vested interests in the current system. SO; the only hope is to simply … SIMPLIFY the Income Tax Act.

So the following is where we begin….

DRAFT VERSION BY DAN WHITE
PART I
INCOME TAX
DIVISION A
LIABILITY FOR TAX

ITA Simplified

Income Tax In Canada

All Canadians pay tax on their worldwide income unless they pass the defined test of nonresident status.
See residency test. Section #…………. “Residency Test.”

Tax payable by persons resident in Canada
1.    All Canadian residents are taxed on their world wide income.
2.    All financial benefits received by a tax payer are taxable income unless specifically exempt.
3.    See definition of taxable income Section #………”Taxable Income.”
4.    See list of exemptions. Section # ………. “Exemptions from Taxable Income.”

Tax payable by persons non-resident in Canada
Offshore income is taxed at the normal rate except as adjusted by a relevant tax treaty between Canada and the Offshore country.

Filing of tax returns.

All Canadians must file a tax return each fiscal year when they have a tax liability owing or when they receive a demand to file from CRA.

DIVISION B
COMPUTATION OF INCOME
Basic Rules

ITA Simplified

To learn more about how a simplified tax would work, click here or go to

http://taxauditsolutions.ca/cms/index.php/flat-tax-or-simplified-tax/

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August 24, 2010 by Dan White.

 Here is an interesting article written by Charles Rotenberg, Counsel
Doris Law Office

222 Somerset St., 2nd Floor
Ottawa, Canada Area, Ontario K1n 5r9, Canada

If you are considering tranfering property to someone related to you (an arm’s length transfer), you need to beware.

Read on…

Dan White

www.taxauditsolutions.ca

What’s Mine is Yours – Including the Tax Bill

Section 160 of the Income Tax Act is probably one of the most, if not the most, dangerous
collection tools available to the Canada Revenue Agency (CRA). If (i) a taxpayer transfers
property to his or her spouse, a minor, or anyone with whom he or she does not deal at arm’s
length; (ii) the transferee does not pay fair market value consideration for the property; and (iii)
the transferor has a tax liability for the year of transfer or any previous year, the transferee will
be liable for some or all of the outstanding tax liability.

The transferee’s liability will be the lesser of the transferor’s liability and the shortfall in the
consideration paid for the property. For example, if I owed the CRA $50,000 for 2010, and in
2011 I gave my child a property worth $20,000, for which he pays only $10,000, his liability will
be limited to the $10,000 shortfall in consideration paid for the property. If my tax liability had
been only $7,000, his liability cannot be more than that.

The transferee’s liability does not depend upon knowledge or intention. He may have no idea
that I owe taxes. For that matter, I may have no idea. If I transfer a property to my son today, and
three years from now CRA assesses me in respect of 2010 and establishes that there was a
liability outstanding, Section 160 will fix a joint and several liability on my son, even though the
transfer was in good faith and, to our knowledge, there was no tax liability at the time. The tax
liability will include any income or capital gain triggered by the disposition of the property.

There is case law to support a Section 160 assessment against the recipient of a dividend from a
non-arm’s length company, if the company had outstanding tax liabilities. For those inactive
shareholders receiving dividends from family companies, this can be a major concern.

There is also authority for assessing the beneficiaries of an estate who receive a bequest, if the
deceased had tax liabilities outstanding.

In a somewhat more rational vein, the Tax Court, in the 1998 decision of Michaud, found that
payments made by a tax debtor on a mortgage on the family home, even though the home was in
the wife’s name, did not constitute a transfer for no consideration. At the conclusion of the
judgment, Judge Lamarre Proulx stated:

“when the evidence discloses that the payment on the hypothec was made in performing the
legal obligation to provide for the family’s requirements that it was made for valuable
consideration within the meaning of s. 160(1) of the Act.”

The Courts have not been unanimous in their acceptance of the Michaud rationale, but neither
has there been any clear rejection of this view.

Unlike normal tax liabilities which must be assessed within 3 or 4 years, there is no time limit on
Revenue’s ability to assess the transferee. The subsequent bankruptcy of the transferor, which
eliminates his or her liability, does not reduce the liability of the transferee. Payments of tax by
the transferor are applied first to other tax liabilities and do not necessarily reduce the liability of
the transferee.

The Courts have held that the transferee assessed under Section 160 is entitled to challenge the
tax assessment of the transferor. Even if the transferor would have been out of time to challenge
the assessment, since the CRA is not limited in the time to assess under Section 160, the
transferee still has the ability to challenge the assessment.

Clearly, in any contemplated transfer of property, both the transferor and the transferee must
have good advice and information.

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August 16, 2010 by Dan White.

“CRA versus the People of Canada.”
The income tax act being so convoluted, it provides a gold mine for CRA. With over two million words in the income tax act alone, not to mention the Excise Tax Act, The Information Circulars, The Interpretations, and the fact that CRA themselves can’t understand the Acts, the situation has become unmanageable and we need to introduce a program of simplification of the ITA. I will be writing on our proposal for a solution to this lunacy in a separate article.

This battle is a one sided affair where most assaulted taxpayers have to fold because they cannot afford the cost of the battle. Even though companies such as ours have managed the rough efficiencies of scale, to keep the cost to the consumer down to a manageable fee, however it is still a hunk of change for the average small business to come up with.
It is an interesting view of the battle field where CRA agents extract their toll from the toils of the people. The tax man has never been a popular entity, but one wonders how much pressure they can put on small business before there is an explosion. Some kind of tax anger uprising will happen, of that there is no doubt.

The level of intensity of this battle is escalating. The other day in a response to a Globe and Mail article on CRA activities, I read as follows; “It is said government is needed to protect person and property. That’s what I permit in my schools I provision you. What is unsaid but equally true is I will initiate force/aggression against said persons if they fail to inventory their property so I can decide what I take or they are allowed to keep. I am the Mafia with a flag and an anthem.”

Such a statement is in alignment with what taxpayers are telling me what they think and feel about our tax collections agency. Anger is at a boiling point. Blogs bombast the CRA, interest in class action suits is building. There are cases for damages in the courts, trouble is brewing in TaxLand.

I can tell you, if I were working for the CRA, I would wear a bullet proof vest between my home and my Tax Services Office. When taxpayers are on the verge of suicide, facing financial ruin, there is no telling where their emotions will go or what the results will be. Will it be anger or suicide? No one can be certain of the pending outcome.  We have seen outbreaks of violence before in other situations, where people break and shootings occur. I really hope CRA cleans up their act before something awful starts happening, and then the copy cats get the idea. You may think I am being overly dramatic, but please understand that it is me who is hearing the hostility directly from the taxpayers who are under the abuse of overzealous auditors who act like the raiders of the Dark Forces from the evil empire. here will be retribution, what exactly it looks like is anyone’s guess. What is for sure; is there is a “Tipping Point”coming.

What we read on the CRA’s web site about what an audit is or how you can expect to be treated. Reasonable treatment is certainly not what taxpayers who come to see us are experiencing. To be fair, no one comes to us who has had a good experience in an audit. So either there are no good experiences by taxpayers, or there are good experiences but we just don’t hear about them. Which of those two possibilities are true will be based on your own perceptions.

Some CRA staff are the salt of the earth, others act as if they work for the Mafia and are quite threatening. At one point when I took an auditor to task about the nastiness of the written communication, I complained and was told that they needed to be blunt for legal reasons. So I redid the letter for them to show that it could be every bit as clear, only the tone was factually neutral. My letter was much easier to digest, yet still addressed the seriousness of the matter. From my perspective, it is pointless to suggest that the taxpayer could go to jail, when that just would not be the case.

Our aggressive auditor problem has been compounded because the Conservative government added millions of dollars in performance pay for public service executives during the recession even as it pledged to slash bonuses in the face of hard times. One can only rationally assume that the increase of bonuses for CRA bureaucrats is like giving a business sales person a performance bonus, in which case the company makes more sales.

This information was provided to you the reader, as a result of Stockwell Day doing an Access to Information. This revealed that in CRA’s case the Management Tab went up, and so to did the CRA Revenue. Thus proving that pay bonuses do result in higher taxation. What does this tell you about our taxation system.

The government promised in June, 2009 to cut bonuses by 70 per cent – a target it eventually succeeded in meeting when the final numbers came in earlier this year.

However, in the technical language of the federal bureaucracy, “bonus pay” is only a small part of what many would consider to be a bonus. There is also the practice of giving an extra lump-sum payment at the end of the year based on performance. Executives in the Federal Government also qualify for extra bonuses by calling the bonuses “At Risk Pay.” These are often very lucrative bonuses and are on the rise.
While most private employers have a similar concept of at-risk pay that is often referred to as incentive pay, he said most workers still call these payouts a bonus.

“When people hear bonus, they will likely think it’s going to be anything you get that isn’t part of your salary, paid out annually,” he said. “That’s just how people think. A bonus is a bonus.”

“Clearly the government was very careful in the language they used,” said Christopher Chen, a private-sector compensation consultant at Hay Group in Toronto. “And they followed through exactly to the letter of their own definition of bonus.”

What this boils down to is that CRA is paying their way to larger tax revenue from small business in Canada. That would be fine if CRA was being reasonable in their audits. It is not our experience that audits are not usually based on the published policies and practices on the CRA web site.

Simply rewarding the tax man for collecting quantity of dollars puts the auditors in a conflict of interest situation. On one hand there is there service contract signed with CRA with their job description, but on the other hand there is pressure to bring in dollars as the number one objective. These two interests are juxtaposed to two different interests. Do the audit right or get as much booty as you can.
So the question has to be asked. “Does CRA mean what they write? Or is that just marketing to lull taxpayers in to a false sense of security in knowing that they never intentionally did anything wrong, and inadvertently believe that the CRA audit is just what the Agency web site says it is.?”

For a taxpayer to think that they have nothing to worry about is completely foolhardy. In today’s audits where the auditors are measured on the amount of money they collect, you cannot rationally be assumed that the audit is just a compliance education. An audit is an education all right, a financially very painful one indeed.

Now with the PST Auditors leaving the Provincial work force and now working for CRA, audit numbers have spiked and on top of this so too has the nastiness an unreasonableness of audits increased.

We are seeing that the ITA and ETA are not enforced equally across the country, for instance we see that the Pacific CRA Tax Services Offices (TSO) operations are the most aggressive and punitive in the country. In the case of one particularly nasty CRA auditor; a Mr. Chuck Henault, he teamed up with a bailiff to harass and intimidate a small business. Chuck likes to have conference calls with the taxpayer and the bailiff on the line and to demand money or he will close the business down. This is in spite of the fact that the taxpayer was current in his filings and payments. The balance owing was as a result of a CRA audit determining a mistake in accounting. A particularly nasty bit was forcing the taxpayer to pay bailiff fees, when there was no need for a bailiff in the first place.  In this case we had to get the Minister of Revenue involved with this case. This is an ongoing battle; at least we now have the assurance that they won’t cause the loss of 16 family’s sources of income. Not that Chuck or the Bailiff care about that at all. The bailiff an Chuck were pretty outraged by our attack on them, but they have since become a bit more respectful and a lot more careful. In this case and one other where CRA put the Directors other business out of business for lack of common sense and reason. CRA went from audit to closing the business down in no time. This is particularly unfair, unreasonable and frustrating when the business did nothing wrong. The GST owing was an error of interpretation by the auditor who later admitted the mistake. Now we are headed for tax court on this one. Civil court will follow.

CRA website promotes what an audit is, however they use enforcement and other titles to muddy the water. Enforcement supposedly is to deal with special audits, but we are seeing more and more aggressive audits under this banner. This process certainly works to intimidate, however it has little to do with a regular audit.

Investigations and enforcement is used to muddy the water allowing investigations under the guise of a CRA audit. This is not only crossing the Rubicon, but it is highly aggressive disregard for the laws of Canada. Auditors who think that there are no restrictions under the ITA or the ETA (Income Tax Act and the Excise Tax Act) are misinformed and grossly negligent in their duties to the people of Canada.

We are also experiencing auditors, who think it is ok to punish taxpayers beyond the scope of the auditors’ jobs if they are not cow towed by the auditor. We are making sure that these misguided bullies get some startling wake up actions from us. Contrary to some auditors thinking that there are no restrictions to their powers, there are in fact laws and rights in this country that they have to observe. The rule of law governs, and this often has to be brought to auditors’ attention. Tax Audit Solutions holds auditors accountable to behave within the law. Auditors are often shocked to find themselves under the lime light for abusing their power. The courts take a dim view of auditors abusing their positions of trust. CRA auditor bullying is not tolerated in the courts.

What we have here is a situation that has gone beyond reason. Because Canadians are often afraid to fight, or cannot afford the help they need to defend themselves against CRA, it presents us with an opportunity to assist others when they need the help the most.
There is a ton more information on our web site, be sure to go to www.taxauditsolutions.ca

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August 11, 2010 by Dan White.

This is an interesting article published in the Daily Gleaner by Heather McLaughlin

One has to always wonder, what is the real reason behind the scenes. The Prosecutor says the charges are staid due to economic reasons. Hmm. While that makes sense, it is not normal for CRA to deal with tax problems from a common sense approach. So I wonder; Was David Little, the pro lifer on to something? If CRA and the Courts are correct; Why would they not just throw Mr. Little in jail as an example of what happens to those who decide to fight CRA?

For more information on CRA Tax Problems, go to www.taxauditsolutions.ca

Dan White

______

Charge against pro-lifer stayed
Published Wednesday August 11th, 2010
Taxes | Prosecutor says it’s better to dedicate resources to other matters
A1
By HEATHER MCLAUGHLIN
mclaughlin.heather@dailygleaner.com

The federal attorney general has stayed an income tax charge that was laid against anti-abortion activist David T. Little in April.

Provincial court Judge Julian Dickson was set to hear Little’s plea Tuesday on a new charge against Little brought by the Canada Revenue Agency for failing to comply with a judge’s order to file income-tax returns for 2000-02.

However, the judge instead announced that he had received word that a stay had been issued by the federal government.

A stay halts the prosecution of the charge.

Little wasn’t present in court Tuesday.

In April, Little, after refusing to pay fines for previous tax charges, was ordered to serve 66 days in jail in default.

Chief provincial court Judge Leslie Jackson convicted Little in November 2007 of failing to file income-tax returns for 2000, 2001 and 2002 and fined him $3,000.

Jackson further ordered him to file his outstanding tax returns.

Keith Ward, senior counsel with the Atlantic region office of the Public Prosecution Service of Canada and the lead federal prosecutor on Little’s case, said he made the decision to stay the charge.

“It’s for reasons of economy,” Ward said from his Halifax office Tuesday.

“He was essentially going to run the same defence … He can easily manipulate the system all the way up to the Supreme Court of Canada level.”

When Little was charged for failing to file tax returns for 2000-2002, his defence was that it violated his right of freedom of religion.

During his April court appearance, Little made it clear he would mount a similar defence on the new charge of failing to comply with a judge’s order.

Ward said it was decided federal resources should be dedicated to more important matters.

Ward said it’s also apparent that Little has no taxable income of which to speak.

The 66-year-old Roman Catholic and father of eight has vowed publicly never to file another tax return as long as there’s tax-funded abortion in Canada.

With files from The Daily Gleaner staff writer Don MacPherson

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August 6, 2010 by Dan White.

Well! here we have it.

There are so many Requirements To Pay (RTP’s) in other words…. there are so many bank seizures by CRA, that the RBC or AKA has now made it easy to assist CRA in grabbing your dollars.

Take not of the scanned letter below. It shows clearly just how insidious CRA collections has become and just how willing RBC is to assist in the manner.

RBC has now set up a National Requirement To Pay Centre, and all just to assist in CRA being able to move quickly and easily to grab your money.

Isn’t this nice? We trust our banks, they just do whatever CRA wants; NO Questions Asked.

It really makes you wonder why anyone knowing that Royal Bank has a National Center to assist CRA in grabbing money would deal with them.

Let’s not even talk about that CRA does not care if they grab grocery money.

Here is the letter. Scanned and OCR’d

Also for more information on this subject, go to www.taxauditsolutions.ca

…

RBC Royal Bank CZ

xx July 2010 -
Dear SirlMadam:
Re: Requrement to Pay

By: Canada Revenue Agency
Amount: $12,012.31
Reference Number: xxxxxxxx ( Number removed to protect the privacy of the taxpayer)
(CRA) Contact Officer: Mr. S. Mailoux
Contact Phone: 1-866-406-2214 ext 6458
Requirement to Pay
Canada Revenue Agency
$13,012.41  Business Identity Number ……… xxxxx __ RTOOOI
Mr. S. Mailloux
866-406-2214 x 6458
Royal Bank of Canada
National Third Party Demands
P.O. Box 4509, Station A
Toronto, ON M5W 4K5
Our Royal Bank of Canada branch located at 200 Bay St - Main Fir, Toronto, ON, M5J 2J5 has received service of an attachment order as described above.
Please be advised that, in accordance with its legal obligation, the Bank has complied with and acted upon the  attachment to the extent necessary from available funds in your account.

If there are any further concerns please call the Contact Officer mentioned above.
Sincerely

(Dean’s signature)

Dean Gray
Assistant Manager
Third Party Demands
Our toll-free number is 1-800-582-3615. Any agent/representative will be able to assist you.
® Registered trademark of Royal Bank of Canada. RBC and Royal Bank are registered trademarks of Royal
Bank of Canada.
Rev. 12105
–
• •

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June 29, 2010 by Dan White.

When your tax debt is turned over to CRA Collections Department, that is when your problems really begin.

When CRA turns over a file to collections, that is when complete unreasonableness begins.

The qualifications to be a CRA “Collections Officer” are very little. You will not likely be dealing with someone who is knowledgeable about small business.

The Collections officer will likely see you as a bad person who deserves no forgiveness for anything and will pull no stops at collecting the tax dept.

At this stage there is very little reasoning that can be done and you can expect to suffer some very unpleasant results, such as; wage garnishees, liens on your home, grabbing rent payments due to you, calling your work, issuing a search and seizure, etc.

In Vancouver BC we have even seen the collections officer doing a tag team attack on the taxpayer. The two of them were a couple of underhanded thugs that we dealt with and as a result of a declaration of war, they had to get reasonable.

We had a similar situation recently in Edmonton Alberta TSO, where they were about to put a trucking company out of business. In this case it was not the bailiff and the Collections officer. It was a little tart who personally signed a Requirement to pay issued at the taxpayer’s bank. She had no sense and no integrity. However when the Minister of Revenue’s office called things took a quick change for the better.

CRA collections likes to say that “There are no restrictions under the Income Tax Act (ITA) or the Excise Tax Act (ETA… handles GST and HST). That is a bald faced misrepresentation of the truth. There are a ton of restrictions.

For starters on the issue of no restrictions under the ITA and the ETA, nowhere in either act does it state that “CRA Collections Officers can do whatever they want in order to collect tax debts. Nowhere does it say that CRA is above the laws of this land. There are many more laws than just the ETA and the ITA. One thing CRA continually over looks is common law. Common Law dictates that when an agency prints a Taxpayer’s Bill of rights, it is the law that CRA follow what they have printed.

A taxpayer can fight them on their own, but that certainly is a second best choice to hiring a seasoned Tax Representative.

When CRA Collections starts they pretty much ignore every good principle and policy they have. Collections treats the collection of tax as a free for all where anything goes. They are usually shocked to know that they have to follow the law. Often a call from somewhere above in CRA brings them round to realty.
A taxpayer can fight them on their own, but that certainly is a second best choice. What is required in fighting collections is an understanding that you are going to have to play hardball and expect to be fought at every corner. Expect to be treated badly and to be told that they can do whatever they want. Expect that they will quote sections of the ITA and the ETA as if the mere quoting of the act will seize your home and take your first born.
We know from locking horns it is a big fight and it is not even our assets they are after.

We start by working our way up the line. We start gathering names and contact info. We find out who the team leader is, who the team leader’s manager is, who the manager is, who the Assistant Director is and who the Director is.

We very quickly escalate things. Every day we attack. We file service complaints. (See complaints section of this web site.) We fax and follow up with registered mail. We mail everyone on the list including the Minister of Revenue and the Commissioner of CRA.

We outline where the Agency is breaking laws, violating the charter, the constitution, privacy rights, overstepping authority, where they ought to know better, where they are willfully blind, where they are grossly negligent, where they are biased, where they violate criminal law, the collections act, The ETA the ITA and civil law, etc.

We can fire more legal issues at them then they know how to deal with.

We do press releases.

We advise them that the Society of Professional Tax Representatives is going to be investigating this matter. (See our website for the Society’s constitution.)

We hound them on the phone.

As we build the pressure, things start melting down.

By the time the Minister’s office is on the phone calling the Director…. Things start to getting very hot at the TSO (Tax Service Office. It often takes going all the way to the Minister to make them bend.

The fight is worth the battle, but it is not an easy one.

We don’t bother with the Ombudsman as he only investigates 20% of the cases, takes too long and has no legal authority over CRA. He can only make suggestions.

I will be adding more info on this subject to the CRA Collections area of the web site. www.taxauditsolutions.ca So stay tuned.

More to follow….

Dan

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June 21, 2010 by Dan White.

The Following article is posted at www.thestar.com as listed as The Canadian Press.
CRA Employees are caught running amok. More bad stuff from CRA. It is time for them to clean up their acts.

I don’t have the background proof in my hands, but it will not surprise me to find out that it is all true. I can state that a friend of mine who used to work for CRA; commented on the article as follows:

“We saw this all the time at TSO’s. It was Standard Operating Procedures. Also, I found people faxing, emailing and calling long distance family members and businesses (i.e. in India) planning business ventures and weddings. No Big Deal.

Scary stuff but the Fight must continue.

Thomas Jefferson said, “The Price of Freedom is Eternal Vigilance.”

Having written the above, I can tell you from my daily battle for clients against CRA… none of this surprises me.

To learn more about CRA audits and the tax problems, go to www.taxauditsolutions.ca

Dan White

_______

Dean Beeby

The Canadian Press

OTTAWA—Dozens of workers at Canada’s tax agency have been caught snooping on their ex-spouses, mothers-in-law, creditors and others by reading confidential tax files.

Internal reports at the Canada Revenue Agency show that rogue employees are improperly reviewing the private financial affairs of taxpayers without their knowledge.

And some are using agency computers to give favoured treatment to colleagues, friends, family — and themselves.

In one egregious breach last October, a woman accessed 37,500 emails and 776 documents containing confidential financial information about ordinary Canadians. She downloaded the files onto 17 compact discs for her personal use, inexplicably helped by agency technicians.

Documents outlining the forbidden invasions into private tax data were obtained by The Canadian Press under the Access to Information Act.

In one case, a worker secretly operated a business on the side with her spouse, and between 2004 and 2009 “accessed the accounts of two creditors and the spouse of one of those creditors.”

Another worker was found to have inspected his spouse’s tax information 69 times without permission.

A woman in one unidentified office poked into the agency’s data looking for confidential information on colleagues, friends and family — apparently to give them a break on their taxes.

“The employee made unauthorized access to the tax information of three colleagues and to the tax information of a colleague’s daughter, spouse and mother,” says one report.

“She accessed her own tax information and the tax information (of) 13 relatives…. She provided preferential treatment to colleagues, relatives and acquaintances.”

Agency gumshoes then stumbled on a secret cell of snoopers in the same location.

“The investigation also determined that 13 other employees of the same office made unauthorized accesses to taxpayer information. Of the 13 employees, 10 provided preferential treatment to taxpayers, five accessed their own tax information, four received preferential treatment …”

Another worker peeked at secret agency information about two companies she operated on the side — while those firms were undergoing tax audits.

“In addition, the employee made extensive unauthorized accesses to the taxpayer information of friends and family members and hundreds of other individuals.”

Yet another investigation found an employee peering into the electronic tax files of two of her spouse’s business partners, though the motive is not specified.

The documents show that ex-spouses are sometimes targeted, for reasons not made clear in the heavily censored material from September and October last year. Family members were also a favoured target.

Some workers who were caught claimed they were simply helping relatives file their income-tax forms.

But one worker admitted using the CRA computer system and confidential tax information to issue himself a false charitable donation receipt for $3,000, thus reducing his income-tax payable.

Agency records for 2008-2009 show there were 29 cases in which workers were caught accessing taxpayer records without authorization, about the annual average for the last five years. And there were a dozen instances in 2008-2009 in which tax records were improperly disclosed to third parties.

All information about disciplinary measures taken against staff who broke the rules is censored in the released documents. But in several cases, the agency appeared to be lenient with long-term employees.

“The employee admitted that she accessed the taxpayer information belonging to a former employer, her relatives including her mother, her father, her sister and her brother, as well as the information belonging to her former spouse,” says one report.

In deciding on discipline, “management took into consideration the employee’s years of service, her good employment record and her co-operation with the investigation.”

A spokesman for the agency said the number of breaches is relatively small, given that there are more than 40,000 employees.

“While the number of unauthorized access incidents is not large, the agency consistently continues to review its activities to enhance … prevention, detection and deterrence,” Noel Carisse said in an email response to questions.

Carisse said taxpayers are not always informed when workers improperly access files because the breach may be judged too minor. But taxpayers whose information is improperly disclosed to third parties are almost always alerted by telephone or mail.

“The (CRA) assessment will almost always lead to the conclusion that injury to the taxpayer is likely, or has already occurred,” he said, referring to disclosures.

Carisse did not provide information on the numbers of employees suspended, fired or criminally charged for such breaches, but said the agency has a “strict and enforced Code of Ethics and Conduct.”

“While any unauthorized access is unacceptable, the agency believes that the current numbers indicate that the agency is doing a good job protecting taxpayer information.”

He declined to provide any further information on the worker who downloaded 37,500 emails and 776 documents, saying only that the investigation continues.

There have been previous reports of isolated security breaches by insiders at the tax agency.

CTV News reported last year, for example, that a tax agency worker was found to be leaking confidential information to a violent gang in British Columbia. The worker was suspended months after the agency was first alerted to the problem through a police wiretap.

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June 18, 2010 by Dan White.

This is a great article on understanding how to defend yourself against penalties and interests over an innocent mistake.

If you need help with your penalties and interest tax problems, go to www.taxauditsolutions.ca for more information.

Thanks

Dan White

Tax Court Suggests CRA Be More Responsible in Evaluating Diligence Defenses
Print Version
9/1/2009
Bill Maclagan & Luke Mlynarczyk

The recent decision in Home Depot of Canada Inc. v. Her Majesty the Queen dealt with the common law defence of due diligence, as opposed to one of the statutory defences available to directors under subsection 323(3) of the Excise Tax Act (the ETA) or subsection 227.1(3) of the Income Tax Act. It serves to demonstrate the function of the common law due diligence defence in connection with strict liability administrative penalties and suggests that the Canada Revenue Agency (CRA) should apply commercial common sense before dismissing a taxpayer’s defence of due diligence.
FACTS

Home Depot was assessed late filing penalties pursuant to subsection 280(1) of the ETA. As part of its retail business in Canada, Home Depot collected and remitted GST as required by the ETA. Since 2005, it had contracted out its GST remitting and reporting obligations to Deloitte Tax LLP (Deloitte Tax), the largest North American provider of sales tax compliance services. Home Depot had remitted millions of dollars of GST each year, and with two exceptions, it made all its payments on time. Due to a clerical error, the two monthly GST returns and the accompanying remittances were not received on time by the CRA because Deloitte Tax had sent them to the wrong address. Once the errors were realized, Home Depot took immediate steps to re-file those returns and pay all outstanding amounts including interest. In respect of these errors, the CRA imposed late filing penalties in the amounts of C$77,097.76 and C$326,223.74. Home Depot appealed the late filing penalties on the basis that it exercised due diligence in attempting to meet its obligations under the ETA.

COMMON LAW DEFENCE OF DUE DILIGENCE AVAILABLE WHERE THERE HAS BEEN AN ERROR
The parties agreed that Home Depot could not succeed in a due diligence defence merely because it hired a third party to perform its GST obligations, and therefore, the actions of Deloitte Tax were relevant in evaluating the due diligence claim. The Minister took the position that the due diligence defence was only available in very narrow and restrictive circumstances and was not available where a taxpayer collected GST from customers but failed to remit the correct amount by the due date. The Honourable Justice Campbell Miller rejected the Minister’s position. Miller J., relied on the Federal Court of Appeal decision of Corporation de l’Ecole Polytechnique v. Canada, where the court stated “that there is no bar to the defence argument of due diligence, which a person may rely on against charges involving strict liability, being put forward in opposition to administrative penalties … due diligence excuses either a reasonable error of fact, or the taking of reasonable precautions to comply with the [Excise Tax] Act.”

The Minister then took the position that “in considering the question of what reasonable precautions were taken, the issue must be narrowed to ask [whether] reasonable precautions [were] taken to ensure the remittance was mailed or delivered to the correct address.” Miller J., took a broader approach to addressing whether Deloitte Tax, as agent for Home Depot, took reasonable precautions to properly remit GST in accordance with section 280 of the ETA. Specifically, Miller J., decided that Deloitte Tax’s overall compliance system should be reviewed and not just the specific precautions in place to make sure that remittances were properly addressed and mailed. In assessing the overall system, Miller J., found Deloitte Tax to be “a well-oiled sales tax remitting machine”. The failure to properly deliver the November and January remittances was due to simple human error.

Miller J., noted that it is easy to be critical of behaviour after an error has been committed and that one can always find something else a taxpayer might have done. Miller J., stated however, “that is not the test. The test is whether what the taxpayer in fact did was sufficient reasonable precaution – not that the taxpayer did not hold the hand of the employee throughout every single task no matter how menial.”

Finding in favour of Home Depot, Miller J., concluded that even if there were some safeguards missing at the mailing stage of the system, taken cumulatively, they would not outweigh the overall care and attention of Deloitte Tax in fulfilling its obligation to Home Depot to file returns and remittances on a timely basis.

AUTOMATIC PENALTIES SHOULD NOT BE APPLIED IN ALL CIRCUMSTANCES
The most interesting part of this case is the obiter dictum (the observation of the court which does not form part of the official reasons for the decision in the case). Miller J., was of the view that the case should never have gone to trial. He acknowledged that the penalty under subsection 280(1) of the ETA applies automatically when GST is remitted late. However, he went on to state that “a step back for a balanced look by a CRA official exercising a good dose of commercial common sense should not have resulted in [a] relentless pursuit of a half-million dollar penalty.” He made this statement after noting Home Depot’s history and the positive efforts it made to comply with its GST obligations. These comments provide a clear statement to CRA that it should be more reasonable in its application of administrative penalties where otherwise diligent and compliant taxpayers happen to make the occasional innocent mistake.

COMMENTS
This case comes on the heels of two other recent Tax Court of Canada cases which were decided under the informal procedure process. These cases found that the automatic penalties which applied, under section 163 of the Income Tax Act, could be avoided where the taxpayer exercised due diligence.

While, historically, the CRA has taken the position that penalties should be applied automatically and it is up to the taxpayer to apply under the taxpayer relief (fairness) provisions for a waiver or cancellation of the penalties, the taxpayer relief provisions do not specifically allow for the defence of due diligence and therefore, they may not be applied on that basis.

The interesting question for the future will be to see whether such positive statements by the courts will be enough to cause CRA to accept due diligence defences (where the taxpayer relief provisions might not apply) before proceeding through litigation.

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June 16, 2010 by Dan White.

Rental Expenses, paying your children.

It is clear that when you are paying your children, you need to have good records for what you paid for. This is not any different than any other discretionary business expense. You have to have proof of payment and sufficient details to prove that you received real value for that payment.

If your bookkeeping system does not catch this important information at data entry time, you may lose your deduction. You can hire your kids but the expenses have to be real and reasonable. In the following case the judge appeared a bit biased in only allowing $500, but the taxpayer has to accept responsibility of keeping good records. Audit Ready Books avoids these issues.

In a recent case, Dilys Massicotte vs. The Queen, Nov. 27, 2009, the taxpayer claimed a certain rental expense.
The expense is question were amounts paid to the taxpayer’s sons; aged twelve and fourteen to perform maintenance and cleanup work at her rental properties.

The taxpayer paid $7,500 to each of her sons per year. The total amount of $15,000 exceeded her annual gross rent. The rental loss for those two years also exceeded $15,000. The CRA disallowed the $15,000 expense for those two years. Naturally as they don’t like the idea of paying your family.

The judge acknowledged the taxpayer had rental business problems. The city had issued infraction notices regarding the property’s poor upkeep and non-removal of snow from the sidewalks. A tenant was evicted in 2004 and left her possessions behind. Removing her contents required multiple trips to the dump. The eviction’s aftermath also required extensive cleaning, repairing and refinishing of the floors.

The taxpayer paid her sons $12 per hour during those two years. The judge noted that amounted to 13 hours of work every weekend per child. In reality, the working weekend’s hours had to be longer than 13 hours after discounting certain non-work weekends due to birthdays, special occasions and hockey practices. The children did not work during the weekdays.

The rental property was situated about 30 to 35 km from the taxpayer’s home which would have required the taxpayer to drive to the property. The taxpayer claimed this travel time as part of the working hours for the kids.

The judge felt that the $12 per hour rate was on the high side and wondered if the paid travel time was reasonable for local work. In the end, he ruled the taxpayer did not provide him with sufficient evidence to show how each child could have worked more than 13 hours per weekend during those two years.

He acknowledged the children did provide valuable services and allowed a flat deduction of $500 per child for each of those two years.
The bottom line here is that if you don’t know how to keep audit ready books, you better start learning. To find out more go to www.taxauditsolutions.ca

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June 11, 2010 by Dan White.

CRA Audits run wild in Canada and they are no random event.

Audits are cold calculating attacks on the Mom and Pop businesses across this land. Alberta, BC and Ontario being the top 3 audit hot spots.

Audits are at an all time high. CRA through data mining, snitch lines, press releases, more staff and targeted audit campaigns is creating a plethora of tax problems for small businesses in Canada. Tax problems can sink companies and CRA is usually ruthless in their approach to collecting taxes.

I have been saying that audits are not random for years and if you think logically about it, the idea of a random audit evaporates in to a cold hard reality of tax problems.  William V. Baker, commissioner and chief executive of the Canada Revenue Agency, stated; “There are no random audits,” “There’s always a reason.” CRA does not audit randomly with no reason. It just does not happen.

I can tell you the number one reason for getting audited is because CRA wants your money. The number one cause of audits is a poorly done set of books that result in a poorly done tax return. Garbage in is garbage out.

If you don’t want an audit, don’t cause one. Keep audit ready books. To prevent a financial disaster from hitting you, read more about audit ready bookkeeping, CRA behavior and about CRA tax audit problems at www.taxauditsolutions.ca

More about audits;

If your tax return is selected for audit, the CRA has identified some aspect of your return, be it a deduction claimed or an industry that it is focusing on. Now CRA is looking for a reason to audit… and you likely were computer flagged as a good tax problem prospect.

So once the audit begins, the audit being a cat and mouse game. You become the mouse… or maybe it is the cat versus rat in the hat game… or maybe it is the snake and the mongoose in a life or death battle… whatever tax problem game you are in… you better realize that CRA is not going to be kind nor are they going to be fair. You may think that you have nothing to hide. Ha!!! what is fair, does not matter, you may think you have nothing to hide, but unless you are the mongoose, you are going to pay with your financial life. Just as in the game of snake and Mongoose, your audit has to be a process of being careful or you could pay dearly.

In the cat and the rodents game, CRA will intimidate and go after every nickle they possibly can. If they know you will figuratively bit off the head of the serpent, they will treat you with respect and only go only for what is provably their share. This game can not be played by the average business owner in Canada.

Being that the businesses of this land do not keep audit ready books, CRA exploits this to a point where taxpayers just pay the juice to get rid of the tax problem that is in their face.

The audits are an incredibly stressful experience for people who do not realize how much they don’t know about what can go wrong in an audit. At the end of the audit, then they know what can go wrong and then it is much harder to fix things. Harder but not impossible. CRA will stonewall…. you just have to know how to smash stone walls.

Folding when you are right, is foolish because you just set yourself up as a good paying client of the tax man.

Should you disagree with the CRA’s findings, you have the right to object to your assessment, launch an appeal and, ultimately, have your day in court.

Filing a Notice of Objection is the first formal stage of disagreeing with your assessment if you fail to resolve your differences through informal discussions with your local tax services office.

The Notice of Objection must be in writing and must clearly set out the reasons why you’re objecting. The benefit of a formal objection is that the CRA will generally suspend any collection procedures they may have started until the appeal is resolved. This will depend on whether they have just cause to move quickly to “Protect their Interests.”

Each year, the appeals branch of the CRA, which is charged with the responsibility of resolving disputes between the CRA and taxpayers, handles between 50,000 and 70,000 objections. This number will grow now that thousands of provincial auditors will move to CRA to do HST audits starting in July 2010.

92% of these objections are resolved administratively, which means you have to fight hard to keep your money.

Once the audit is over about 8% of taxpayers choose to appeal to the Tax Court of Canada.

About 1/3 of the filed appeals end up in Tax Court, which means the taxpayer folded before court in 2/3 of the cases.

The remaining balance of appeals are settled before court or withdrawn by the taxpayer.

It is a level playing field in court and the odds are good you will win if you know what you are doing. Most people do not, and they need a tax representative to solve their tax problems.

Should you lose in Tax Court, you do have the right to go to the Federal Court of Appeal — but do not count on a reversal of fortune at that level. The odds are against you. I recommend that in the majority of times, tax court is the final decision. Take your tax problems and go home.

So in summary the Mom and Pop businesses of this country are under siege by CRA. Once targeted you are either going to fight like hell or you are going to get railroaded into a big tax problem bill.

Start by learning audit ready bookkeeping and don’t talk to CRA, get a representative before the audit even happens.

Dan White
www.taxauditsolutions.ca

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May 13, 2010 by Dan White.

Here is a really good article regarding the home tax credit and what CRA is really up to, which of course is simply generating tax debts which result in tax problems, such as net worth assessments. Net Worth Assessments is a hot item with CRA at the moment and they are going crazy doing this across the country.

Every week we get calls from taxpayers who are finding out how an audit can turn into a net worth assessment. This is very bad for small business but very good for our business of protecting Canadians.

To find out more about net worth Assessments go to www.taxauditsolutions.ca

Dan White

Wednesday, May 12, 2010
The Short Happy Life of the Home Renovation Tax Credit, by Ryan Green.
This April, Canadians across the country will claim the Home Renovation Tax Credit in their tax returns. This will be the only year in which the popular tax credit can be claimed, as the Federal Government recently announced that it will not be renewed for 2010.

Announced as part of the Federal Government’s “Economic Action Plan”, the Home Renovation Tax Credit is generally understood as an incentive to encourage spending in the home renovation sector during bleak economic times. It is less appreciated that the tax credit is also a tax collection measure designed to identify businesses that fail to remit tax as required.

Transactions in the home renovation sector are frequently paid in cash without a written contract or invoice. Relying on the fact that such transactions are more difficult to trace, some contractors do not fully report their income and forgo collecting GST.

Customers take a significant risk when they participate in undocumented transactions. If a dispute ever arises with a contractor, the lack of a written contract means there is no evidence of the work for which the contractor was retained, the agreed price, or the warranties provided. Despite this risk, some customers agree to undocumented transactions as a means of avoiding GST on their home renovations.

The Home Renovation Tax Credit targets tax avoidance in the home renovation sector by removing the incentive for customers to participate in undocumented transactions and encouraging them to report their home renovations to the Canada Revenue Agency (the “CRA”).

The credit equals 15% of eligible home renovation expenses between $1,000 and $10,000. The maximum allowable credit of $1,350 represents 13.5% of a taxpayer’s first $10,000 in home renovation expenses. It is no coincidence that in provinces currently imposing HST (a combination of GST and provincial sales tax), the HST rate is 13%.

To obtain the tax credit, taxpayers must report certain information in Schedule 12 of their 2009 tax return, including the name and GST number (if applicable) of their supplier or contractor. If requested, taxpayers must also provide the CRA with copies of their invoices.

The information provided by taxpayers claiming the tax credit will provide the CRA with a snapshot of the contractors and suppliers in Canada’s home renovation sector. Ingeniously, this valuable information will only cost the Federal Government a one-year tax break for Canadian homeowners equal to slightly more than the sales tax owed on their home renovations – much of which would not have been remitted in the absence of the tax credit.

By examining its snapshot of the home renovation sector, the CRA will be able to target businesses for audit. Once a business is in the CRA’s sights, reliance on undocumented transactions will provide no protection from reassessment.

During an audit, a CRA auditor reviews all deposits into a business’ bank accounts. To the extent that deposits cannot be explained, they are deemed to be sales income. Based on this analysis, the CRA will issue reassessments for unremitted income tax and uncollected GST.

Keeping cash outside of a bank account does not prevent reassessment. CRA auditors will examine a target’s standard of living to determine if it fits with reported income. Where this is not the case, the auditor will calculate the target’s income based on annual expenses and asset growth.

Where the CRA suspects that a person has intentionally under-remitted tax, it will generally impose a penalty equal to 50% of the tax avoided. In particularly egregious cases, the CRA will recommend criminal sanctions for tax evasion.

If you are a contractor or supplier who complies with your tax obligations, you have nothing to fear this tax season. For you, the Home Renovation Tax Credit likely provided a boost to business in a difficult economic period. However, if you have not complied with your tax obligations, the tax credit’s legacy may not be a brief boost to business but instead a costly reassessment.

- Ryan Green

Visit the Dwyer Tax Lawyers web site for information about
our services and lawyers’ profiles.  www.dwyertaxlaw.com

The above article provides general commentary of an educational nature. It does not constitute advice for any specific person or any specific set of circumstances. Because circumstances vary, readers should consult professional advisers in order to obtain advice that is applicable to their specific circumstances.

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May 7, 2010 by Dan White.

You just have to watch this candid interview with a CRA Auditor.  This is the interview that every business person in Canada needs to watch and understand. CRA is no joke. We can laugh at this insanity, but we need to understand what kind of entity we are dealing with.  We need to know what kind of people work for CRA.
This may be a hilarious insight into the insanity of the Canada Revenue Agency, but it is very real and they are very dangerous if not handled properly.
If you want to understand what an audit is all about you really need to watch this video.
If you think you can handle an audit without professional help, you will find out just how costly that will be. CRA can and will trip you up.
Enjoy the 4 videos, it will take you ten minutes each, so go get a coffee and a valium, or better yet a double scotch, straight up. Please be sure to comment on the videos.
http://taxauditsolutions.ca/cms/index.php/cra-info/inter/
Thanks
Dan White

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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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March 31, 2010 by Dan White.

CRA gets caught in their own errors.

Contrary to popular opinion, you can fight CRA and win. That is the business we are in, fighting CRA. We do fight CRA tax problems,  we provide solutions to those problems and we do achieve victories. Usually the solution is a procedural war with CRA. Fighting CRA is not particularly easy. There are brush offs,  ignoring, there are silly responses… all these things usually cause taxpayers to just fold. We have learned from experience that one has to be dogmatic and persistent as well as knowing CRA weaknesses.

It is good to see that “a Lady in her 80’s,” could and did fight and win.

To read more about fighting CRA, go to www.taxauditsolutions.ca

Dan White

Here is a good article written by Neil Reynolds, for the Globe and Mail.

Neil Reynolds
Taxman fallible? Lady in her 80s has the answer

Sometimes, the CRA has to deal with its own human errors

Published on Wednesday, Mar. 31, 2010 12:00AM EDT Last updated on Wednesday, Mar. 31, 2010 6:31AM EDT

In Saunders v. the Queen, the Tax Court of Canada had only a single legal question to resolve: Did the appellant, Elizabeth Saunders, described in court documents as “a lady in her 80s,” file her 2007 income tax return by the deadline of April 30, 2008, or did she file it on May 20, 2008, the date stamped on her return by Canada Revenue Agency staff at the agency’s Montreal office?

The answer would determine whether the agency had the right to levy a late-payment penalty. It would also give the public a glimpse of the arbitrary inclinations of government bureaucracy.

Accountant Nicolas Karavolas testified for the appellant, his client. He described first the established process that his office had followed for a number of years when filing personal income tax returns in the final days before the deadline. As he and his staff (all of whom were accountants) completed various clients’ returns, one staff member would rush them - a pile of returns at a time - to the CRA’s office, where the delivery person would join the line of people waiting to have their returns stamped.

The delivery person would then return to the office for another batch of returns. The office kept a list of all the returns with the corresponding delivery dates. Aside from lineups at the CRA office, Mr. Karavolas testified, the process worked well. Each return got a CRA stamp documenting the time of delivery.

In 2008, presumably in an attempt to provide faster service, the CRA modified its system. It would still accept returns at the counter from people who didn’t mind waiting. Taxpayers could avoid the wait, however, by inserting their returns into the slot of a closed box (similar to a mailbox). It was this time-saving mechanism that the Karavolas team used when it filed Ms. Saunders’ return. The Karavolas list indicated that her return was deposited into the CRA “mailbox” on April 29, 2008. The CRA, however, stamped it as May 20, 2008. What went wrong?

Throughout the days before the April 30 deadline, the CRA procedure for emptying the box didn’t change. At the end of the day or perhaps the next morning (according to CRA testimony), CRA staff would remove the accumulated returns from the box and deliver them to other staff for stamping; these stamped returns were then turned over to other employees who dispatched them to the appropriate CRA officers for processing.

Was this system reliable? The senior CRA official who testified for the agency said it was “pretty” reliable - which was why he believed the stamp properly identified Ms. Saunders’ return as delinquent.

Oddly, the CRA used only a single date in stamping the returns, regardless of the actual date of filing: “April 30, 2008.” The agency reasoned that the deadline date was the only one that mattered. Any return that was not dated April 30 would be automatically deemed a late filing.

Of the Karavolas tax returns deposited in the CRA box on April 29, 2008 (according to the Karavolas list), half bore CRA stamps with drop-off dates in May. The CRA confirmed that it had put in place no mechanism to verify the delivery date of returns placed in the mailbox.

In her ruling last month, Tax Court Judge Georgette Ann Sheridan ruled for “the lady in her 80s.” First, the judge found the three Karavolas witnesses credible. She found the CRA executive who testified, Phillippe Demeule, credible as well - though, she noted, he had “no personal knowledge” of either the collection procedures in place at the agency’s Montreal office at the time, or of how the Saunders return “was treated at the time of filing.” “I must say that I do not share Mr. Demeule’s faith in the infallibility of a huge government bureaucracy, especially during its busiest time of the year,” Judge Sheridan said in her ruling.

She concluded that the different stamp dates resulted from “the mishandling of returns by the roster of unidentified (and, for the Appellant’s purposes, unidentifiable) officials charged with retrieving, stamping and redirecting the flood of returns that would have been deposited at the Montreal office in the dying days of April, 2008.”

Furthermore, Judge Sheridan observed, the record showed that Ms. Saunders met with her accountant early in April, learned that she would owe a significant tax payment, subsequently transferred the money into her chequing account, and delivered two cheques to Mr. Karavolas (one for her federal taxes, one for her provincial). This behaviour, the judge said, hardly suggested either a tax cheat or a tax avoider. “In closing,” the judge added, “it is interesting to note that after 2008, the Canada Revenue Agency modified the collection box procedure to allow for date stamping upon delivery.”

In this case, the tax agency wasn’t dealing with taxpayer dishonesty. It was dealing with human error in its own department. The judge voided the late-payment penalty that the CRA had imposed - though, in fairness, it should have been paid, as damages, to “the lady in her 80s.”

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March 27, 2010 by Dan White.

You have to love it.!  It is pretty interesting the subject of “Politics & Propaganda.”  I guess some real lobbying and some real back room chats changed what was really going to happen.

The Minister of Finance has said in the past that there would be no more changes. I suppose that his “spin” is pretty clever… It went along the lines of; I know you believe what you think you think that I meant, however, I am sure that you don’t realize that what I actually meant was not what you think I meant, or that you actually realize that what it appears you  I think , I meant what I said, however, however I don’t think that what I said was not clear, it is just not what I think you think I meant…… oh, boy…. oh, boy… spin spin, we sit and spin, then we suck it up and we spin again. And miraculously the truth becomes a truth that was not a truth, but was meant to be a truth, even if it is not clear which it was, but the intent was clear. As Jean Cretian said; “A truth is a truth is a truth.”

So now the tax problems change. HST is getting more and more confusing and convoluted… But I guess CRA will like that, as all the new HST issues will get more and more complicated.
So now HST which was intended as a flat tax is no longer a flat tax, and the flat tax fell flat… and now us, the  Tax Dudes are going to need to try to figure it all out.

Stay tuned for more HT data here and at www.taxauditsolutions.ca

Dan White

Here is a good article from the Globe and Mail by Tara Perkins.

________

No GST hit for financial sector: Ottawa
Finance Minister Jim Flaherty

Finance Minister Jim Flaherty

Tara Perkins

Globe and Mail Update Published on Friday, Mar. 26, 2010 7:39PM EDT Last updated on Saturday, Mar. 27, 2010 3:12AM EDT

Finance Minister Jim Flaherty has pledged to not impose any additional GST on financial services, suggesting that a rule change that appeared to cost the sector $1-billion was just badly worded.

“There’s no intention of changing tax policy,” he said Friday at a press conference in Oshawa, Ont., on another subject.

The Finance Department issued a statement late Friday saying that the Canada Revenue agency will review and update the rules, and that it welcomes views and suggestions from the industry.

“Businesses need clear GST rules,” Mr. Flaherty said. “We are not imposing new taxes.”

Mr. Flaherty’s comment was met with cautious optimism from the industry.

Barry Segal, a tax partner with Ogilvy Renault, said the comments “should be viewed as a positive step in the tax and financial communities.”

Mr. Flaherty’s remarks suggest that the Canada Revenue Agency’s February notice, which laid out what many experts in the financial sector viewed as a radical change to the way GST applied to a number of services, “may have gone beyond what the Department of Finance intended,” Mr. Segal said.

“We will have to see whether the government’s legislation conforms to Minister Flaherty’s comments,” he added.

The issue began when Ottawa said in December that it would clarify the rules that govern how GST applies to a number of financial services, in response to recent court cases on the topic. The CRA followed up with details in February. The changes applied retroactively to Dec. 14.

The financial sector says the CRA notice amounted to a drastic change in tax policy that would increase Ottawa’s GST revenue by more than $1-billion a year.

It boils down to the definition of “financial service” in tax laws. Such services are usually exempt from GST but Ottawa altered the definition so that many activities that “facilitate” or “prepare” financial services appeared to be newly subject to tax.

Mr. Flaherty said Ottawa did not mean to do that. “We will have the tools in the first Budget Implementation Act to make sure we get back to the status quo before the court cases, so people can rest assured that the tax treatment of defined financial services will not change,” he said.

Some experts are not satisfied.

Mike Firth, a tax partner with PricewaterhouseCoopers, said that “what industry really needs is a clear response on the specific examples of [services] which the CRA has clearly declared are taxable effective Dec. 14, 2009, whereas they were clearly agreed as exempt before that date, such as commissions paid to car dealers to arrange for consumer credit and commissions paid to investment dealers for the sale of mutual fund units.”

Most industry voices were optimistic.

“Anybody that’s trying to save for retirement or anybody that’s trying to save using mutual funds or other financial products, this is good news for them,” said Barbara Amsden, director of strategy and research at the Investment Funds Institute of Canada.

However, she added that she remains cautious until she hears the final word from the Canada Revenue Agency.

“It gives us some assurance,” Jim Murphy, head of the Canadian Association of Accredited Mortgage Professionals, said of Mr. Flaherty’s position.

“We hope the Minister’s comments today reflect the government policy of not raising taxes on consumers,” said Steve Masnyk, a spokesman for the Insurance Brokers Association of Canada.

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March 21, 2010 by Dan White.

 HST is the final nail in the coffin of what home ownership is all about. And it is not all bad news. The dilemma that has been created,  is HST is a tax problem for home buyers. This changes the price of homes that people can afford. The HST will give birth to smaller more affordable homes. Especially for new home buyers.

As far as downtown Vancouver condos having $100,000 in HST is not so much of a problem in the greater scheme of things. Those that travel in those circles, can afford more tax problems.

Eventually there will be a positive effect on the economy due to HST, but the effect on home ownership is permanent.

There will be a positive effect on the home renovation business. Renovations versus moving has taken an tax aptitude adjustment. This area of the economy will boom.

Want to start a new business…. ?  How about training for home owners in being their own renovators  ?

“Hello 1950’s” way back then, people could not afford big houses. The average family had a small home of less than 1,000 square feet. They had one car and they had a bunch of kids. They learned to live together.

Then houses got larger and the basements got bigger and were large unfinished storage areas or they became finished and the homeowner had tons of living space… and the size of homes grew because people could afford more and more. Or they could afford more and more debt.

Then zoning regulations were passed preventing small homes from being built. No one wanted to be embarrassed by having their monster home devalued by some modest home next door.

Then came the condos… they don’t even have basements and there is a plethora of condos that have less than a 1,000 square feet. They filled a lifestyle need that accepted not having basements and large amounts of rarely used space.

Now in “1950 revisited,” in order to get new home buyers, there is going to be a  new offering. Smaller and smaller homes, with finished basements or that can be finished by the new home owner. Basements will become the kitchen family room for us “want to be Italians,” who love the family interaction of living and eating together.

The kids won’t be able to smoke pot in the house and not be noticed. Mom and Dad will have the kids underfoot. Now that is a concept…

Houses will be to live in, not to impress people. What we now have is a concept of being HST taxed into reality of needing to live within our means. Modest living will become our new reality.

The second car will again be the old beater… Cheap will be called “Less Tax.”  Less tax is less problems. CRA auditors will no longer be offended by life styles beyond the auditor’s own ability to live. The CRA Lifestyle Audit will go away for the average family, and be reserved for the rich.

The concept of average families being able to live in the styles of the last few decades has now been taxed away. Canadians will learn to live tax smarter. Failing which, they won’t be able to pay their taxes and will financially crash and burn.

You are not “Richer than you think.” That BNS ad should be called a BS ad.

To learn how to turn the page on tax reduction strategies go to www.taxauditsolutions.ca

Dan White

____

Read what the Vancouver Sun has to say on this matter.

 Why I have come to think of the new HST as a death tax

And why I think this year, as never before, the first-time buyer who wants to make informed choices needs Tuesday’s seminar

By Peter Simpson, Vancouver SunMarch 20, 2010

“Of two things you can be certain -death and taxes.” -Benjamin Franklin

As forward-thinking as he was, inventor Ben likely never imagined death would be taxed.

B.C. residents are a scant 3 1/2 months away from the implementation of the harmonized sales tax -the dreaded HST -and, yes, death is included on the provincial government’s hit list.

In fact, a Surrey funeral home has been running public-notice ads in local newspapers urging folks to beat the HST. “Plan now and save. Prearrange your cemetery and funeral plans now to avoid paying hundreds of dollars in extra tax … save seven per cent.”

I resisted the temptation to call the funeral director to ask if he had problems with crowd control as panicked people picked through the caskets.

And is it just me, or does anyone else find it morbidly amusing that the tax date, July 1, is the day Canadians are usually celebrating, not lamenting a huge hole in their wallets?

More businesses are now offering beat-the-HST specials. Expect these marketing efforts to multiply through the spring as businesses are anticipating a post-HST sales hangover during the summer.

As we inch closer to H-Day, politicians on both sides of this issue are jockeying for position. The other day, I found in my mailbox a flyer from federal NDP leader Jack Layton. The headline screamed: “Thanks to the HST, Vancouver homebuyers will get ripped off.” Layton wanted me to tick off a box indicating I agreed with him and return the form, postage paid. I passed.

Recently, provincial Finance Minister Colin Hansen held a news conference to announce that University of Calgary public-policy chair Jack Mintz believes the HST will boost investment and create thousands of jobs. No surprise here: Mintz is the academic who supported Ontario’s HST model last year.

I opined many times that the HST might be beneficial to some industry sectors. I get that, I really do. But the HST will impose a heavy burden on consumers, especially on big-ticket items like new homes. To its credit, the provincial government, after months of intense pushback from the homebuilding industry, made adjustments to how the HST is applied to new homes.

Originally, the rebate threshold was $400,000, ridiculously low for the Lower Mainland. There was also a one-time rebate of $20,000 on homes priced higher than $400,000. Last November, the threshold was raised to $525,000 and the rebate hiked to $26,250.

At the time, I said the enhancements deserved a handshake, but that we were still a long way from slapping out any high-fives. Many new homes in this region are priced well above $525,000. And the people plunking down their hard-earned cash for those homes are average folks, representing all age groups and professions -teachers, blue-collar workers, office personnel, firefighters, whatever.

A developer told me the average HST bill on his downtown Vancouver condos will be $100,000, after the rebate. Remember when you could buy a whole condo for less? The developer also said he, along with many competitors, are scrambling to to get homebuyers into their homes before the HST hammer hits.

Recently, at the Canadian Home Builders’ Association annual conference in Victoria, I attended a presentation by pollster Allan Gregg, who outlined his latest polling results on government actions and the housing market. Most of those polled said the most important issues facing Canada are the economy and taxes. The environment -by a wide margin -was the least important issue.

Regarding the HST, the question was asked: “On balance, do you think the HST will make it easier or harder for people like you to buy a house in the future?” Not surprisingly, 69 per cent of those polled in Ontario and B.C. said the HST will make it harder or significantly harder to buy a home.

Understandably, house prices and other affordability factors significantly affect the intentions of renters, who were asked: “How likely do you think it is that you will be purchasing a home in the next two to three years?” Sixty-five per cent indicated it was either not very likely or not at all likely.

On the financing front, 69 per cent of the renters who intend to purchase a home believe it will be easy for them to obtain a mortgage. Regarding homeowners who intend to renegotiate their mortgages, 83 per cent were confident it would be easy for them to obtain a mortgage.

Overall, Canadians are optimistic about the future, and both consumers and governments now recognize how important housing is to the economic recovery and growth.

Another study released last week by RBC found that 91 per cent of Canadian homeowners believe a home is a good investment, the highest level in 12 years. Sixty per cent believe housing prices will rise in 2010 and 64 per cent believe mortgage rates will also rise. Bottom line, now is the time to buy.

The RBC report notes homebuyers, particularly first-timers, need solid advice about what they can afford, not only today, but down the road. And this sage advice is the perfect segue into where exactly first-time buyers can get all the advice they need to make more informed purchase decisions -the 16th annual free seminar for first-time homebuyers, presented next Tuesday by the Greater Vancouver Home Builders’ Association and the Homeowner Protection Office.

The Vancouver Sun and Province are sponsors.

Seminar attendees will get answers to these questions: What location is preferable? What type of home is best matched to needs and financial resources? What are the mortgage options? What are the legal considerations and closing costs? How will the federal government’s new mortgage qualifying rules and upcoming HST affect buyers? What is involved with buying a pre-sale condo? What are the benefits of builder licensing and mandatory home warranties?

Pre-registration is required. Learn more about the seminar and register at gvhba.orgor call . Registrations will also be accepted via voice mail during the weekend.

Peter Simpson is the chief executive officer of the Greater Vancouver Home Builders Association.
© Copyright (c) The Vancouver Sun

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March 19, 2010 by Dan White.

 CRA is on a mission,being, to get as much money as they can. Sometimes it boggles the mind as to how they can be so inconsistent in their approach to businesses.

Being that a lot of people incorporate to pay less taxes, which in itself is a bit of a joke, because in the big picture that belief is unfounded.

We won’t get into the fact that there are thousands of more legal issues that surround being incorporated which makes having a corporation a risky business.

Aside from the extra tax payable, the higher risks, there is a lot more bookkeeping.

And of course more government agency problems. Especially with CRA.

Here is an example of a CRA problem.

Posted in the Globe and Mail, comment by  the Canadian Federation of Independent Business

Published on Thursday, Jan. 14, 2010 8:54AM EST Last updated on Thursday, Mar. 18, 2010 3:33PM EDT

“Employment Insurance claims are most often refused when employees are considered to have a non arm’s length relationship with their employer. In such cases, the number of years paid into EI is not relevant. In general, the Canada Revenue Agency (CRA) does not consider these jobs insurable due to the non-arm’s length relationship that exists, whether through blood (e.g. son), marriage (including common-law) or adoption. Where CRA believes the employer and employee have a job contract similar to one that would apply to an unrelated employee, they are considered to work at arm’s length. In such a case, EI premiums must be paid.”

Dan’s comments:
I find it pretty interesting that CRA does so much sucking and blowing at one time. Their current practice is to go to a single director corporation and deem the director to be their own employee and set up a payroll account for them. Yet they don’t allow that person to collect EI. Of course being that I make a living dealing with CRA issues, it is good for my business of fixing the messes they create. CRA is completely incorrect and inconsistent in their approach, so it is a fixable problem. So; “Long Live CRA” and may they continue to create problems that we get paid to fix.
Dan White
Whitby

To learn more about dealing with CRA go to www.taxauditsolutions.ca

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March 18, 2010 by Dan White.

About Complaints to CRA.
This is a good article about service level complaints against CRA. You can complain before going to the ombudsman, and I would recommend that you do that first. You will get a faster response, and may be able to resolve the matter at level one.

I note that the ombudsman’s office only had a thousand proper complaints last year… I guess you can look to see that grow about  a hundred times greater as Canadians learn that there is power to the complaint. Too many accountants are telling clients that there is no point to complaining because nothing happens. That is true if a complaint is either wimpy or filed by a wimp. (Not all accountants are wimps, although CRA gives them some pretty good reasons to be wimpy)  I you are going to accept a level one brush off.. then, there is no point in complaining.

When considering complaining to the ombudsman, the issues are really to understand that all an ombudsman can do is deal with how you are treated and not if the numbers are wrong or deal with legal issues..

Wrong numbers fall under the administration of the ITA, auditors are required to come to the right numbers. However that is not always the case. If you are dealing with legal or administration complaints, that is best dealt with directly with CRA.

Auditors are authorized representatives of the Minister, to administer the ITA and the ETA… they are not authorized to overrule other laws.

CRA staff do not like having complaints escalated, so if you file your complaint properly, you will get a response. Often you will get what I call the level one compliant brush off. If this happens, then you need to escalate the complaint, and put in some more ammunition in your gun.

To learn more about the fine art of complaining, go to www.taxauditsolutions.ca

Dan White

By Bruce Johnstone, Leader-PostMarch 18, 2010 2:10 AM

Canada’s Taxpayers’ Ombudsman, Paul Dube, spoke to the Regina & District Chamber of Commerce on Wednesday.

Canada’s Taxpayers’ Ombudsman, Paul Dube, spoke to the Regina & District Chamber of Commerce on Wednesday.
Photograph by: Roy Antal, The Leader-Post, Leader-Post

Canada’s Taxpayers’ Ombudsman says the biggest problem he deals with in mediating disputes between taxpayers and the Canada Revenue Agency is poor communications.

Paul Dube, a self-confessed “recovering lawyer,” who was appointed to the newly created position in 2008, says the CRA is a big, powerful bureaucracy that doesn’t always communicate well with its clients.

“The CRA has a tough job,” Dube said following a speech to the Regina and District Chamber of Commerce here Wednesday. “They have to protect the tax base. They have to detect fraud. They have to weed out the cheaters.

“And yet they have to give taxpayers their fair due and administer benefits to those who are eligible. Sometimes they err on one side, sometimes they err on the other.

“So they’re damned if they do and damned if they don’t.”

What Dube, who was named Canada’s first Taxpayers’ Ombudsman in February 2008, attempts to do is ensure that taxpayers are treated fairly and professionally by the CRA.

“The way the CRA administers the law, the way they calculate the amounts is not within our mandate,” Dube said. “What is in our mandate is the way they explain to you what they’ve done, and the way they treat you.”

While the Taxpayers’ Ombudsman can’t adjudicate disputes over tax rates or policies, or matters before the courts, or disputes that pre-date the ombudsman’s creation, it can “bridge the communications gap” between the CRA and its clients.

“The bottom line is: Taxpayers are entitled to know how and why the CRA came to that decision,” Dube said. “And sometimes that’s all taxpayers want.”

Dube added that CRA generally does a good job in dealing fairly with taxpayers, but sometimes people “fall through the cracks.”

“Rules are dumb. Rules applied universally sometimes have an unfair result,” Dube said.

Given the size and scope of CRA’s job — the agency has 44,000 employees, handles 26 million individual tax returns and 1.6 million corporate filings, and administers benefits for 11 million Canadians — mistakes are inevitable.

“We are dealing with the exceptions. Just given the sheer volume of the transactions, the exceptions can mount and they can be pretty significant situations for taxpayers.”

In its first year of operation, Dube’s office received 5,000 contacts, but not all were valid complaints. Out of those 5,000 contacts, about 1,000 files were opened and over 950 files were closed that year.

“We’re on track to match that this year. The difference is more of the complaints are mandate-related,” Dube said.

“(Last year) a lot of people heard about us and just called us and said ‘I’m paying too much tax and I don’t like my notice of assessment.’

“This year, we’re finding more of the calls are within our mandate.”

Dube said taxpayers are pleased to learn they have rights, such as the right to be treated professionally, courteously and fairly, the right to receive complete, accurate, clear and timely information, the right to lodge a complaint against the CRA.

“People are encouraged by the fact that they have somebody to go to with these complaints — outside the CRA. That’s the big difference,” said Dube, whose office is funded out of CRA’s budget, but reports directly to the minister of revenue.

Taxpayers with complaints about the service provided by the CRA can call or visit www.taxpayersrights.gc.ca.

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March 14, 2010 by Dan White.

 While the following cases are not exactly current, they are really good refreshers in how to see GAAR. (General Anti Avoidance Rules.)

This a first rate bench mark for deciding about a transactions.

For more information on how CRA sees things, go to www.taxauditsolutions.ca

 Dan White

__________

Most important tax decision in a generation
By Arnold Ceballos
Toronto
October 28 2005 issue

In a widely-awaited pair of decisions, the Supreme Court has set out guidelines which could make it easier for taxpayers to arrange their affairs in a way that minimizes taxes without violating the general anti-avoidance rule in the Income Tax Act.

The Court established a new test for determining when there is a violation of the general anti-avoidance rule (GAAR), which is set out in Section 245(4) of the Act.  The Court stated that three requirements must be established before the GAAR will be applied: a tax benefit must result; the transaction is an avoidance transaction; and there was abusive tax avoidance in the sense that the tax benefit would be inconsistent with the object, spirit or purpose of the provisions relied upon by the taxpayer. The burden is on the taxpayer to refute the first two prongs of the test, while the Minister must establish the third prong. If the existence of abusive tax avoidance is unclear, the Court said the benefit of the doubt goes to the taxpayer.

“The decision is enormously significant and sets out the parameters for legitimate tax planning,” said Vern Krishna, Executive Director of the Tax Research Centre at the University of Ottawa. He adds that the decision is particularly important because the GAAR is an overreaching section of the Act that hovers over the entire statute.

The new guidelines are set out in judgments released Oct. 19 arising out of two cases that considered the GAAR.

In Canada Trustco Mortgage Company v. Canada [2005] S.C.J. No. 56, the Court was considering a tax-reducing arrangement established by Canada Trustco Mortgage Company (CTMC). CTMC is a mortgage lender which derives revenues from leased assets. The company had purchased a number of trailers which it then leased back to the vendor in order to offset revenue from its leased assets by claiming a capital cost allowance on the trailers.  By doing so, CTMC was able to defer paying taxes on the profits reduced by the capital cost allowance deductions, which would be subject to recapture into income when the trailers were later sold.

The Minister of National Revenue disallowed the capital cost allowance claim and on appeal the Tax Court set aside the decision. The Federal Court of Appeal affirmed and the government appealed the matter to the Supreme Court of Canada.

The second case was Mathew v. Canada [2005] S.C.J. No. 55, involving Standard Trust Company (STC), whose business included lending money on the security of mortgages. The company became insolvent when the real estate market declined, leaving an unrealized loss of $52 million. The liquidator executed a series of transactions which, through the operation of certain provisions of the Income Tax Act, allowed a number of taxpayers to use the losses accrued on the mortgages against their own incomes. The Minister of National Revenue applied the GAAR and disallowed the deduction. Both the Tax Court and the Federal Court of Appeal upheld the Minister’s decision. The taxpayers appealed to the Supreme Court.

The basic issue before the Supreme Court in both cases involved an interpretation of the GAAR and specifically whether the there was abusive tax avoidance by the taxpayers in question.
The GAAR was added to the Income Tax Act in 1988 as a result of the 1984 Supreme Court decision in Stubart Investments Ltd. v. The Queen. In that decision the Court rejected a literal approach to interpreting the Income Tax Act, while also rejecting the business purpose test, which would have restricted tax reduction to transactions with a real business purpose. In response, the government introduced the GAAR in order to deny the tax benefits of certain arrangements that comply with a literal interpretation of the provisions of the Act, but which amount to an abuse of the provisions of the Act.

In the current Canada Trustco case, the government argued that the usual result of the capital cost allowance provisions should be overridden by the GAAR where there was no real financial risk or “economic cost” to the taxpayer, which it said was the case with CTMC’s leasing arrangement.

The Supreme Court, however, rejected this interpretation, agreeing with the Tax Court judge that the transaction was not so dissimilar from an ordinary sale-leaseback so as to take it outside the object, spirit or purpose of the capital cost allowance provisions. In doing so, the Court articulated a new two-part approach to interpreting whether the tax avoidance was abusive, based on what it called a unified textual, contextual and purposive approach.

Writing for a unanimous court, Chief Justice Beverley McLachlin and Justice John Major stated that the “first step is to determine the object, spirit or purpose of the provisions of the Income Tax Act that are relied on for the tax benefit, having regard to the scheme of the Act, the relevant provisions and permissible extrinsic aids. The second step is to examine the factual context of a case in order to determine whether the avoidance transaction defeated or frustrated the object, spirit or purpose of the provisions in issue.”

The Court continued: “the abusive nature of the transaction must be clear. The GAAR will not apply to deny a tax benefit where it may reasonably be considered that the transactions were carried out in a manner consistent with the object, spirit or purpose of the provisions of the Act, as interpreted textually, contextually and purposively.”

“The Court established a legal standard for GAAR and it did that very well,” said Al Meghji of Osler Hoskin & Harcourt LLP in Toronto, who acted for Canada Trustco. He added that the Court’s task was to ensure that GAAR was an effective anti-avoidance tool while at the same time applying it in a way that did not result in unacceptable commercial uncertainty.

The difficulty with GAAR, he continued, was that it “was very capable of becoming a smell test.” According to Meghji, the new legal standard allows a determination of whether something is abusive without reference to subjective views about what is or is not acceptable.

In Mathew, the Court applied its reasoning from Canada Trustco and held that, based on a contextual and purposive interpretation of the relevant sections of the Income Tax Act, and in particular the partnership provisions relied upon by the taxpayers, the impugned transactions were abusive and frustrated Parliament’s purpose.

Kim Hansen, a Vancouver sole practitioner who represented the taxpayers in the Mathew case, agreed that the Court did a good job of providing direction with respect to applying GAAR, pointing out that “the rule itself provides uncertainty.”

Calling the Canada Trustco decision a “major setback for the government”, Professor Krishna says he expects the Department of Finance to respond to the decision in much the same way it did following the Stubart decision. “They overreacted in 1988 and I expect they’ll overreact again and bring technical amendments to bolster the rule,’ said Krishna.

Justice lawyer Anne-Marie Levesque, who represented the government in both cases, agreed the Court gave “clear guidance to the government, to taxpayers, and to courts on how it sees GAAR being applied in the future.”

However, she added that “the Court has put GAAR in a box and I’m not sure the government saw the same box as the Court.” She said that the government will consider the decision and its impact before deciding how it will affect the future application of GAAR.

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March 5, 2010 by Dan White.

Agressive Tax Planning Crackdown

CRA is looking to deny tax savings where a tax expert advises based on collecting a share of the rewards.

I guess this means that getting tax advice saves taxes.  (Now I am really glad that  I don’t charge based on the money I save people.)

Read other news from our Budget 2010 Section

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March 2, 2010 by Dan White.

I don’t know… but it seems to me that $53,000 for job related expenses could be high. Regardless of high, low or whatever; Toronto has not been handling this properly.

How it should work is that the counselors can be paid an extra $53,000. They then deduct as employment expenses those expenses that legitimately reflect job related expenses. The rest is taxable income. End of story.

Things such as zoo passes, seem pretty personal to me… not that I want to get personal on this.

For more info on tax problems and solutions;  go to  www.taxauditsolutions.ca

Dan White

Here is the Globe and Mail article on the subject.

ANNA MEHLER PAPERNY

From Tuesday’s Globe and Mail Published on Tuesday, Mar. 02, 2010 12:00AM EST Last updated on Tuesday, Mar. 02, 2010 5:01AM EST

The Canada Revenue Agency is trying to tax Toronto city councillors on benefits ranging from golf and zoo passes to underground parking spaces. And the city is fighting back.

On Feb. 18, each councillor received a letter from the city’s pension, payroll and employment division with the results of a CRA employer compliance audit. Each letter included a figure (some in the thousands of dollars) for taxable benefits related to passes for the Toronto Zoo, Sony Centre, TTC and city garages. It also included councillors’ expenses (each has a budget of $53,000 annually) as taxable benefits.

“The city does not agree with the interpretations set out in the proposal,” the division’s director, Celine Chiovitti, wrote in the letter, adding that the city believes councillors need all of these things to do their jobs and shouldn’t have to pay taxes on them.

The city is challenging the CRA’s findings through a submission to its audit division and a notice of objection. The city has until March 15 to respond, the letter said, asking councillors to submit information on their 2006 and 2007 expenses by that date.

The city has set up drop-in sessions for councillors to meet with the lawyers it has retained to deal with the dispute: David Spiro and Timothy Fitzsimmons of Fraser Milner Casgrain.

Councillor Joe Mihevc said he’s puzzled by the designation. “It’s appropriate that we pay our appropriate share of taxes … I have no problem on that front,” he said. “But when you look at the things they want to tax, it seems a bit ridiculous.” He added that most councillors use their expenses budget to cover such costs as newsletters and community meetings, not personal items. “My sense is that the CRA gave us a cursory look and did not probe in detail as to how these quote-unquote ‘benefits’ are actually used by city councillors,” he said.

But Councillor Rob Ford, who has long spoken out against councillors’ “perks,” said the CRA is right to crack down on free passes for councillors.

“All these perks, one right after the other. And I’ve tried to get rid of them at budget meetings and they just laugh at me,” he said. “I think it’s great that they’re forcing us to show who’s used [a pass], and how many times you’ve used it. And if you have used it, you have to pay taxes on it, ’cause it is an income.”

Mr. Ford said he has filed numerous complaints with the CRA, and, “finally, somebody up there’s listening.”

Yesterday evening, CRA spokesman Philippe Brideau said he couldn’t immediately confirm that the agency has conducted the audit and is asking for payment. He cited confidentiality provisions in the Income Tax Act.

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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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January 28, 2010 by Dan White.

Today more than ever it is important to remember that playing games with clever schemes to avoid taxes is no longer a good idea. CRA changes the rules, new laws come up, and CRA works retro actively.

There are tons of things that can be done to reduce taxes while amassing assets…. but you have to play by not only the spirit of the law, but you have to play exactly by the law… not by loopholes.

We all need to understand that taxpayers are not the only ones who can crawl through loops and hoops, so too can CRA.

So the next time someone says… hey! there is this cool scheme to foil the tax man, think again.

Today is the time where we all need to accept, we now have to play by the book. If we accept that fundamental truth, make everything transparent to the tax man, you can still win the tax game. You just have to follow the spirit of the law, which can work in your favour.

You need to begin audit ready bookkeeping now, and save your self grief in the future.

To learn more about Audit Ready Bookkeeping go to:

http://taxauditsolutions.ca/cms/index.php/audit-ready-bookkeeping/

Below is a good article demonstrating CRA’s ability to assess retroactively.

Dan White

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No `free’ ride
Ottawa looks for ways to stop abuses of popular TFSA accounts
Published On Thu Jan 28 2010

Canada Tax Audit CRA

Get Information On Tax Audit Canada
Free Initial Consultation Call Now!
www.MeadeTaxHelp.ca/TaxAuditCanada
Paula Kulig Special to the Star

They may be called Tax-Free Savings Accounts, but the federal government is raising the stakes for those Canadians trying to get a free ride.

In an effort to prevent the use of tactics that lead to gains beyond what Ottawa intended when TFSAs came on the scene a year ago, Finance Minister Jim Flaherty announced proposed amendments to the Income Tax Act in October that target over-contributions, ineligible investments and asset transfers. The amendments apply to transactions after Oct. 16, 2009.

Although the legislation has not yet been introduced, the finance department says it wants taxpayers to file their returns on the basis of the proposed legislation. If they file under existing law, their claims will be reassessed by the Canada Revenue Agency when the amendments are passed.

“What often happens when you bring in something new is you bring out the rules and creative tax planners find ways to get around them, and then (the finance department) reacts to it and tightens up the rules,” says Bruce Ball, national tax partner of BDO Canada (formerly BDO Dunwoody), adding that the tactics at issue tend to be used by “sophisticated” investors.

“Tax-Free Savings Accounts are a huge thing. If you create a Tax-Free Savings Account balance, you’re never going to pay any tax on income or gains.”

It is clearly a concern to the government if investors are increasing those gains by breaking the rules. While it’s too early to tell if federal coffers have lost money, says Heather Evans, a partner and tax services leader with Deloitte & Touche in Toronto, “my sense is that they might be concerned about lost revenue, because that’s why they’ve unleashed the auditors. They’ve made it clear that they’re going to be looking very, very carefully at TFSAs and any `unusual’ transactions.”

Tax-Free Savings Accounts, which became available in Canada last January, allow for annual deposits of up to $5,000. If money is withdrawn during the course of the year, it can be redeposited the following year, along with another $5,000.

Like an RRSP, TFSAs can hold cash, mutual funds, GICs, bonds, publicly traded securities and certain shares of small business corporations, Ball says. Unlike an RRSP, investors don’t receive a deduction on their taxes when they open a TFSA, but in return, anything that is withdrawn is tax-free.

“Many financial advisers recommend that individuals keep a reserve fund for a rainy day. The TFSA is perfectly suited to this, as your reserve fund will not be taxed, and if you do have to draw on it, you can put the money back in a later year when financial resources permit,” Ball says

The government’s amendments include applying current anti-avoidance rules to any income that comes from deliberate over-contributions and prohibited investments, such as shares of stock in a corporation in which the investor has an interest of 10 per cent or more, and investments in entities where the holder does not deal at arm’s length.

Under the current rules, a tax of 1 per cent a month is levied on contributions that exceed the limit, an amount that was seen as adequate to balance any benefit from over-contributions. In response, Ottawa now wants income connected to a deliberate overcontribution to be taxed at 100 per cent, in line with existing advantage rules in the Income Tax Act. The same goes for asset transfer transactions, which are sometimes called swap transactions. The amendments would essentially prohibit such transactions between registered or nonregistered accounts and TFSAs – for example, shifting value from an RRSP to a TFSA without paying tax, “in the absence of any real intention to dispose of the asset” – and would tax TFSA amounts attributable to these transactions at 100 per cent.

Other amendments include taxing any income linked to non-qualified investments at regular income tax rates, and ensuring that withdrawals of deliberate over-contributions, ineligible investments or amounts stemming from swap transactions do not create extra TFSA contribution room.

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January 18, 2010 by Dan White.

 We are watching this case with great interest. This is not a case of tax problems, but rather using the tax system, to make public a social cause. Lets see how the government publicity machine stick handles this one.

For more info on solving tax problems, go to www.taxauditsoluitons.ca

Jail time could be greatest victory print this article
The Journal Pioneer

It is likely, at some point this year, David Little will head off to jail, his penalty for steadfastly refusing to file income tax returns.
David Little is willing to sacrifice his personal freedom on behalf of those who cannot speak for themselves. He is a decades-long anti-abortion crusader who vowed in 2000 he would not file another income tax return for as long as tax-funded abortions are provided in this country.
With the Supreme Court of Canada’s refusal last week to hear an appeal of his 2007 conviction for failing to file tax returns, Little could be heading off to jail as early as April. That’s around the time of the year most other Canadians are either preparing their 2009 returns or waiting for Revenue Canada to send them their income tax refund or bill.
Such timing could prove beneficial to Little’s cause. Some filers who share his position that abortion is wrong – and there are many – might choose not to file this year.
But millions, including many Pro-Life supporters, will file returns as usual, because it’s the law and because they know tax dollars fund many essential services, like health care and education.
This, however, is not a case of someone cheating Revenue Canada out of millions or even hundreds of dollars annually. This is a case of an individual simply refusing to file annual returns.
But there’s a principle here: you have to file a return whether you owe money or are getting some back.
There’s also the possibility that individuals who get caught trying to avoid paying taxes on large sums of income will end up serving less time in jail than David Little.
That’s the sacrifice David Little seems willing to make, and he’s likely to get lots of attention while doing so. In fact, he seems to be banking on that. His 2007 conviction applies to tax years 2000, 2001 and 2002. He claims he hasn’t filed returns for the subsequent years and he wants to be charged for those years, too. David Little might not be dragged off to jail kicking and screaming, but he won’t be going quietly. This is a planned campaign against abortion. He wants Canadians to hear of his cause.
Even many of those who don’t agree with his protest method are likely to possess some sympathy for a fellow whiling away his time in jail because he opposes abortion.

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January 14, 2010 by Dan White.

Top court rejects anti-abortion crusader’s tax case David Little loses his tax case, based on government funding of abortions. Too bad we as Canadians can not force the government to be accountable to how they spend our money.

It is funny how some people think that they don’t have enough tax problems, they invent even bigger tax problems by taking on lost causes.

The abortion battle has been fought and it is over. Women have the right to chose what is best for themselves, so let’s accept that and not turn to the tax courts to give rise to social causes irrelevant to the tax problems of this land.

I am sure David Little believed in what he was saying as evidenced by his move to a province that did not support abortion. Good for him. However he still pays more in federal tax than in provincial taxes, so that move seems kind of pointless.

I guess he made a good point on that we should question how the government spends our money. On that I can agree with him. And at least he does stand up for what he believes in.

Had he been successful in winning and bringing down the government. Well that would have been fun, eh?

My approach to solving tax problems suggests that to not get confused between tax problems and moral issues. In the mean time life goes on and we deal with the mean things CRA does to Canadians.

To learn more on solving tax problems in Canada, but not about social causes, go to www.taxauditsolutions.ca

Dan White

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Top court rejects anti-abortion crusader’s tax case

Janice Tibbetts, Canwest News Service  Published: Thursday, January 14, 2010
More On This Story

Top court rejects anti-abortion crusader’s tax case

OTTAWA — The Supreme Court of Canada has declined to consider an appeal from a devout Roman Catholic who refused to pay his taxes because he said he did not want his money to go toward funding abortions.

The court did not give reasons for rejecting the appeal application of David Little, an anti-abortion crusader who had unsuccessfully argued in the New Brunswick courts that forcing him to contribute to abortion funding violated his Charter of Rights guarantee of religious freedom.

The New Brunswick Court of Appeal, in a ruling last summer, concluded paying taxes does not equate to support of any particular government policy.

The appeal court also found that legitimizing Little’s claim would mean that anyone who opposed a government policy could dodge paying taxes, while still receiving public benefits, such as medical care.

Mr. Little was charged with failing to file tax returns in 2000, 2001 and 2002.

Representing himself in court, he testified that he was concerned about the moral consequences of filing tax returns, because some of his money would go toward paying for abortions, which he said was mortally repugnant to him as a Roman Catholic.

The Supreme Court’s refusal to wade into the dispute means that Mr. Little’s 2007 conviction is upheld.

Mr. Little moved last year to Prince Edward Island, which does not publicly fund abortions.

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January 13, 2010 by Dan White.

January had hit the world with a renewed assault by CRA on Canadians across this land. Audit and tax problems are becoming a part of everyday life for small business in Canada.

It is not just tax cheaters they are after,,, they are after anything that they can attack.

Every Canadian needs to learn how to protect themselves from what is coming from CRA.

To learn more about taxes and tax problems, go to www.taxauditsolutions.ca

Dan White

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Taxman has eye out for cheaters, by the Cochrane Report

As income tax time moves closer, the Canada Revenue Agency has begun its annual campaign to warn cheaters about the trouble they could be in, and how they can use the Voluntary Disclosures Program.

The CRA says it is aggressively addressing non compliance. Last year, the agency conducted over 350,000 audit and review actions, including about 17,300 underground economy audits, and more than 1,100 audits of taxpayers suspected of earning income from illegal activities.

The CRA completed 20,750 international audits and 34,111 audits of tax shelters. The CRA identified a total dollar value of $5.7 billion in non”‘compliance for international and large business and $2.1 billion for small and medium-sized enterprises.

The CRA reassessed over 20,000 individuals who had participated in at least one of 20 unacceptable tax shelter gifting arrangements.

The CRA completed 148 interprovincial tax avoidance cases, which resulted in more than $300 million worth of taxes being recovered.

“These accomplishments led to results in the courts, including significant fines and — for some people — jail time,” the agency said this week.

The CRA is a member of international organizations that work to tackle the abusive use of tax havens. International partnerships help us uncover schemes that are developed abroad and marketed in Canada. Taxpayers with unreported assets and income offshore could face penalties of up to 50 per cent of unreported tax on income and five per cent per year for any unreported assets.

The agency says taxpayers who have not reported all of their income can voluntarily correct their tax affairs. They will not be penalized or prosecuted if they make a valid disclosure before they become aware of compliance actions being started by the CRA against them. These individuals may only have to pay the taxes owing, plus interest. More information on the VDP can be found on the CRA Web site at www.cra.gc.ca/voluntarydisclosures.

* The Cochrane Report appears each Wednesday and Saturday. Items for publication may be submitted by e-mail to cochrana@timestranscript.com, or by fax to 859-4904.

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January 13, 2010 by Dan White.

This is not one of our cases, but it is a terrible injustice Audit Horror Story.

For more information on audits and how to prevent tax problems in Canada, go to www.taxauditsoluitons.ca

British Columbia’s Mr. Irvin Leroux, who has lost everything fighting for 14 years against such bully tactics by the CRA
Audit Nightmare As Published in Canada Free Press
By Kevin Gaudet  Wednesday, January 13, 2010

Imagine the Canada Revenue Agency (CRA) shows up at your door to do an audit.  As if that alone isn’t scary enough, they proceed to take both copies of your documents, originals and photocopies —without your permission.

They lose or destroy these key originals. Then they assess hefty tax bills against you because you cannot provide documents in your defense.  CRA mistakenly demands you pay $800,000 in taxes allegedly owed.  This helps ruin your business, leaving you broke. Does this sound far-fetched?  Not according to British Columbia’s Mr. Irvin Leroux, who has lost everything fighting for 14 years against such bully tactics by the CRA.

His treatment outraged his MP, the long-serving Dick Harris, who took up his cause with the former Minister of National Revenue. According to Mr. Leroux, his MP was told by the Minister that the CRA couldn’t pro-actively compensate Mr. Leroux for his loss, but that he could sue the government and they would offer a settlement.

As ridiculous as it is that Mr. Leroux has been forced to sue the Canadian government to get back some or all of what he has lost in his lengthy tax fight fiasco, not a nickel has been offered. In this case it appears the federal government made a mistake; a big one at that. They should just admit it, apologize for it, and settle out of court with Mr. Leroux. Instead, they are playing the Goliath against his David, fighting him in court and denying any wrong-doing on their part.

The latest tactic employed by government lawyers, scheduled for court at the end of this January, has been to argue that Leroux’s lawsuit has no merit as his tax case was resolved earlier.

The issue of taxes owing was resolved by a judge only after Leroux fought in tax court to prove he owed no money. The case was settled in 2005 with the CRA agreeing that he had actually overpaid his taxes. They were required to pay him a small refund.

The CRA’s attitude seems to be ‘oh well, this issue is over.’ But it isn’t over for Mr. Leroux who is struggling to pick up the pieces after CRA’s withering 14 year campaign against him.

Their campaign against him drained him of cash, aggravated by the expense of legal and accounting fees and triggered a domino effect. Mortgagees began foreclosing, and Leroux’s properties were sold off for one-third of their value. When the dust settled, the creditors were paid, but nothing was left for Leroux. Once he had been comfortably set for a secure retirement. Now he is virtually destitute, living on CPP and Old Age Security. He now has recurring nightmares about being homeless and scrounging for food in garbage cans.

While taxpayers certainly don’t want the government tossing money away unnecessarily, governments must do the right thing to correct its mistakes.

Do Revenue Minister Blackburn and Justice Minister Nicholson really not know what is going on here? Are they really condoning this attack on a tax-paying Canadian? Perhaps they simply have no idea what the government’s lawyers have been doing?

Irvin Leroux is an ordinary Canadian who trusted his government to be honest and decent towards him. He paid taxes like he was supposed to – overpaid, in fact. His government turned on him and has ruined him.

This is a case either of rogue tax collectors or of systemic abuse by the CRA. Taxpayers should hope it is the former; that rogue tax collectors were running amok and made life hell for Mr. Leroux. Why would they do this? Because they can. The powers of our tax collectors are enormous and stacked against the little guy. If you mange to get on their bad side then look out because this case shows what the CRA, when roused, can do to you.

The cabinet ministers involved should instruct their lawyers to negotiate a way out of this shameful episode. It further damages the already tarnished reputation of the CRA, and continues to punish a taxpayer who has already gone through too much.

As the end of the year approaches many people take stock of the year that was and make resolutions for the year to come. If politicians did this they first would realize that there is much work to be done.

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January 12, 2010 by Dan White.

TAX CRISIS MANAGEMENT

While the gist of this article is about the risks of evading taxes offshore, the key thing here also is relevant for whenever you are contacted by CRA. A phone call or a brown envelope means you have a tax problem and you need to treat is seriously.

When you get one of those phone calls or letters it is too late for a voluntary disclosure which in itself is a risk maneuver.

You need to be aware that CRA matters are not to be treated as anything less than a major wake up call.

The most important thing you need to know is that talking to CRA is asking to have what you say used against you. CRA has a data management system where CRA takes electronic notes that will be compared to whatever further information they collect from you.

Understand that you are talking to a very money hungry agency when you are dealing with CRA. They will go after any angle they can and will most definitely use intimidation on you.

Normally there is nothing you say that can help you and everything you say can and will be used against you. CRA does not look for reasons to leave you alone, they look for angles to get money.

Don’t think because you are an honest upright citizen who believes in paying your fair share of taxes, that you will be treated fairly. The Tax System in Canada is anything but fair.

Why do we give you this harsh warning? We do so because we deal with CRA every day in our business and we know what they are like, first hand. There are some great people who are auditors, and it is the luck of the draw whether you get a reasonable auditor or some small minded snake taking their venom out on Canadian Tax Payers because they suffer from their personal lack of self esteem.

Be honest, you are not a tax expert, so don’t act like you are. Tax Audits are a mission critical financial survival exercise where you engage the opposition in a battle for your money. So if you think you are equipped to fight the pros, you better govern yourself accordingly.Herein is an excellent summary taken from www.proinvests.com  What ti does is demonstrate the level of agression by CRA into any possible area to collect taxes.

We are not saying that you should evade paying taxes. To the contrary, we have been saying for years that using offshore to evade taxes, thinking privacy will protect you is not astute.

Offshore is great for tax avoidance, but you better be transparent to CRA or you are going to be getting some interesting calls and brown letters, from people you don’t even know.

You could be contacted by CRA for any suspicious numbers on your tax return, a disgruntled spouse, a jelous co worker or neighbor. So treat the contact seriously.

For more information visit www.taxauditsolutions.ca

 Dan White

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Tax collectors and the Bank of Nova Scotia BNS-T

are locking horns in federal court over access to the names of investors – including “six prominent Canadian business families” – behind a $1.1-billion offshore investment fund.

For about three years, the Canada Revenue Agency (CRA) has been engaged in a high-stakes to-and-fro with the bank. Tax collectors are trying to pierce the layers of a British Virgin Islands investment fund, while the bank insists it can’t force its own foreign subsidiaries to name names.

The battle escalated last autumn when, in a sworn affidavit, a CRA auditor alleged that the bank was effectively defying a 2008 judicial order. “The Bank of Nova Scotia has not provided to the CRA the information and documents it was required to pursuant to the order of this court,” Pierre C. Leduc, one of the CRA officers overseeing the probe, said in the sworn statement, which was filed in federal court in October.

The bank disputes the contention that it has not fully complied, court filings show, and it is opposing the CRA’s latest application. The bank has not been accused of any criminal wrongdoing.

None of the investors have been accused in the court filings of any wrongdoing, and CRA has merely said it is seeking to “verify” their “compliance.”

The spat is another sign of the tax agency’s ramped-up efforts to target the use of offshore investments by wealthy Canadians, tax lawyers and experts say.

During the past year, CRA auditors have zeroed in on Canadians suspected of disguising their holdings in the principality of Liechtenstein.

Just last week, Revenue Minister Jean-Pierre Blackburn threatened again to sue Swiss bank UBS AG unless it hands over the names of its Canadian clients.

The CRA’s row with Scotiabank also offers an inside look into how difficult it can be for tax officials to unmask taxpayers who are less inclined to be identified, even when the bank handling their funds is headquartered in Canada.

Scotiabank declined to make a bank official available for an interview with The Globe and Mail, and said it could not respond to a detailed list of questions because the matter is currently before the court.

Many of the identities of the Canadians behind the Caribbean-based investment fund, which is known as St. Lawrence Trading Inc., are still a mystery to federal auditors. Internal fund documents circulated to investors show that, as of 2001, “six prominent Canadian business families” owned as much as $900-million (U.S.) of the fund, which held investments in hedge funds and mutual funds around the world. CRA auditors say they have unearthed the names of 120 of the estimated 180 Canadians behind St. Lawrence Trading, and are still in pursuit of the unidentified investors.

Caitlin Workman, a spokeswoman for the CRA, said auditors have completed reassessments of 49 investors and the agency believes those people failed to report a total of $70-million in income. However, the CRA was unable to say how many investors are disputing those reassessments. One source close to the dispute said a number of investors have responded to the department with notices of objections about the amount the agency says it is owed.

“Somebody in the CRA has a bee in their bonnet and thinks they’re going to bring a fortune into the treasury and somebody’s going to make a name for themselves,” the source said.

The roots of the agency’s fight with Scotiabank can be traced back to 2002, when the bank entered into a convoluted agreement with St. Lawrence Trading.

At that time, the then-Liberal federal government had proposed changes to the Income Tax Act that would have resulted in “adverse Canadian tax consequences” for the fund’s investors, according to an internal fund memorandum that auditors have filed in court. In the end, the rules were not enacted into law, but the prospect of changes sparked a flurry of behind-the-scenes manoeuvrings.

According to the internal fund literature, the investors and their advisers devised what they thought was a solution to ensure that their investments maintained their “exclusion from Canadian tax” – the Canadian investors agreed to sell half of St. Lawrence Trading to Scotiabank in return for a note. The note is set to mature in 2016, at which point the bank would likely sell St. Lawrence Trading on the market and hand the proceeds back to the Canadian investors. An internal fund memorandum shows that investors expected to pay Scotiabank an annual “seven figure” fee in return for the bank temporarily taking the investments off their hands.

The CRA’s efforts to lift the veil on the investors via Scotiabank, however, have been met by repeated obstacles. The first barrier, court records show, was that the sale of St. Lawrence Trading to the Bank of Nova Scotia was made through subsidiaries of the bank in the Bahamas and Ireland.

When the CRA obtained its first federal court order in 2008 for the list of investors, a Dublin lawyer for the bank’s Irish subsidiary declared that the subsidiary could not hand any information because of Irish law. Scotiabank Ireland had “a duty of secrecy with regard to the information,” the lawyer, William Johnston, said in a Sept. 11, 2008, letter.

Undeterred, the auditors tried other channels. Given the vast fortunes involved in this transaction, the bank was required to perform anti-money-laundering checks on the investors, so the tax collectors asked for that material and the names of any outside firms involved in the checks.

The bank responded that, yes, Scotiabank Ireland performed such checks, and it enlisted the services of a firm in Bermuda, another country outside the jurisdiction of the court.

Auditors persisted, arguing that because the bank’s Canadian parent guaranteed the note provided to investors, there must be information somewhere in Canada about these people.

Chris Purkis, the bank’s managing director of equity derivatives, responded in an affidavit that, unless Scotiabank Ireland defaulted on the note, Canadian bankers “would not, and did not, know who the shareholders were.”

However, as part of its most recent application, CRA has brandished internal Scotiabank e-mails that show at least one Canadian bank official was part of an e-mail exchange with a Montreal businessman with an interest in St. Lawrence Trading.

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January 12, 2010 by Dan White.

Hello world, the TaxMan Cometh to those who overly complicate their tax affairs.

The more complicated things are the more complicated they become.
I am wonder struck on how complex our world has become.
In today’s world, tax planning has become such a complex matter that it requires a ton of expertise to achieve tax savings that may well be overshadowed by the cost of setting up, defending and reporting on.

Complexity opens up a great opportunity for CRA to bully their way to your money.

A basic survival rule is that you need to be able to understand what it is you are doing and why you are doing it, not to mention does it really make sense in the grand scheme of things.

Often there are better answers.

The big problem with getting involved with Trusts and Corporations as an asset and tax management strategy as the fact that the Dark Forces can and do change the rules… (Remember income trusts?)

Often tax planning ignores that what works for the goose, may not work for the gander, in other words, you may find yourself unable to have tax benefits from losses.

Anyway, unless you have great gobs of cash to throw at tax planning, you may find yourself under a tax assult by CRA. You may find that instead of being a tax winner, you are a tax loser.

If you are in a mess because you got involved with a complex structure, then contact us at info@tax-audit-solutions.com also please visit our web site. www.taxauditsolutions.ca

Dan White

The following article illustrates what I am talking about. Consider how people who set up complicated structures based on blind faith in their advisors, become vulnerable to the tax man.

Purchase of US vacation properties by Canadians
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Miller Thomson LLP
Nathalie Marchand

Canada, USA
December 22 2009
Miller Thomson LLP logo

Given the attractive U.S. real estate market, the strong Canadian dollar and low interest rates, more and more Canadians are purchasing U.S. vacation properties.

Canadians should be aware, however, of the potential exposure to U.S. Estate Tax on death. Simply stated, a Canadian owning assets in the U.S. on death (such as real estate) is liable to U.S. Estate Tax on the value of all U.S. “situs” assets and benefits only from a limited tax credit, proportionate to the value of the U.S. assets over the worldwide estate. Hence, if the U.S. property represents only a small percentage of a large worldwide estate (over $3,500,000 U.S.), the tax credit will be minimal. The U.S. Estate Tax rates range is from 18% to 45% and may create a substantial tax bill on death.

It is possible, with proper planning, to eliminate exposure to U.S. Estate Tax and it is usually preferable to implement such planning prior to the acquisition of the vacation property.

One technique involves the use of a Canadian trust. Under this plan, the Canadian would settle a Canadian discretionary trust and transfer to the trust the funds necessary for the purchase of the U.S. property. The Canadian contributor, however, may not be a beneficiary nor a trustee of the trust. Typically, the beneficiaries would include the spouse of the contributor and his or her children. If properly implemented, this structure eliminates U.S. Estate Tax exposure both on the death of the Canadian contributor and on the death of his or her spouse. It also permits the gain on a sale of the U.S. property to be taxed in the U.S. at the favourable federal long-term capital gains rate applicable for individuals (currently 15%). From a Canadian point of view, it minimizes Canadian taxation on death as the property is owned by the trust and not by the Canadian contributor and would not be subject to a deemed disposition at fair market value on the death of the Canadian contributor or his or her spouse. The trust would, however, be subject to the deemed disposition of all of its assets at fair market value 21 years after its creation, unless steps are taken to avoid this result.

Another alternative may be to minimize U.S. Estate Tax exposure by purchasing the U.S. property through a Canadian limited partnership. This planning is more complicated and raises various issues to consider (such as the need to have the partnership treated as a corporation in the U.S. and hence, subjecting any gain on a sale of the property to the higher corporate tax rate).

Finally, another option would be to use a Canadian corporation to purchase the property. The Canada Revenue Agency considers that if the property is made available to the shareholder, a taxable benefit will arise, that may not be limited to fair market value rent and might be based on the cost or value of the property. The benefit would, however, be reduced if the funds to purchase the property are provided interest-free by the shareholder to the corporation. The property being owned by a corporation, any gain on a disposition of the property would be taxed in the U.S. at the corporate rate. At the Canadian level, the shareholder (or the shareholder’s spouse, as the case may be) will be deemed to have disposed of the shares of the corporation at fair market value on death.

Purchasing a U.S. vacation property is an important decision that should not be taken lightly. Canadians contemplating such purchase should consult their tax advisors in order to properly implement a structure meeting their particular needs and situation. We can help you with this.

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January 11, 2010 by Dan White.

While one has to point out that while this scare mongering results are true, it is also true that there are often much better approaches than there are to run to the tax amnesty slaughter house.

For insight into VD, make sure you visit our web site which gives you the skinny on doing a Voluntary Disclosure or not. We do advise coming clean, but not necessarily through the VD TA program…  (Won’t you come into my parlor said the spider to the fly.)

Save yourself from getting into more serious tax troubles, by becoming an informed taxpayer.

For more info go to www.taxauditsolutions.ca

 Dan White

________

Jan 11, 2010 14:04 ET
Canada Revenue Agency: Come to us, Before we go to you

OTTAWA, ONTARIO–(Marketwire - Jan. 11, 2010) - The Canada Revenue Agency (CRA) wants to make you aware of the Voluntary Disclosures Program (VDP) as we move forward to aggressively address non-compliance internationally and domestically.

Here are some examples of what the CRA did to address non-compliance in the 2008-2009 tax year:

- The CRA conducted over 350,000 audit and review actions, including about 17,300 underground economy audits, and more than 1,100 audits of taxpayers suspected of earning income from illegal activities.

- The CRA completed 20,750 international audits and 34,111 audits of tax shelters.

- The CRA identified a total dollar value of $5.7 billion in non-compliance for international and large business and $2.1 billion for small and medium-sized enterprises.

- The CRA reassessed over 20,000 individuals who had participated in at least 1 of 20 unacceptable tax shelter gifting arrangements.

- The CRA completed 148 interprovincial tax avoidance cases, which resulted in more than $300 million worth of taxes being recovered.

These accomplishments led to results in the courts, including significant fines and-for some people-jail time:

- In 2008-2009, the CRA referred 164 income tax and goods and services tax/harmonized sales tax (GST/HST) investigations to the Public Prosecution Service of Canada.

- The CRA referred 58 GST investigations to Justice Quebec.

- These and referrals from previous years resulted in 323 convictions for fraud or tax evasion (including 66 cases in Quebec courts).

- Courts across Canada imposed fines of close to $29.2 million (including $9.3 million in Quebec courts).

- The offenders were sentenced to more than 81 years in prison collectively (including 17 years in Quebec courts).

- Convictions were obtained in 98% of the cases prosecuted.

In cases of gross negligence, the Income Tax Act and Excise Tax Act allow the CRA to assess a penalty of up to 50% of unpaid tax or an improperly claimed benefit. In addition, a court may, on summary conviction, fine people 50% to 200% of the tax evaded, and sentence them to a jail term of up to two years.

The CRA is a member of international organizations that work to tackle the abusive use of tax havens. International partnerships help us uncover schemes that are developed abroad and marketed in Canada. Taxpayers with unreported assets and income offshore could face penalties of up to 50% of unreported tax on income and 5% per year for any unreported assets.

You can come to us to correct your tax affairs before we go to you. Under the VDP, taxpayers who have not reported all of their income can voluntarily correct their tax affairs. They will not be penalized or prosecuted if they make a valid disclosure before they become aware of compliance actions being started by the CRA against them. These individuals may only have to pay the taxes owing, plus interest. More information on the VDP can be found on the CRA Web site at www.cra.gc.ca/voluntarydisclosures.

For more information, please contact
Philippe Brideau
Media Relations
Canada Revenue Agency
613-957-3522
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January 7, 2010 by Dan White.

What is the meaning of life? Why are we here? It is all about paying Taxes!

In life you are fined for doing things wrong. That is punishment for wrong doing.

Taxes are punishment for doing things right. Making money is a right thing to do. Taxes punish you for rightdoing.

One would think that working hard and creating jobs and prosperity for the country is a good thing. It must not be good because we get all kinds of tax punishment for being profitable.

Small business and investors are under an ever increasing assault against their financial well being. CRA does not care what individual corporation or taxpayer goes bankrupt.

There is a Tax Fairness Provision but it is not fair.

There is Tax Amnesty, Voluntary Disclosure, but that is a horrible trap where you could find yourself in a boiling pot of tax trouble.

There is a Tax Ombudsman, but only for when you have exhausted all other options to resolve problems.

You can fight CRA in court, but normally that is more expensive than paying taxes, so the small guy is out of luck because legal justice is usually not affordable for the average Canadian taxpayer who is suffering from tax abuse.

The minister of finance claims that the aggressive assault by CRA on Canadians is to ensure fairness. That is such a load of bull. If it was about fairness then CRA would be fair when they audit. CRA does not even care if they tax phantom income (income on paper that you never actually received and may have already lost) that is just one example of unfairness, there is not enough time to go that tangent any further today…

So there we have it…. As in the days of old, the Kings of Bold, paid the serfs in gold and taxed back every ounce of gold not needed for bare essentials. They kept the serfs poor and controlled them by way of taxes.

How is it any different today? The answer is the only thing different, the only thing new is the complexity and the increased level of tax collector aggression.

Read on for what is going on with CRA today; It is really quite scary.

For more info go to www.taxauditsolutions.ca

Dan White

If you have tax problems requiring a strong CRA tax fighter, please email me;

dw@911taxes.com

_______________

Taxmen wield powerful arsenal

Whistleblower laws, exchange of information rules

Vern Krishna, Financial Post  Published: Wednesday, January 06, 2010

In this story:

Whistleblower Bradley Birkenfeld was jailed for 40 months. Getty Images Whistleblower Bradley Birkenfeld was jailed for 40 months.

Exchange of information laws combined with whistleblower legislation are powerful tools in the arsenal of tax authorities. As global economies and international trade expand, so also do the problems of tax compliance and administration. The Union Bank of Switzerland versus the United States legal saga illustrates that one man’s meat is another man’s poison.

The so-called Revenue Rule prevents nations from using conventional judicial channels to enforce their tax laws in a foreign jurisdiction. So countries use tax treaties to override the common law by providing for exchange of information and assistance through administrative channels.

For example, the United States used the U.S.-Swiss Treaty to extract banking information from UBS, after one of the bank’s former employees, Bradley Birkenfeld, blew the whistle on UBS and divulged tax-evasion secrets to the U.S. Department of Justice.

The Swiss government and UBS must hand over names of 4,450 U.S. taxpayers believed to be hiding assets in secret bank accounts. About 14,000 UBS clients stepped up to plead and negotiate tax-evasion charges as a result of the whistleblower’s information. For his part, Birkenfeld was sentenced to 40 months in a plea bargain.

The Canada-U. S. Tax Treaty also allows the Canada Revenue Agency and the Internal Revenue Service of the United States to request information from each other so that they can properly administer their taxes. However, there are legal constraints on the exchange-of-information rules. Under U.S. law, the IRS will not honour summonses unless it can show that it issued the summons in good faith. The critical question is not whether the investigation by the foreign tax authority is legitimate, but whether the compliance of the IRS with the request of the foreign tax authority is legitimate.

Taxpayers who engage in international trade and commerce can expect greater scrutiny from tax administrations. We will see more exchange-of-information legal issues as the CRA requests files on Canadians from foreign governments with whom we have tax treaties.

Birkenfeld’s fortunes change when he completes his federal prison sentence. Under the whistleblower law, he can collect 15% to 30% of the taxes, fines, penalties and interest that the IRS ultimately stands to collect. The payoff will run into the billions. The tax collector and the whistleblower are both smiling at their meat as the taxpayers drink their poison.

-Prof. Vern Krishna, CM, QC, FCGA, is tax counsel and a mediator and arbitrator at Borden Ladner Gervais and is executive director of the CGA Tax Research Centre at the University of Ottawa.

Read more: http://www.financialpost.com/news-sectors/legal/story.html?id=2409645#ixzz0bwDr3zNe
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January 3, 2010 by Dan White.

It appears that there still are people out there who think the Smith Maneuver is a good tax strategy, so I am posting a reprint  of Bob Aaron’s article that is an excellent review of the situation.

Financial planners like Ed Rempel, who wrote insulting things about me in regards to my negative opinion on this tax strategy now not only does he look like a rude jerk, but he is a prime target for some serious tax problems with all the clients he lured into this program. If Ed gets audited, so too will most of his clients.

The concept that by doing boogy woogy, suddenly your principle mortgage can be converted to a tax deductible debt should never have expected to survive in tax court. So Mr. Remple if what you said that any accountant would be able to poke holes in my argument, that would leave all accountants looking foolish. You can be sure that in the next 2 years there will be a lot of Canadians getting audited for excessive interest claims on their tax returns. I hope Mr. Ed Rempel and the other financial planners who sold people on this idea have good insurance.

There were a good number of other people who got pretty riled up about my article in REM, but Ed’s article bugged me the most. The reason it was so annoying is that he attacked my credentials instead of my argument. If his basis for being right is that he has better credentials. Again we prove having lots of letters after your name does not mean that you know what you are talking about.

Dan white

for more info on tax problem solutions, go to www.taxauditsolutions.ca
_________

Beware of Mortgage Tax Deduction Claims
Posted last year.

by Bob Aaron

Earlier this month, the Supreme Court of Canada issued a decisive ruling that clarifies once and for all that the interest paid on a mortgage taken out to purchase a principal residence cannot be tax deductible under any circumstances (unless part of the house is used for business purposes.)

The ruling in the case of Lipson v. Canada, 2009 SCC 1, relates to a complicated series of transactions put into place by Earl and Jordanna Lipson back in 1994.

Initially, Jordanna borrowed $562,500 from the Bank of Montreal to buy shares in her husband’s company at market value. She paid the proceeds of the share purchase loan directly to her husband. The next day, the couple bought a home for $750,000 and obtained a Bank of Montreal mortgage on it for another $562,500. Right after the house closing, the Lipsons used the proceeds of the mortgage to pay off the share purchase loan completely.

In 1994, 1995 and 1996, the husband deducted from his taxable income a total of more than $104,000 in interest expenses on the mortgage loan. The Minister of National Revenue disallowed the deductions and reassessed Lipson accordingly. The government’s position was that the complicated series of transactions amounted to “abusive tax avoidance.”

In this country, evading tax is illegal, but avoiding tax is – generally – acceptable, except when the avoidance is abusive. If the minister believes a tax avoidance scheme is an abuse and misuse of the Income Tax Act, the government can invoke the general anti-avoidance rule (GAAR) and deny the taxpayer’s claimed deductions. That’s what happened in Lipson.

When his deductions were disallowed under the GAAR rules, Earl Lipson took the minister to Tax Court, then the Federal Court of Appeal and ultimately, the Supreme Court of Canada. In a 36-page judgment with two separate dissents, the Supreme Court sided with the government and the two lower courts in a 4-3 ruling.

Lipson may have serious ramifications for taxpayers who use schemes like the Smith Manoeuvre to attempt to convert the interest on their principal residence mortgage to a tax-deduction.

The seductive pitch for the Smith Manoeuvre on the promoter’s website, www.smithman.net, reads, “Go ahead, make your mortgage tax deductible. Yes, it can be done. Yes, it’s legal.” The essence of the Smith Manoeuvre strategy is that each month the homeowner pays down a little bit of the principal owing on the home mortgage, and then borrows it back. The borrowed money is then invested and the carrying charges on that newly borrowed money only are tax-deductible.

But, according to Melanie and Robert McLister at canadianmortgagetrends.com, “it’s not for everyone. There are both investment risks and serious tax risks. Your (investment) returns could be insufficient, CRA (Canada Revenue Agency) could invalidate your application of the strategy, or you could wind up in a negative amortization scenario if your house value falls.” (A negative amortization occurs when the balance owing on the mortgage exceeds the value of the house.)

In my opinion, strategies like the Smith Manoeuvre are far too risky for the average homeowner. After the Lipson decision was released, tax specialist Dan White wrote me to say that taxpayers simply “cannot convert their mortgage to tax-deductible interest. The final verdict is in. … The primary purpose of an activity dictates the final results in tax deductibility. They can borrow money against their house to invest and write off the interest … so long as it is not just a manoeuvre.”

Anyone tempted to participate in the Smith Manoeuvre or other strategies to try and make interest on a home mortgage tax-deductible should obtain tax advice from a qualified accountant or tax lawyer who is not selling anything except unbiased advice. Tax advisers who make a commission from selling participation in schemes like the Smith Manoeuvre may be in a conflict of interest and their advice may not be impartial.

Above all, taxpayers should not be misled by promises which appear to make all their home mortgage interest tax-deductible.
[filed: Income tax Lipson (2009) Real property]

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December 31, 2009 by Dan White.

The most common tax traps

Keeping bookkeeping audit ready while straightforward it feels quite burdensome to produce all the required documentation. Just remember that an audit is a process of elimination of business deductions by auditors. There are numerous items and conditions that an auditor will commonly look for in order to catch you. Here are the top Tax Traps that are most likely to trip you up, and what you need to do to avoid them:

Having your GST returns not add up to other records.
If your GST return does not match to your tax return, you are dead in the water.

Guessing at numbers.
Guessing is sure fire trap, especially if the numbers look phony.

Expenses out of whack with conventional norms.
If for instance your entertainment expenses are high, that is a sure audit trigger.
The tax return numbers story does not make sense to the business codes.
Improper recording of consumption expenses.

This is an easy and substantial tax grab for an auditor. Usage tax applies to the routine purchase of such items as consumables and office supply, as well as to the purchase of large fixed assets. Thus there is the potential for CRA to assess a very large fee. Unfortunately, most people don’t know this until it’s too late. For example; when the auditor has come in, looked at a certain period of time, and then assessed back taxes and penalties retroactively. The only way to fight this is to maintain proper business rational statements to solidify business use tax rational. This is an area where most businesses stumble and fall and provides a lucrative source of revenue for the Canada Revenue Agency.

Exemption and resale certificates.

If you don’t possess proper exemption certificates, you can find yourself needing to pay tax on items that you should not have to pay.

If the resale certificates are not on file, the auditor will typically determine an error rate and project backwards to assess tax and penalties. If it’s proven that a resale certificate has been used improperly, the penalties can be substantial.
To avoid these situations, companies need an automated process to enforce exemption and resale certificate compliance for each tax jurisdiction in which they do business.

Unreported sales.

Mistakes happen and certain sales can go unreported. Sometimes even entire divisions get left out in error. The remedy is to rely on systems, not people.
Charging wrong tax rates.

Staying on top of these changes and instituting new rates at the right time is extremely difficult. The only good answer is to have real-time rates applied automatically from the day they are effective.
History of audits and assessments.

Bureaucracies have long memories. Once flagged, and if you were an easy target who did not hire a representative and you just coughed up dough, you will be under the microscope for life and can expect repeated audits.
Most auditors will make note of an error, and you may not realize that you need to make the time, and commitment to address your bookkeeping going forward. If you don’t make the appropriate changes, then on a return audit, auditors can easily find the same repetitive infraction and assess penalties on it.
The best defense here is to have iron-clad processes and procedures and good business statement rationals. Adequate documentation makes an audit go much more smoothly, while poor record keeping will prolong an audit and ultimately bankrupt you.

Lacking documentation, an auditor will make a lot of assumptions where the onus is on you to prove the auditor wrong.
The best answer is always to accept that bookkeeping is as much a cost of doing business as gas is a cost of being able to drive an automobile.
Unique rules and regulations.

The Tax Act has many twists and turns to its sales and use taxes. Auditors are highly tuned into these, particularly when the rules are new, and are quick to spot non-compliance. Tax authorities often have special taxes that apply to specific goods. There are many food/beverage, gambling, cigarette/tobacco, soft drink, timber, and fuel taxes that can be uncovered during an audit. Tax authorities will also audit specifically for these types of taxes from time to time, which can open you up to a full-blown tax audit.

Sales tax accruals.

Many companies don’t properly remit the sales taxes that they have collected. An auditor will look at federal tax returns, the general ledgers, invoice register, actual invoices, sales journals and summaries of sales by province to identify errors and omissions, and will then use the their number that provides the best assessment revenue for them. The best advice here, is to do the same thing yourself. You must keep audit ready bookkeeping.

Assets.
The buying of selling of large assets will catch attention… E.G. was there capital gains calculated, and was it reasonable to the situation.
A business acquisition can often mess up your accounting when it comes to sales and use tax compliance. You need a solid audit trail.
There is always the issue of previous tax liability: when you acquire a company.
Internet sales.
As a result of CRA requiring eBay to release data to the taxman, demonstrates that you better treat your Internet the same as the rest of your business when it comes to bookkeeping.
Inventory shrinkage.
If inventory shrinks out of reason, it will draw attention.
Business Activity Questionnaires.
Any form you fill out and give to a government auditor is a risk of an audit. Before sending in forms to the government get good advice as to best package information.
Summary:
The recommendations for avoiding these tax traps are just a matter of using common sense.
You either need a highly skilled bookkeeper (not just someone who can do data entry) or you need to hire a professional bookkeeping service.
As a business owner, you need to do your part in the record keeping. You need to record business rationales for your bookkeeper.
You and your bookkeeper need a good working relationship with your tax preparer. Always remember that old saying of “garbage in is garbage out.” No tax preparer can do a proper tax return without first having proper bookkeeping.
Yes good bookkeeping cost money, yet despite the economic reality, businesses cannot afford to simply roll over and let the auditors eat them alive. It is possible to protect your business from non-compliance and audits without breaking the bank.
THE BEST DEFENSE IS ALWAYS A GOOD OFFENSE and your best offense is truly audit ready bookkeeping.

If you are being audited, be sure to understand that you need to have someone prepare your books and records in a way to protect your best interests.

To learn more, go to www.taxauditsolutions.ca

Give us a phone call at 905-668-4816 or email info@tax-audit-solutions.com

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December 31, 2009 by Dan White.

What you need to know about Tax Audits for the New Year 2010.

Times are tough; money is hard to come by. Small business knows this fact very well. So too does the tax departments of the world. CRA being in a cash crunch has targeted small businesses with a never precedent aggression. They want to do audits NOW! They don’t want the audit delayed. Delaying an audit only delays their cash flow.

CRA has a new level of aggression. Auditors pushed by team leaders are forgetting about the taxpayer’s bill of rights, the charter of rights and often the laws of Canada.

There used to be good concern for not getting audited, because the accounting industry is stuck in the Accounting Stone Age. Using generally accepted accounting principles, which often translates to a process of accounting for accounting sake and not for practical and logical reasons.

Accounting is done to track every financial transaction and how it relates to business. It is done so tax returns can be done and most importantly to be ready for a audit. Interestingly enough the most important reason is pretty much ignored. When an audit happens there is a panicked scurrying around, following the pages of audit requirements given by the auditors.

Auditors requests are pretty much standard across the board. So why is it that the statement is true but accountants and bookkeepers don’t just follow CRA audit requirements as a standard practice? The answer lies in tradition, a dumb tradition that has outlived its usefulness.

In an audit, the auditor will typically look for the following data.

Copies of previously filed sales/use tax returns with any related reports or work papers used to fill them out.
Detailed general ledgers and a chart of accounts.
Sales invoices.
Resale certificates and exemption letters collected.
Federal and Provincial Income Tax returns for the years under audit.
All purchase invoices.
Cash disbursement journals or check registers.
Asset depreciation schedule or fixed asset schedule.
Bank statements and cancelled checks
Cash register tapes.
Copies of Contracts.
Copies of lease agreements.
Articles of incorporation.
A business description.
A description of who does what.
All bank statements, both personal and business.

All the above CRA Audit documentation requires an audit trail.

In order to keep audit ready books, we had to develop our own software and procedures. Now begins the difficult task of reprogramming bookkeepers and auditors to understand that if books are kept audit ready, it then solves all the other requirements of good bookkeeping.

We enter the year 2010 knowing the following there will be more audits and we can expect the following:

1. CRA is ferociously aggressive in their desperate drive for tax dollars.
2. They are using Bedford’s laws… a mathematical analysis of probabilities of tax cheating based on the numbers in a tax return.
3. They have new data mining software that matches information from various sources back to tax returns that have been filed.
4. CRA continues to hire more auditors so that they can collect more money from a smaller source amount.
5. The transition to HST is triggering a 4 year window for Ontario and BC to backlog Retail Sales Tax audits.
6. Tax Audits are now being automatically generated by computers.
7. The bookkeeping by small business has been dismally bad, so they are going to fry this year.
8. The recession has made things a double bladed axe. Cash Flow Problems and CRA Cash Flow problems. This year will be a brutal tax audit season.
9. For your business you need to understand that CRA view you and your business as a cash flow revenue stream.
10. It is going to be a dirty year and small business needs to clean up their act.
11. Any business that files a tax return based on non-audit ready books is going to fry in an audit. I recommend having your bookkeeping redone to audit ready status. Pay me a little now or pay me a lot later. Those are the only two choices left on the tax man’s chopping block. The axe will fall on those who ignore this wisdom.
12. With lead sharing between government agencies, and the requirements to register for numerous government bureaucracies many more new audits will be triggered.
13. For every corporation formed, there is a new audit target established. Being incorporated is a very questionable activity for small business that does not have a big net income. Incorporation’s appear bigger, and the bigger they are the harder they flop.
14. Birds of a feather mining… if your clients or suppliers are getting audited this puts you on the radar for a relational audit.
15. Higher gross sales make you a bigger target, regardless of your net income.
16. Auditors and CRA investigators are trained to have their antennas up… just dealing with an off duty auditor could trigger an audit.
17. If a revenue department falls short of their revenue quota there will be a scramble to audit a lot of businesses to shore up the team performance records.
18. CRA auditors are now doing drop in visits to businesses, under the guise of being helpful, they are really looking for cues to justify an audit. I know of one picture framer who ended up going bankrupt following a drop in audit. He talked too much and caused himself a terminal problem. Friends drop in, so do enemies.
19. Bureaucracies have the memory of an elephant. Once flagged, you are under the microscope for life and can expect repeated audits. If you don’t have audit ready bookkeeping when you are audited, you have a Tax disease for life. And you have to fight like hell to keep your dollars so you are not seen as a willing victim.

This is the year to enter it ready for an audit. Also a year to await the three year statute barred window for sloppy past years tax returns. Each year you can breathe a sigh of relief as the three year danger zone decreases by a third.

The days of being able to be a sloppy bookkeeper are over. If you don’t have the time to do good books and can’t afford to hire a professional bookkeeper, your days in business are numbered. It is just as simple as that.

 To learn more about audit ready bookkeeping, contact www.taxauditsolutions.ca or email info@tax-audit-solutions.com

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

December 30, 2009 by Dan White.

 The ever growing invasion into the rights of Canadians

I don’t have an issue with making sure that Canadians pay their fines. However I have a huge issue with Canada Revenue Agency (CRA) being a bill collector for bills that have nothing to do with them.

I don’t even mind that they will collect invoices on behalf of a taxpayer who can not pay his taxes without collecting outstanding invoices. CRA loves being a bill collector, but collecting traffic fines and CRA not getting the money is a different matter. I suspect that it violates our rights. Not that acting outside the law bothers all CRA workers. We have clients with outrageous tax problems created by CRA.

I guess when our governments get short of money they will leave no stone unturned in their desparate drive to grow government to an ever bigger monstrosity. I say… downsize the government.

For more into on taxes, go to our site www.taxauditsolutions.ca
Dan White
dw@911taxes.com

___________

News Canada

Provinces, cities track down unpaid tickets

By Peter Rakobowchuk, THE CANADIAN PRESS

Last Updated: 29th December 2009, 1:51pm

MONTREAL — Canadian motorists who think they can ignore old speeding or parking tickets shouldn’t get too comfortable.

Tickets from years past can come back to haunt scofflaw drivers in the form of much higher fines.

“We have some people we have been going after who have in excess of 50 outstanding tickets,” says Steve Jackson, executive-director of the claims and recoveries program of the Alberta Justice Department.

Jackson says his department tracks down unpaid fines that are more than one year old and registers the offender with the Canada Revenue Agency.

“We’re allowed to intercept their income tax refunds and the GST rebates.”

Jackson says he’s gone after offenders across Canada and the United States and advised them their income tax return will be redirected until their outstanding debt is settled.

“You could have people who are living in the U.S. temporarily who are still deemed to be Canadian and are filing Canadian income taxes,” he said.

Jackson noted that one motorist had 57 outstanding tickets over a five-year period which included speeding, driving an unregistered vehicle and driving with a suspended licence.

The man was eventually incarcerated when authorities caught up with him.

Jackson recalled another case last year when a father came in to pay his daughter’s fines, which totalled more than $5,000.

Pietro Macera, a bailiff who collects unpaid fines for the City of Montreal, says a five-year statute of limitations on outstanding fines can be renewed.

“Whether it’s a civil matter, a ticket matter, a criminal matter, it’s gonna catch up to you,” he said in an interview.

Macera, 50, says any unpaid fines will stay in a town or city’s computer system.

“So you’re driving and you get grabbed by the police for speeding, or a red light, or a burned-out light — well that day is not your lucky day, especially if you’ve ignored that $100 speeding ticket.”

Macera says the ticket can end up costing $500 with court costs and other fees that have been tacked on along the way.

In some courts in Nova Scotia, motorists who require extensions to pay a fine will appear before a justice of the peace to discuss payment options.

But if a fine is past due and without payment for six months, it will be referred automatically to Service Nova Scotia and Municipal Relations for collection action.

There are no extensions on fines that have been referred for collection and a motorist can’t renew his licence or registration until the outstanding fine is paid up.

In Ontario, overdue fines may not be such a big problem — in fact, some motorists have even ended up paying twice.

Rolly Riopel, runs POINTTS, a Barrie, Ont., firm that provides legal representation for people who want to fight their traffic violations.

He says “hundreds, maybe thousands” of Ontarians may have paid overdue traffic fines to both the province and their local municipality.

The Ontario government transferred enforcement of provincial offences to municipalities between 1999 and 2002 and many hired collection agencies to go after outstanding fines.

Over a five-year period, at least 50 motorists have come into Riopel’s office to complain they had already paid the province but were still being chased down by local municipalities.

“The only thing I could say is either you have a receipt or you don’t,” he said in an interview.

“If you’ve got a receipt, no problem, (but) if you haven’t got a receipt, you have to pay it again.”

Riopel, 62, says most of his regular clients are first-time offenders, who are worried about losing their licence, points and insurance premiums.

“They want to try to keep their record as clean as possible,” he said.

But the former Ontario Provincial Police officer says he’s noticed fewer people have been coming to him for help in recent years.

“Either people are paying their fines or they’ve caught up to everybody who was outstanding,” he said.

Posted in Tax Topics | Print | No Comments »

December 25, 2009 by Dan White.

You have to love the politics ot tax problems. HST is now the tax we love to hate.
For me, it is the tax I love.

Why does Dan like HST.
1. Only one tax collector to deal with.
2. One entire Tax Act to not deal with.
3. Much easier to understand.
4. Much easier to track.
5. As a business we get our HST back in the form of tax credits. This is a big improvement over PST.
6. Our new audit ready bookkeeping keeps perfect track of the GST/PST trantition to HST…. I love easy.
7. It puts more money into circulation for the consumer to get their hands on.

Yes it is normal to resist change, but when it comes to resisting HST. It goes like this….there is no point in peeing into the wind. All you get is a wet face. You need to pee and the wind needs to blow. It is an ill wind that blows no good. So if you weigh the good and the bad, you will see that the HST is more better than it is badder.

So if you want any help with your tax problem transition to HST, give us a call at 1-905-668-4816 for your tax solutions or visit our site and read the article on audit ready bookkeeping. www.taxauditsolutions.ca

HST   is …
Happy Sales Tax to you!

Dan White

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Harmonized Sales Tax becomes law in Ontario
Posted Dec 24, 2009 By Rosalyn Stevens

Liberal MPP Yasir Naqvi has been travelling the province talking up the benefits of the HST, in his role as the parliamentary secretary to the Revenue Minister.
Desmond Devoy, Ottawa East EMC
Liberal MPP Yasir Naqvi has been travelling the province talking up the benefits of the HST, in his role as the parliamentary secretary to the Revenue Minister.

EMC News - On July 1, 2010, Ontario residents will wake up to a reformed tax system designed to boost the economy and create jobs, while offering tax cuts to the province’s most vulnerable, according to Ottawa Centre MPP Yasir Naqvi. The controversial Harmonized Sales Tax (HST) bill passed into law on Dec. 9 at the provincial legislature, despite strong opposition by the Progressive Conservative (PC) opposition.

Mr. Naqvi, the Parliamentary Assistant to the Minister of Revenue, said the reorganized taxblending the 8% provincial sales tax and 5% federal goods and service tax into a single 13% levywould give the manufacturing sector a much needed boost by eliminating the multiple taxation levels currently in place. As well, he said, income tax cuts and permanent sales tax credits would assist low-income residents and families in a sort of “stimulus funding for individuals.”

However, Nepean-Carleton MPP Lisa McLeod, the opposition revenue critic, said the new tax will do nothing but hurt the provinces most vulnerable with an additional 8% tax on many items previously exempt.

“They essentially ignored 75% of the population who was telling (the government) they don’t want this new tax, not now,” she said.

The opposition fought hard against the tax change, which Mr. Naqvi said has been successful in other Canadian provinces. Opposition tactics drew national attention as MPP’s protested the act, including one move which saw two MPP’s refuse to leave the legislature after being ejected by the speaker. Ms. McLeod said the party also filed over 5,000 amendments to the law, looking to slow down progress through legislative procedure.

Despite the opposition, which included thousands of signatures on petitions from the PC party, Mr. Naqvi said the new law would benefit everyone in Ontario by bringing the province’s tax system inline with those of “modern” economies.

“We have, obviously, concrete, empirical evidence from Quebec and Atlantic Canada where they did the same thing,” he said.

While many itemssuch as home heating, and gasolinewill see an additional 8% levy, Mr. Naqvi said the majority of items will not increase in price. Currently, he said 83% or consumer spending in Ontario includes the full 13% tax.

To offset the increases, Mr. Naqvi said new, permanent tax cuts and credits would be introduced on January 1. That means that residents receiving the federal GST credit will also receive a provincial credit, with the first cheques scheduled to be in the mail in August. Come tax time, residents will see cuts to the lowest tax bracket, offering support for low income families, and seniors on fixed income, as well as other individuals making less than $37,000 a year. To ease the “sticker shock” expected during the first year, the province would also make one-time payments of up to $1000 for families, and $300 for individuals.

“That is why we continue to argue it is not raising taxes,” Mr. Naqvi said. “It’s revenue neutral.”

Ms. McLeod said the opposition PC party would continue to fight against the tax law, though she said the province is currently locked into the plan for five years, with a penalty of $4.3 billion to be paid to the federal government should they reverse the decision.

She said the tax cuts aren’t enough to save Ontario residents from the financial burden of an increased cost on many common products.

“It’s disingenuous for the McGuinty government to tell Ontarians that is a good deal, because it simply isn’t,” she said.

The federal government is expected to pass a bill that would enable the province to apply the new tax, and would include a transfer payment of $4.3 million to cover the cost of tax cuts and credits. However, Ms. McLeod said she doesn’t feel the government is supporting the tax change, rather supporting the province’s right to manage its taxation system.

“The federal government isn’t supporting Mr. McGuinty’s plan to hand out $4.5 million in bribe cheques before the next election,” she said.

Though the law has passed, she said there is an opportunity for change in the 2010 budget, noting that her party will continue to pressure the government for changes at that point. She said the Liberal government has had a difficult session in the legislature, and added that the controversy of the HST would add to the party’s difficulties when the house sits again in the New Year.

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

December 23, 2009 by Dan White.

 While CRA Loves to embarrass people

There is also a big lesson here. Tax evasion is expensive. In order to avoid having the huge tax penalties and have CRA post the case as a “Press Release” you need to protect yourself.

We don’t know the real story behind the scenes here, but I would love to know, I will eventually study the tax court case to see what transpired. However without going into the case, I know I will find bad bookkeeping.

We are focusing on bringing audit ready bookkeeping to the market, that will keep taxpayers out of tax trouble. To read more about audit ready bookkeeping, go to www.taxauditsolutions.ca

Don’t get in tax trouble, there are tax problem solutions out there and you need to use them to keep you out of Tax Man Torment.

Here is the press release from CRA… nice of them to spoil someone’s Christmas… Merry Christmas CRA!

PS>.. and note that at the bottom of the article they promote doing a voluntary disclosure. (A.K.A as Tax Amnesty) … hm mm…. so odd that in a scary press release, they want to scare Canadians into opening themselves up to a ten year audit.

 Dan White

_________

Markham Realtor Fined $68,000 for Tax Evasion

NEWMARKET, ONTARIO–(Marketwire - Dec. 23, 2009) - On December 11, 2009, Claudette Walker of Markham, pleaded guilty in the Ontario Court of Justice in Newmarket to a total of four counts of tax evasion. She was fined a total of $68,000. In addition to the fines imposed by the courts, individuals or corporations, convicted of failing to file tax returns, are still obligated to file the tax returns and pay the full amount of taxes owing, plus interest, as well as any civil penalties that may be assessed by the Canada Revenue Agency (CRA).

A CRA investigation revealed that Walker, a self-employed real estate agent, failed to report income of $215,412 on her 2002 to 2004 income tax returns.. Furthermore, by not filing income tax returns for 2005 and 2006, she did not report taxable income of $121,609 in 2005 and $78, 966 in 2006. In total, Walker pleaded guilty to evading federal income taxes of $70,000 and was fined $35,000.

Walker also pleaded guilty to not remitting a total of $35,135 in GST from January 2002 to December 2006 and was fined $33,000.

Individuals who have not filed returns for previous years, or who have not reported all of their income, can still voluntarily correct their tax affairs. They will not be penalized or prosecuted if they make a full disclosure before the Agency starts any action or investigation against them. These individuals may only have to pay the taxes owing, plus interest. More information on the Voluntary Disclosures Program (VDP) can be found on the CRA’s website at www.cra.gc.ca/voluntarydisclosures

The information in this news release was obtained from the court records.

Further information on convictions can also be found in the Media Room on the CRA website at www.cra.gc.ca/convictions

For more information, please contact

Kim Hynes
Manager, Communications
705 671-0594

Posted in Tax Topics | Print | No Comments »

December 17, 2009 by Dan White.

Now this is pretty funny.  The finance minister slaps a 100% tax on over contributions for  TAX FREE savings accounts. I could see a 5% penalty… that would be reasonable… but when the money that goes into a TFSA is after tax dollars, slapping such a penalty is nothing short of an abusive tax grab.

I like TFSA’s, they are much better than an RRSP, but I don’t like the fact that the government can change the rules as they go along.

The Finance Department has instructed the Canada Revenue Agency to charge a levy of 100 per cent on any overcontributions in a Tax-Free Savings Account. OK… so now let’s just make this a complicated audit problem for Canadians.

In spite of the fact that everyone knows that the tax laws are too complicated, Government seems to love complexity and keeps piling it on is.

Oh… well… it is good for my business of sorting out tax messes.

For more information go to www.tax-audit-solutions.com

Dan White

Here is the Globe and mail article by Kevin Carmichael

__________

Flaherty targets tax-free account abusers

Tuesday, October 20, 2009
People who exceed limit on TFSAs will lose 100 per cent of their overcontribution, as Finance Minister closes loophole

KEVIN CARMICHAEL

OTTAWA — Finance Minister Jim Flaherty is cracking down on abuse of Tax Free Savings Accounts, closing loopholes in the popular investment program that is one of his centrepieces.

Citing a need to “challenge aggressive tax planning,” the Finance Department is moving to stop transactions involving TFSAs that violate the spirit of the program, which is intended to coax Canadians to build up their personal savings.

The program, a key element of the government’s 2008 budget, allows savers to invest a certain amount each year without paying taxes on the gains. The changes, which went into effect yesterday, seek to stamp out schemes that saw investors make deliberate overcontributions or unapproved investments because the tax-free gains exceeded the penalties.

While the minister’s move will affect only a small number of TFSA holders, it is aimed at curbing potential abuses in the accounts before they are more widely adopted and contain larger amounts.

Finance does not yet have a tally of how many tax-free accounts have been opened since the program came into being on Jan. 1, but a survey by HSBC Bank Canada earlier this year found that two-thirds of Canadians planned to open one.

One move Finance is seeking to end involved savers putting money into their tax-free accounts in excess of the annual $5,000 limit.

The previous penalty for going over the limit was 1 per cent a month.

Finance said that “some TFSA holders are attempting to generate a rate of return” by going over the limit for “a short period of time,” in the belief they can earn more than enough to outweigh the cost of the penalty.

To close the loophole, Finance instructed the Canada Revenue Agency to charge a levy of 100 per cent on overcontributions.

TFSAs, which Mr. Flaherty calls the most important innovation in Canadian tax policy since the introduction of Registered Retirement Savings Plans, have proved popular with both taxpayers and financial institutions.

In May, Peter Aceto, chief executive officer of ING Direct Canada, went to Ottawa to present Mr. Flaherty and National Revenue Minister Jean-Pierre Blackburn with a poster signed by more than 2,000 clients “thanking” the government for introducing the program.

Essentially, taxpayers who are 18 years and older may make contributions of $5,000 annually to a TFSA and may withdraw the money tax-free at any time, for any purpose. As with an RRSP, savers can make contributions above the limit when they have contributed less than $5,000 in previous years.

Unlike RRSPs, they can replenish money they withdraw from their TFSA account.

David Barnabe, a spokesman for the Finance Department, said the government learned of the alleged abuse from concerned individuals, and that inappropriate transactions had occurred in a “very small minority” of accounts.

The government also discovered some investors were seeking to cash in on gains in the value of their investments by transferring money from their RRSPs and other registered savings plans, which discourage early withdrawals with heavy taxes, to their TFSAs.

From now on, TFSA amounts that are “reasonably attributable” to these kinds of transfers, will face a tax of 100 per cent.

The third loophole Mr. Flaherty is closing relates to unqualified investments, such as property or companies in which the account holder has a significant stake.

It appears some investors were making these investments despite the existing penalties because the gains remained in the accounts even after the offending purchase was removed.
Wednesday, October 21, 2009
CORRECTION

The Finance Department has instructed the Canada Revenue Agency to charge a levy of 100 per cent on any income or gains from overcontributions in a Tax-Free Savings Account. Incorrect information was published yesterday.

Posted in Tax Topics | Print | No Comments »

December 17, 2009 by Dan White.

It is clear the government want money, and they are going to cause tax problems for a lot of people looking for tax solutions.

If you are a passive investor, you are going to pay more Tax, if you are an active investor, you will pay less tax. It is your choice.

Call or email me to see how you should position yourself.

Dan White

www.tax-audit-solutions.com

Dan White

__   dw@911taxes.com   ________

Here is a good article by Lynda Hunt.

Department of Finance Responds to GST and Financial Services Court Decision

Posted by: Lynda Hunt in Untagged  on Dec 16, 2009

On December 14, 2009 the Minister of Finance issued a News Release and Backgrounder setting out the Government of Canada’s response to an April 2009 court decision on the application of GST to certain investment management fees.

As you may recall (from our blog of July 6, 2009), the Federal Court of Appeal had ruled in favour of the taxpayer, Canadian Medical Protective Association (”CMPA”), in their bid to have their investment management fees charged to their discretionary investment account considered as a “financial service” and thereby exempt from GST under Schedule V of the Excise Tax Act (the “ETA”).

The Government’s response to that decision was the December 14, 2009 press release; in their words, an effort to “reaffirm the policy intent and provide certainty respecting the GST”.  The proposals state that they will “clarify” that “financial services”, as defined for purposes of the ETA, do not include investment management services, in spite of the Appeal Court’s ruling.  In addition, they have identified a number of credit management and credit facilitatory services which are also confirmed to not be financial services.  Additional details are available at http://www.fin.gc.ca/n08/09-115-eng.asp.

It is important to note that these proposals apply not only to services rendered from December 14, 2009 forward, but also to previous transactions where the service provider had originally charged GST.  Our understanding of this wording is that if the supplier had originally charged GST and the recipient had applied for a rebate (based on the CMPA case) the rebate will be denied.  Also the Canada Revenue Agency has up to the later of one year after these proposals become law and the normal reassessment period under section 298 of the ETA to reassess.  An exception exists for any case where a final determination has already been made by the courts.

Draft legislation was not included with the proposals, so complete details are not available.  However, such legislation will be introduced at “an early opportunity”.

The CMPA case was of particular interest to the mutual fund industry as they faced the prospect of Ontario’s new 13% HST (beginning July 1, 2010).  It would appear, at this time, that the Ontario Government is not prepared to extend an exemption to the mutual fund industry from the extension of the HST to the management fees they incur.  The reason this is a concern to our readers across Canada is because the place of supply rules will likely apply to have that 13% tax apply to all mutual funds that are managed in Ontario (which is the vast majority - at least for now!).

We await the release of detailed legislation and will also monitor the HST situation, but for those hoping for a break on the application of the HST to mutual fund investment costs, these legislative proposals clearly indicate the Government is moving in the opposite direction!

Posted in Tax Topics | Print | No Comments »

December 16, 2009 by Dan White.

Here is a classic case of just what kind of tax problems can happen to Canadians.

It will be interesting to see what kind of solutions will happen, when this gets back in tax court.

For further info, conact me at dw@911taxes.com and check out www.tax-audit-solutions.com

Dan White

Tax dispute heats up
Written by Frank Peebles
Citizen staff
Monday, 14 December 2009
00670000
Related Items
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Million-dollar tax miscalculations caused Irvin Leroux to lose everything he owned, but a tax official also offered to end his tax troubles for a personal fee.
This is the latest accusation by a Prince George man who was, by Canada Revenue Agency’s own admission (proven in court once already), the victim of an incorrect tax bill.
The events began with an audit of Leroux’s books in 1995, but CRA officials accidentally shredded all his documents, but forged ahead with claims that Leroux owed the federal government enormous amounts of money - about $1 million.
He fought back, insisting that he had always fastidiously paid his taxes.
In 2005 the CRA dropped their claim that Leroux owed them any money at all. In fact, they discovered in the process he had actually overpaid $24,000 in taxes and was entitled to a refund. They paid him that amount (then took it back immediately for an outstanding GST bill). Yet the CRA refused to compensate him for all his losses as a result of the years-long fight. Leroux lost his home, his business (an RV park near Valemount), land with timber, a housing subdivision, his life savings, and other assets, not to mention his credit rating and potential earnings. According to a Statement of Claim Leroux filed in Prince George court in 2006, his losses equaled more than $4 million.
To properly fight for his lost assets, Leroux asked for copies of all documents the federal government had that pertained to his taxes. He and his lawyer received a shipment of 2,500 pages of material, most of it heavily censored.
One part wasn’t blacked out though, said Leroux, and it was the most important part of the whole ordeal. It was a piece of paper that allegedly points out a corruption incident. It is now a major part of a vastly new Statement of Claim that was just handed in to Prince George court last week. The Citizen got the first look at it, outside of the legal groups on either side of the issue. In it was a damning allegation that involved a Prince George tax official named Hansen (now deceased):
“On Dec. 23, 1998 Hansen telephoned the plaintiff (Leroux) and requested another meeting to discuss the resolution of (Leroux’s) tax problems,” said the revised Statement of Claim. “The plaintiff met with Hansen at which time Hansen advised the plaintiff he could resolve the plaintiff’s ‘tax problem’ if the plaintiff would pay $25,000 cash to Hansen personally. The plaintiff refused, whereupon Hansen stated that he should reconsider, failing which the plaintiff would encounter significant, costly problems with the (CRA).”
This week in Prince George court the CRA’s lawyers attempted to quash the proceedings, insisting that too many delays were unfair to the tax agency. They also asked Mr. Justice Eric Chamberlist to officially declare Leroux as the one who should bear all court costs if he ultimately loses the case.
Not so fast, Chamberlist said on both accounts.
“I am of the opinion that this plaintiff should have his day in court,” the judge said.
He allowed both sides to adjourn for several weeks to properly prepare their cases in light of the new allegations. He also deferred the issue of court costs until farther into the proceedings.
“I can understand the position of the defendant with regard to now having to face amended pleadings from those originally filed,” said Chamberlist. “But by the same token I am concerned that the court not deal with issues raised by the plaintiff in his claim without a proper hearing, and all matters being heard.”
A date is now being fixed between the lawyers for some time later this winter. Chamberlist gave the CRA lawyers up to 30 days to revise their defense documents. When those are submitted, Leroux and his lawyer would have up to 14 days to prepare their counter-position. At the end of this back-and-forth

Posted in Tax Topics | Print | No Comments »

December 9, 2009 by Dan White.

Victor Drummond writes and excellent article. I have been aware of this case for a while now, and I see it as just one example of our government creating horrible tax problems for Canadians. The Tax Department is about collecting money and will use every angle they can.

To learn more about keeping out of tax trouble, go to www.tax-audit-solutions.com

Read on…

 Dan White

________

Victor Drummond ©
Posted by Victor Drummond at 12:01 PM

Posted in Tax Topics | Print | No Comments »

December 5, 2009 by Dan White.

As usual Jamie Golombek writes useful and informative articles.

In respect to charitable donations; I would add the following observations…
Canadians have reason to second guess donations as a safe do good things tax strategies.
We can not trust just checking with CRA to see if the charity is in good standing with them. That does not mean we can use the charitable receipts. Many Canadians who donated to charity schemes were shocked to find out they could not even claim ther actual cash part, and that CRA argues that because the money was never used properly by the charity, the deduction is denied.
Further Many Canadians think that they save money by donating, they never break even tax wise because of the donation, CRA still gets anywhere from a small slice to the the whole thing.
We can not trust our tax department to have the true spirit of giving, so one wonders why donate this way at all.
I recommend considering donating directly to the needy and forget the deduction.
For more information, contact danwhite@danwhite.ca  or go to www.danwhite.ca or www.tax-audit-solutions.com
Here is Jamie’s info.
Dan White
_________

New rules needed to spur small donations

Charities increasingly depend on wealthy donors for survival

Jamie Golombek, Financial Post  Published: Saturday, December 05, 2009
Related Topics

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Jamie Golombek
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C.D. Howe Institute

‘Tis the season for giving, not only to friends and family members but to the numerous worthy charitable causes that vie for our attention — and wallets — this month.

As a reminder, donations to registered charities need to be made by Dec. 31 to be eligible for the donation tax credit for 2009.

This credit was the subject of a new study released this week by the C.D. Howe Institute titled, “Lending a Hand: How Federal Tax Policy Could Help Get More Cash to More Charities” by A. Abigail Payne, fellow-in-residence at the Institute, and also an associate professor and Canada research chair in public economics at McMaster University in Hamilton, Ont.

Prof. Payne has observed a marked change in the pattern of charitable giving over the past twenty years, specifically noting that the share of Canadians reporting cash donations has fallen while at the same time the charitable sector’s reliance on large donations by wealthy donors has risen.

This dichotomy is problematic to charities that primarily rely on numerous smaller cash donations for their funding. Prof. Payne proposed a couple of tax reforms that would encourage wider cash donations.

Under the current rules, the amount you donate is eligible for both federal and provincial donation tax credits. For the first $200 of donations you make in a calendar year, the federal donation credit is equal to 15% of the amount given. Once you’ve made at least $200 of donations in any year, however, the donation credit jumps to 29% federally. The provinces and territories also provide provincial donation credits at varying rates.

Prof. Payne recommends two possible reforms to the federal donation system, the first one being a “united rate” of 29% for all donations. This would simplify the administration of the credit and provide an additional incentive for smaller, lower-income donors.

Taxpayers who already donate $200 or more would save an extra $28 in taxes [$200 x (29% -15%)] for an estimated total cost to the government of approximately $110-million in lost federal tax collections.

The second reform would be to provide a higher tax credit, say 40%, for the first portion of donations that would be linked to your annual income. This higher rate would, however, be capped for higher-income earners.

For example, let’s assume a higher tax credit was available for donations made up to the first 1% of your income, subject to a $500 cap. If you earned $40,000 per year, you would get the high 40% donation credit for your first $400 in annual donations (being 1% of $40,000) and the regular 29% credit for donations above this amount. If you earned $50,000 or more, your high-credit donation would be capped by the $500 limit.

Finally, Prof. Payne recommends that amounts eligible for the higher tax credit be allowed to accumulate in much the same way that unused RRSP and TFSA room can be carried forward from year to year. This amount would be tracked by the Canada Revenue Agency and reported to you annually on your Notice of Assessment.

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.

Read more: http://www.financialpost.com/personal-finance/fp-investing/story.html?id=2305729#ixzz0Yp8sCbTc
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December 3, 2009 by Dan White.

CRA goes into competition with with the banks.

They are offering better than bank rates if you overpay your taxes.

Canada Revenue Agency: Interest Rates for the First Calendar Quarter

OTTAWA, ONTARIO–(Marketwire - Dec. 3, 2009) - The Canada Revenue Agency (CRA) today announced the prescribed annual interest rates that will apply to any amounts owed to the CRA and to any amounts the CRA owes to individuals and corporations. These rates are calculated quarterly in accordance with applicable legislation and will be in effect from January 1, 2010 to March 31, 2010.

Income tax

- The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%.

- The interest rate paid on overpayments will be 3%.

- The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%.
If you have tax problems requiring solutions, be sure to go to www.tax-audit-solutions.com or go to www.danwhite.ca

Best Regards

Dan White

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December 3, 2009 by Dan White.

The following article by Vern Krishna, who writes for the Financial Post, give some very good advice on one of the biggest tax problems you can have e.g. a tax search and seizure.

While the article focuses on tax practitioners, it is still completely relevant for small business owners.

Dealing with CRA problems requires expert help. If you are having a problem like this, then email me at dw@911Taxes.com, put “Tax Emergency” in the subject line.

Or call our hotline  905-668-4816

For more information on tax problems and tax solutions go to www.tax-audit-s0lutions.com and or www.danwhite.ca

Dan White

_______

Dealing with a tax-search warrant

Know the process, and remedies after search and seizure

Vern Krishna, Financial Post  Published: Wednesday, December 02, 2009
Related Topics

Dealing with a tax-search warrant

Know the process, and remedies after search and seizure
Vern Krishna, Financial Post  Published: Wednesday, December 02, 2009
Related Topics

A tax search and seizure of a lawyer’s or accountant’s office can be stressful, but it does not have to be so. What do you do when the taxman arrives with a search warrant and sworn information authorizing the search to look for documents in connection with a criminal tax investigation?

First, take a deep breath and normalize your blood pressure. There are various legal protections available, but you must be calm enough to invoke them.

Both the Income Tax Act and the Criminal Code allow the Minister of Revenue to apply ex parte, or without notice, to a judge for a search warrant to enter into premises and seize documents or things found therein. The minister (officially, it’s a minister of the Crown that seeks the warrant) seeking the warrant must support the application for a warrant with information establishing the facts on which he or she seeks the warrant.

The judge has discretion to issue the warrant. The judge will issue the warrant if the government establishes reasonable grounds that the taxpayer or person being investigated has committed an offence under the Income Tax Act and that documents contained on the premises will be evidence of the offence. This is a fairly low threshold and the tax authorities will likely have enough to get a warrant.

Second, examine the search warrant and any information sworn to determine the scope of the warrant and any limitations that it outlines. At this juncture, you must determine whether the Canada Revenue Agency is investigating a particular client, the professional firm or a third party.

The warrant must be specific and identify the particular offence to which it relates. It must also identify the particular building or premises that it authorizes for search and the person who is the target of the search and is alleged to have committed the particular offence.

If the search warrant pertains to a client, you should obtain instructions immediately from the client and, on his or her instructions, retain legal counsel.

If the client authorizes the search, you can co-operate with the authorities in their investigation, but you should keep a detailed record and notes — preferably in the presence of another person– of all documents that the CRA seizes.

You should co-operate with the tax officials to the extent that you can do so. It is an offence to interfere with, hinder or molest any official or prevent him from doing his authorized duties under the tax statute or the Criminal Code.

Third, claim privilege on all documents at the outset. You can ask for the documents to be sealed and placed in custody under the authority of the Criminal Code or the Income Tax Act.

Once the documents have been seized and are in authorized custody, you have 12 days to apply to the court to determine whether the documents — or any portion thereof — should be disclosed to the tax authorities. You will need to review all of the documents to select the particular ones in respect of which you wish to claim privilege on behalf of your client. Failure to pursue this document review will result in the documents being turned over to the CRA after 14 days.

Read more: http://www.financialpost.com/news-sectors/legal/story.html?id=2292884&p=1#ixzz0YY7goFKX
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The Charter of Rights and Freedoms circumscribes the law in respect of search and seizure warrants. The information cannot be simply a fishing expedition; it must specify the documents or things that the government is looking for. Thus, the tax authorities or police must limit their search and seizure to the documents or things that they specify and believe reasonably support the commission of the offence. Under the “plain view” doctrine, however, the person executing the warrant may also seize any other documents or things that are evidence of any other offence under the law.

There is very little that the taxpayer or his or her legal counsel can do to curtail the execution of a properly obtained and executed warrant. The remedies, if any, lie after the search and seizure.

A judge will determine whether the government can retain the seized materials. The revenue minister is entitled to retain seized materials — and the judge must so order — unless the government waives retention. The taxpayer can, however, through his legal counsel apply to a judge for the return of documents if he can show that the documents will not be required for an investigation or in criminal proceedings. Of course, any documents or things that were improperly seized and outside the scope of the warrant will be returned to the taxpayer.

A tax search and seizure can be traumatic. If handled professionally and politely, it should be less so. The client may panic; the professional must remain calm. The courts are quite zealous in protecting unwarranted state intrusions in matters pertaining to criminal tax evasion charges.

- Prof. Vern Krishna, CM, QC, FCGA, is tax counsel and a mediator and arbitrator at Borden Ladner Gervais and is executive director of the CGA Tax Research Centre at the University of Ottawa.

Read more: http://www.financialpost.com/news-sectors/legal/story.html?id=2292884&p=2#ixzz0YY7WytKX
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December 3, 2009 by Dan White.

I am having fun tracking this subject with all the spin doctoring going on. It is amazing to see how CRA is so effective in their scare tactics.

While I agree, Canadians need to report all their income and prepare their tax returns completely and honestly, I don’t agree that a voluntary disclosure is the right answer.

In most cases, there are much better ways to handle coming clean.

For more information on alternatives to Tax Amnesty / Voluntary Disclosures.

Go to www.tax-audit-solutions.com and www.danwhite.ca

or email dw@911Taxes.com

Dan White

________

here is John Greenwood’s interesting article on what the Minister of Revenue has to say, and what

Steven Kohn, the lawyer for Bradley Birkenfeld, a key whistleblower in the UBS case has to say;

Canada’s tax cheats confess in record numbers

6,798 people holding $1.66-billion in hidden assets come clean with CRA

John Greenwood, Financial Post  Published: Wednesday, December 02, 2009

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A flood of Canadian tax cheats are voluntarily coming forward to disclose hidden assets and offshore accounts in record numbers, says Jean-Pierre Blackburn, the Minister of National Revenue. Reuters A flood of Canadian tax cheats are voluntarily coming forward to disclose hidden assets and offshore accounts in record numbers, says Jean-Pierre Blackburn, the Minister of National Revenue.

A flood of Canadian tax cheats are voluntarily coming forward to disclose hidden assets and offshore accounts in record numbers, says Jean-Pierre Blackburn, the Minister of National Revenue.

As of Wednesday, 6,798 Canadians had come clean to the Canada Revenue Agency since the start of the year, revealing $1.66-billion of assets they had not paid tax on, or about 50% more than in the whole of 2008, Mr. Blackburn said in an interview.

The jump in the numbers is because people are getting the message that “people should pay their taxes” after publicity around a recent string of tax-evasion cases, he said.

“People realized that it’s a question of time before we get them,” he said. “I tell them, we’ll get you, we’ll find you.”

The comments come after tax authorities in the United States announced last month that 14,700 well-heeled Americans had confessed to evading taxes to take advantage of the government’s amnesty program.

The lion’s share of those cases involved hidden offshore accounts with UBS AG, which agreed this year to reveal the names of 4,450 U.S. clients with US$18-billion in hidden assets.

Despite evidence that many well-heeled Canadians also hid money with UBS, only a trickle disclosed the information to the CRA, which has led some observers to complain the government is not doing enough to fight tax evasion.

Indeed, of the nearly 7,000 people who came forward in Canada, only 90 involved UBS cases. The rest involve either different offshore banks or other forms of tax evasion, Mr. Blackburn said.

He said the critics are failing to take into account this country’s overall very strong record on persuading Canadians to pay their taxes, which compares well with the United States where in a typical year very few tax cheats come forward.

Under the law, Canadians can avoid legal penalties and fines if they voluntarily disclose assets they are not paying taxes on and there is no deadline. By doing so, they are liable only for the taxes and accrued interest.

South of the border the laws are a lot tougher and in the case of UBS there is a deadline, with no breaks for people who fail to confess in time. On top of that there are rewards for whistleblowers.

“I think our system is a lot better, more [attractive] for Canadians to use,” said Mr. Blackburn.

Not everyone agrees with that.

A central figure in the UBS case Wednesday slammed the CRA for failing to take tax evasion seriously.

Steven Kohn, the lawyer for Bradley Birkenfeld, a key whistleblower in the UBS case, said the Canadian government needs to put in place laws to protect people who come forward with information about tax evasion and reward those who help the government collect revenue that is owed to it.

“The first issue is, does the Canadian government really want to stop tax evasion, and if they want to stop it we now know the steps that have to be taken to do that?” said Mr. Kohn. “Any government that is not instituting effective whistleblower programs is really turning their back on most effective detection mechanism for fraud.

“Canada does not have good whistleblower protection,” said Mr. Kohn. “It’s kind of remarkable that they’re lagging behind [so many other countries.]”

jgreenwood@nationalpost.com

Read more: http://www.financialpost.com/story.html?id=2295700#ixzz0Ydn0JNRd
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December 2, 2009 by Dan White.

End of year tax reminders

Couple of Tips

The Home Renovation Tax Credit-Remember the feds are basically giving anyone who completes home renovations a 13.5% tax credit on the first $10,000 in expenses as long as they are completed by the end of January 2010. Virtually any true renovation expense is eligible, so long as the the expense is incurred before February 1, 2010.

Purchasing Business Assets- If you are thinking about purchasing office equipment or furniture as a small business owner, if you do it prior to the year end, you will be eligible to take advantage of the depreciation one year earlier.

This is the time to buy Computer equipment as you will be eligible to get a full 100% write-off for both Federal and Quebec purposes. This 100% deduction program actually expires at the end of January 2010, but why not write off the full expense now and reduce your 2009 taxes instead of waiting a full additional year.

If you want more information on this topic, please email danwhite@danwhite.ca

Dan White

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December 2, 2009 by Dan White.

 This Bloomberg.com article reinforces the point I am making about swiss banking dangers in respect to doing a voluntary disclosure.

I am bugged over this latest round of CRA propaganda because it is not honest. Can’t we at least expect the Minister of Revenue for Canada to be honest with us?

Why not just be truthful and say, “We are going to do everything we can to nail every ass in Canada for every cent we can get, starting with offshore banking.” Instead he implies  that UBS is going to turn over the names of Canadians who bank in Switzerland.

I am not saying two wrongs make a right, but I am saying it is wrong to mislead Canadians for any reason.

If you read between the lines in what Revenue Minister Jean-Pierre Blackburn says; you will see the following.

Likely if names are released, it will be for amounts over a million dollars. (A swiss frank is worth slightly more than a Canadian dollar).

UBS has refused to turn over names to Canada. Canada is “threatening” that it will sue….. I guess if they actually do launch an action, it could be more believable, that names would be turned over, but I doubt it.

If 88 Canadians who banked in Switzerland came forward and have paid 14.3 million in taxes, that would be an average of $162,500 each. That is quite short of the million threshold that applies is the USA issue.  How many of those 88 were over the one million threshold?

But the most imporant question of all is. “Did those who did the Voluntary Disclosures and up paying less tax than if they had come clean without the disclosure?” What are the real numbers. What is the story behind the aftershocks.?

I have seen in first hand. A voluntary disclosure is often not the way to go.

If you have offshore wealth, be sure to talk to someone who is not selling the Voluntary Disclosure Program, to find out if it really is the right thing for you to do or if it is absolutely the wrong thing to do.

To learn more, go to www.tax-audit-solutions.com and www.danwhite.ca

If you have a serious tax issue, contact me dw@911taxes.com

Dan White

________

Here is the article by Alexandre Deslongchamps

Canada Has Tax Disclosures From 88 UBS Clients, Blackburn Says
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Dec. 2 (Bloomberg) — Eighty-eight Canadian clients of UBS AG have contacted the country’s revenue agency to voluntarily disclose income they previously failed to report, Revenue Minister Jean-Pierre Blackburn said today.

Forty-one of those customers have reached settlements with the Canadian government, reporting C$15 million ($14.3 million) in previously undisclosed income, Blackburn said in an interview today. He didn’t say how much revenue the federal government will recover from the tax adjustments.

Canada has been trying for several months to recoup tax losses caused by citizens who hid assets in UBS accounts. UBS, Switzerland’s largest bank, said in August that it will divulge information on 4,450 accounts to settle a U.S. lawsuit that sought names of clients suspected of evading taxes.

Blackburn said the government is “very firm on this; we want the list of clients and we hope that UBS fully collaborates.” He added that the government will go to court if the discussions don’t yield “tangible results.”

Switzerland said last month it will turn over details of UBS AG accounts held by U.S. residents who had more than 1 million Swiss francs ($1 million) in undeclared assets to the U.S. Internal Revenue Service.

To contact the reporter on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net
Last Updated: December 2, 2009 10:42 EST

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December 2, 2009 by Dan White.

Taking losses on rental property is not always a good idea. There is a lot to think about when you start using losses as a plan to reduce your taxes.

To learn more about proper records and what happens when you are audited go to

 www.tax-audit-solutions.com

and

www.danwhite.ca

Here is a good article from Andy Wong.

Andy Wong
Guest columnist
Monday, November 30, 2009

Previous columns

The taxman gets jumpy and may sniff around if you deduct losses from a rental property. Here is a reason why your losses may attract some unwanted attention.

Losses from a rental operation can be applied against other income such as wages. In essence, your rental loss is a tax deduction that nets you a refund and the taxman doesn’t like to hand out refunds unless there is a legitimate reason.

To be fair, the Canada Revenue Agency isn’t out to disallow all rental losses, per se. Rather the agency tries to distinguish between deductible losses from real rental operations and non-deductible losses where the operation involves a strong personal element. For instance, the tax courts have made it quite clear the CRA cannot disallow rental losses from legitimate rental operation. The key considerations are: Why did you buy and rent the property?

Was it a bona fide commercial activity, i.e., to make money, or was it a personal endeavor? If it was a commercial activity, the train stops there and the losses should be deductible.

The tax courts have also agreed losses from rental operations that involve a personal element are non-deductible if the operation isn’t conducted in a business-like manner. And what do ‘personal element’ and ‘business-like manner’ mean?

Say you owned a house with two bedrooms; your parent lives in one and while living in the same house, you rented the other bedroom to your girlfriend. Consequently you claimed rental losses from deducting a percentage of the house expenses against the rented bedroom. Is there a personal element involved? If yes, was the rental operation conducted in a business-like manner? If no, the rental losses are denied.

In Slagado versus the Tax Court of Canada, Nov. 5, 2008, involving the above facts, the judge quickly concluded there was a clear personal element because the taxpayer had rented out his bedroom to his girlfriend and they shared its use. Was the rental conducted in a business-like manner?

The taxpayer had charged annual rent of $1,950 for 2003 and 2004 and claimed rental losses of $5,827 and $3,426 for those years. It turned out his girlfriend didn’t even live in that property during 2003. The judge concluded there wasn’t a business-like arrangement because rent was charged to a non-existent tenant.

The above case is a reckless example of an illegitimate rental operation. The case of Landriault & Bercier versus the Tax Court of Canada, July 29, 2009, is more typical of rental losses that fail the smell test.

The taxpayers, a married couple, lived on the lower floor and rented the upper floor to their son at less than fair market value. They claimed rental losses of $7,523 and $4,836 for 2003 and 2004.

The judge concluded there was a personal element because the tenant was their son. Since the rent was below fair market value and the couple could not expect to make a profit at that rent level, there was no evidence the rental activities were carried out in a business-like manner.

He concluded the operation was a family arrangement to charge minimal rent to help defray the operating costs of the property and he denied their losses.

Andy Wong, CGA, CFP, is a tax consultant at MacKay LLP, Chartered Accountants, in Yellowknife. He can be reached at: andrewwong@yel.mackayllp.ca

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December 2, 2009 by Dan White.

If you are being audited; Read This First!
Canada Revenue Agency (CRA) has one objective. Their sole reason for existing is to collect more and more money from Canadians. You are up against a well-oiled machine that is out to get as much booty from you as they possibly can. Don’t think for one second that there will be any kindness or overlooking of things when it comes to audits and collections.

To think that you are dealing with an agency that is set up for any other purpose than to collect revenue in Canada is not only naive, but it is missing the point that CRA’s mandate is to get as much money as they can.

CRA has risen to a new level of sophistication by way of technology. Data mining, snitch lines fed by disgruntled employees and angry X spouses have resulted in a never before numbers of audits.

CRA treats the collection of revenue as serious business, and if you don’t also treat it as serious business, your financial head is on the chopping block. Your savings and assets will be severed from your ownership by a well-orchestrated swing of the tax man’s axe.

There are so many audits going on by the now over seven thousand auditors in Canada, that CRA is six months behind in their case work. That does not mean that they will not get to it, what it does mean is that they will hire more auditors.

And just where are those auditors going to come from? Auditors already trained in the art of extraction of money? If you guessed the BC and Ontario provincial sales tax auditors, you are right. Good by to the PST auditors and Hello HST auditors. Thousands to trained hit men will join the ranks of CRA.

When the new auditors join the ranks of CRA, then the work will be all laid out for the new army of auditors who will speed up the audits.

If you have received that phone call or the letters from CRA telling you that you are going to be audited, then you need to get help before you talk to them.

Call us now at 1-905-668-4816 and tell the operator that this is a tax emergency.

If it is late at night, and you cannot sleep because of the stress this is causing you, and you just found us on the internet, then email us at info@tax-audit-solutions.com and use the word “EMERENCY” in the subject line. If you have just sent that email, you will hear from us first thing in the morning.

If you want to read on for more valuable insight into the workings of our tax regime, then read on;

You may not know that although Canada Revenue Agency is officially part of the
Government of Canada, since December, 2003, CRA has acted as an independent
agency working for the federal government and most of the provinces.
CRA administers most individual and corporate income taxes in Canada. It also
administers the Goods and Services Tax (GST) in all provinces except Quebec,
where Revenu Quebec administers both the QST and GST. In Nova Scotia, New
Brunswick and Newfoundland & Labrador, the GST has been replaced with the
Harmonized Sales Tax (HST) which is administered by CRA. On March 26, 2009, the
Government of Ontario proposed that the Ontario Retail Sales Tax be harmonized
with the GST on July 1, 2010. Although no announcement has been made, it is
likely this harmonized tax will also be administered by CRA.
The introduction of HST will cost Ontario taxpayers billions of dollars over the next
decade by taxing all kinds of essential items, such as heating fuel, gasoline and
everything that is currently PST exempt. If you write your MP and promise that the
next 5 generations of your family will never vote for the party if the bill passes, you
can defeat the HST. If you think your neighbour will look after that, it will pass for
sure. If you want to reduce your future taxes, this is one easy way to do so.
Governments do not enact bills that are wildly unpopular.
CRA has two main responsibilities: to collect taxes and administer tax law. There is
even a separate court, the Tax Court of Canada, to oversee justice with respect to
tax law. Unlike other courts in Canada, at Tax Court, you are considered guilty until
proven innocent.
CRA is a business, and like any business, it has to watch its bottom-line very
carefully. Auditing a taxpayer is expensive and, even though CRA gets its funding
from 10% of our taxes, they won’t waste the time and money required to perform
an audit unless they feel there is a good chance of making a decent return on their
investment.
What does this mean for you? It means that CRA has already pre-determined that
auditing you is a good investment. The auditor’s mandate is to go after you
aggressively to obtain the most money possible. Fairness is not part of the
mandate - maximum profit is the name of their game. If you don’t realize this from
the outset, you are in for a very rough ride.
We know that most taxpayers don’t try to cheat the tax man — it’s too difficult and
risky. However, most taxpayers don’t save all their receipts and keep audit-proof
books.  CRA relies on those statistics to gain leverage when auditing. They’re
hoping that because you have been honest and fair in preparing your tax returns,
that you expect them to return the favour, in kind. As you will discover exploring
this site, that is not likely to happen.
No, this is a battle. CRA has already targeted you and developed a strategy for
winning. You need to recognize that and arm yourself appropriately to prevent your
financial slaughter.
For more information go to www.tax-audit-solutions.com or www.danwhite.ca

Dan White

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December 2, 2009 by Dan White.

I do not promote tax evasion, neither offshore or onshore. But for Canadians to go into a Tax Amnesty a.k.a. Voluntary Disclosure, thinking that coming clean by way of a Voluntary Disclosure, is always the best way to go is foolhardy.

So far 90 Canadians have lined up for slaughter. They knowingly committed tax evasion, they lived with it. Now out of fear that they may get caught, come willingly into the spiders webb.

I am not saying that they should not come clean. I am saying that there may be better ways to sleep at night.

Simply Stated. CRA is not having any luck getting the records from the United Bank of Switzerland.

To learn more about voluntary disclosure risks go to www.tax-audit-solutions.com  or www.danwhite.ca

Dan White

_______

Canada says could sue UBS over list of clients
Wed Dec 2, 2009 4:19pm EST

* Canada won’t say when it would start suing UBS

* 90 UBS clients have voluntarily revealed accounts

OTTAWA, Dec 2 (Reuters) - Canada, which is trying to clamp down on tax evasion, is prepared to take Swiss bank UBS (UBSN.VX) (UBS.N) to court if necessary to compel it to hand over details of Canadians who might be account holders, a government minister said on Wednesday.

Ottawa has been pressing UBS since early September for the names, but has had no success.

National Revenue Minister Jean-Pierre Blackburn said 90 people have voluntarily disclosed their UBS accounts to Ottawa. The government has reached deals with 44 of them, raising an extra C$15.3 million ($14.6 million) in tax revenue in the process.

“We are still discussing with UBS authorities to try to obtain that list of Canadians who are on their list, who have (accounts in) tax havens abroad,” he told reporters.

“It’s not easy. If we realize that it won’t be possible to obtain it, if they just try to obtain time, we will go (to) court to obtain this list.”

Blackburn did not say at what point the government would end the talks with UBS and go to court.

Earlier this year a high-profile U.S. lawsuit against UBS AG prompted the bank to agree to promise to reveal the names of 4,450 client accounts held by Americans.

Offshore private banking involves managing the wealth of rich clients from a foreign location. Some have exploited the system to avoid paying taxes, especially if transactions are carried out in traditional banking secrecy strongholds.

Last month U.S. officials said some 14,700 rich Americans, worried about a crackdown on offshore tax cheats, had turned themselves in under a government amnesty program.

($1=$1.05 Canadian) (Reporting by David Ljunggren; editing by Peter Galloway) ((david.ljunggren@reuters.com; +1 613 235 6745; Reuters Messaging: david.ljunggren.reuters.com@reuters.net))

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November 30, 2009 by Dan White.

Why the Income Tax Act is failing us

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

———–
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 »

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
__________
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 »

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

___________

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 »

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 »

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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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

_________
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 »

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 »

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…

Related Links

* Irvin leroux’s web site
* Lawful Access: Canadian government proposals for updating criminal laws and facilitating law enforcement in the electronic age
* Proceeds of crime legislation
* Supreme Court OKs confiscation by provinces of proceeds of crime
* Complaint to United Nations and Commission for the status of Women
* ISPs must help police snoop on Internet under new bill
* Public Service Alliance files in court over workers’, women’s constitutional rights
* Canada rejects UN human rights recommendations

Links from Article Text

* http://www.cbc.ca/bc/features/gopublic/2009/04/who…
* classactioncra@gmail.com
* theproducer@thetaxmanmovie.com
* http://community.icontact.com/p/cantaxpayer/newsle…
* http://www.sectorprivate.com/2009/03/jury-awards-1…
* http://www.canada.com/vancouversun/columnists/stor…
* http://salvationist.ca/2009/03/the-silent-ministry…

Press Contact:
Valerie hall

classactioncra@gmail.com

http://community.icontact.com/p/cantaxpayer/newsletters/cantaxpayer/posts/taxpayer-double-feature

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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

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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.

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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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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.

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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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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.

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.

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.

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.

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.

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.

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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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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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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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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October 31, 2009 by Dan White.

The government wants tax whereever possible. There is the never ending hunt for money by the  Canada Revenue Agency… As a result a lot of Canadians finding themselves with tax problems. To avoid being in trouble and need soltutions, be sure you know what is taxable and what is not.

If you are invited to a gold party, or you sell your gold at Cash Converters, be sure to be aware how to handle this in your bookeeping.

Cash for gold not necessarily exempt from tax

Here is another great article by amie Golombeck, writing for hte Gazette.

It is interesting that if you buy gold jewelery (excluding gold coins) and the adjusted tax base is less than $1,000 and you sell it for less than $1,000 then it is tax free.  However if either is over $1,000, then you have a capital gain or loss to claim on your tax return.

So… so long as you don’t make a business of buying and selling gold jewelery, and other listed personal property, it is a good way to come up with either tax free or low tax dollars.

Interesting,,, eh?

Dan White

_____________

Jewellery sales can result in capital gains

By JAMIE G OLOMBEK, The GazetteOctober 31, 2009

It seems everywhere you look, there is someone lining up to buy all that unwanted gold you’ve been hoarding. It started last year with the pawn shops and jewellery stores, some of which have taken to running non-stop TV ads in local markets depicting smiling owners and customers excitingly waving stacks of cash.

No doubt the meteoric rise in the price of gold over the past year, which hit a record high this month, topping US$1,064 an ounce, has prompted people to consider turning their unworn gold jeweller y into cold hard cash.

Last week, I was invited to my first cash-for-gold party, to which partygoers are asked to bring their unwanted gold for a free no-obligation appraisal.

These “parties” are promoted as win-win-win: The buyer gets the gold, the seller gets cash and the host collects up to 10% of the total transaction value that night.

If this sounds tempt - ing, consider the tax consequences of selling your gold for cash. Here’s a quick review of the rules: While a coin dealer who purchases gold coins from an individual has an obligation to report the sale to the Canada Revenue Agency and issue a T5008 tax slip to the seller, there is no such reporting requirement for gold jewellery. The seller, on the other hand, may have an obligation to declare any gains from the sale of jewellery on her tax return since jewellery is considered “listed personal property” (LPP).

LPP is a special category of personal-use property, meaning items you own for your personal use and enjoyment, such as furniture, cars or boats.

While most personal-use property depreciates over time, LPP usually increases in value over time. Listed personal property includes jewellery, works of art, rare books, stamps and coins.

The sale of personal-use property, including LPP such as jewellery, can result in a capital gain, but it’s calc ulated based on special rules. Under these rules, if the amount you paid your adjusted cost base, or ACB) is less than $1,000, it’s deemed to be $1,000 for tax purposes.

Similarly, if the cash you receive for your jewellery is less than $1,000, your proceeds of disposition for tax purposes are considered to be $1,000.

The practical result of these rules is that if both the ACB and the cash you receive for your gold jewellery are less than $1,000, you don’t have to report any gain or loss.

A capital gain from the sale of jewellery must be reported on Schedule 3 of your personal tax return.

A capital loss, however, is considered to be an “LPP loss,” which can only be deducted against other LPP gains. Any unused LPP losses can be carried back three years or carried forward for seven years.

Financial Post Jamie.Golombek@cibc.com

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

tax These ‘parties’ are promoted as win-win-win
© Copyright (c) The Montreal Gazette

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October 30, 2009 by Dan White.

Canada Court Says Sales Taxes Are Ordinary Claims in Bankruptcy

See COMMENTS below…

Oct. 30 The Supreme Court of Canada rulsed that Canada’s federal and provincial governments can’t skip ahead of other creditors in a bankruptcy to retrieve sales taxes the company had collected, Canada’s highest court ruled today.

The Canadian and Quebec governments argued the tax money was simply collected and held on their behalf, putting their claim ahead of other creditors in the bankruptcy, according to the ruling. Bankruptcy trustees said governments should be considered “unsecured creditors” and ranked accordingly.

The Supreme Court ruled unanimously, in a decision written by Judge Louis LeBel, that the country’s bankruptcy legislation calls for sales-tax trusts to disappear once companies become insolvent. As a result, sales taxes can’t be separated from other assets and governments have no priority over other creditors, the court said.

“When a supplier goes bankrupt, the tax authorities do not own Goods and Services Tax and Quebec Sales Tax amounts that have been collected but not remitted or are collectible at the time of the bankruptcy,” LeBel wrote. “Instead, they have an unsecured claim against the supplier.”

The case is Quebec (Revenue) v. Caisse populaire Desjardins de Montmagny, 32486, 32489, 32492, Supreme Court of Canada (Ottawa)

COMMENTS;
Well! does this ever bring up an issue regarding GST……. Considered a crown debt… as the money is held in trust for the crown. It makes me wonder if CRA really has the right to take this approach, when they take their normal position, that “before you can dispute the debt, you have to make arrangements to pay the debt…..hmmmmm…. we will have to ponder on this.

Dan White

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October 30, 2009 by Dan White.

One third of Ontario Ministry of Revenue jobs in Oshawa to be affected by harmonized sales tax

So what we have here is a situation, where workers from Ontario Retail Sales Tax workers will migrate to HST. This will mean an increased assult on small business as the drive to collect more tax gains momentum.

If you think that you can avoid the tax problems that will need solutions, then you are putting your head in the sand. All small businesses must start doing audit ready bookkeeping. Dealing with CRA will become part of your regular business activities.

We are working hard to get our audit ready bookkeeping software to market and it is very close now. We have reinvented accounting and are proud of the solutions that we offer.

Dan White

_________________________
OSHAWA — Ontario’s revenue minister, John Wilkinson, right, spoke with Ron Bordessa, president of UOIT, October 14 during a talk with the Greater Oshawa Chamber of Commerce and business owners at the Holiday Inn in Oshawa. October 14, 2009

Ministry of Revenue offices in Ontario
Employees from 13 different locations will be affected by the sales harmonization tax:

Feds want ‘first crack’ at workers laid off by tax changes

Oct 30, 2009 - 04:30 AM

By Melissa Mancini of DurhamRegion.com

OSHAWA — Harmonizing the sales tax will affect about a third of the Ontario Ministry of Revenue positions in Oshawa.

But the Minister of Revenue said the Province is working closely with the two unions that represent affected workers.

And the good news is there is already an interested employer, Ontario Revenue Minister John Wilkinson said. The feds want “first crack” at the provincial workers affected by the policy change to work in Canadian Border Services Agency and the Canada Revenue Agency.

“The federal government is quite keen on our people because of their skill sets,” he said when he addressed the Greater Oshawa Chamber of Commerce on Wednesday.

There will be 1,271 full-time equivalent positions affected once the GST and PST become one federally administered tax. This is expected to affect 1,500 provincial employees in 13 revenue offices across the province.

The harmonized sales tax is set to be implemented on July 1, 2010.

News there might be fewer people working downtown is unfortunate but it’s hard to say whether it will affect small businesses in the downtown core, said Vivian Sled, office administrator, downtown Oshawa BIA.

“It’s too bad this is going to happen,” she said. “Downtown jobs are feet on the street and bums in the seats.”

But with the courthouse opening and a larger university presence possible, downtown restaurants will probably still have a busy lunch rush, she said.

And last time there were jobs taken out of the Ontario Ministry of Revenue’s downtown offices, Ms. Sled said the concern that it would mean fewer sales in retail shops and fewer patrons in coffee shops wasn’t warranted.

“We didn’t really see a drop,” she said. “There was a panic but it didn’t seem to affect us.”

In an interview, Oshawa Mayor John Gray said the possibility of job losses in the City “is wrong.

“Oshawa has seen its fair share of job losses. We don’t want to see any more job losses,” Mayor Gray said. “Here we are trying to revitalize our downtown.”

About 1,400 people work at the ministry office in Oshawa, he noted, and he doubted many of those who will be impacted would get jobs with the federal government.

“They probably won’t get jobs at the federal level and they’ll find themselves out on the street,” Mayor Gray stated.

Union officials could not be reached by press time.

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October 29, 2009 by Dan White.

Audit Ready Bookkeeping is a requirement if you intend to sell a business.

If you are buying or selling a business, you need to consider audit ready accounting. There are a ton of tax problems requiring solutions that most small businesses are yet to become aware of.

To be a business in Canada today means that you better understand that not doing proper bookkeeping is not an option. You will learn to keep an audit ready set of books or you will pay a greater price for not doing it than what you thought you were saving by going on the cheap and lazy plan.

If you are a sloppy bookkeeper, sooner or later, you will find yourself with a tax audit problem and you will be in the audit emergency room. You will be deal with a CRA Panic Attack.  (CRAPA).

Times have changed and bookkeeping programs like QuickBooks and Simply Accounting can leave you vulnerable to an expensive version of an audit, instead of a slam dunk, non event. These types of accounting packages are not audit ready. That means that they are just not good enough for the current tactics of CRA.

The old generally accepted ways of doing things is no longer adequate. You need to understand that there are so many new laws that no reasonable business person could ever hope to be aware of them all. Ignorance of the law is no excuse for breaking it. What that means is that you have to get in the habit of practicing due diligence in everything you do in business.

You also need to understand that conventional accounting may not be the best way to do things.

If you hope to sell your business, having an audit ready set of books will increase the value of your business in direct relationship to the worst case tax liability risk.

Consider how important filing on time is in relationship to “Stature Barred” dates.

Statute barred, in Canada means that Canada Revenue Agency (”CRA”) cannot audit those years unless they find gross misrepresentation or fraud.  If they are unable to find this, then they cannot audit those years after they become statute barred.

Tax returns become statue barred three years from the date on the notice of assessment. Therefore a business owner is vulnerable for that time frame. This logically is a serious factor when someone buys an existing business.

If the business owner filed the returns late and CRA audits the years that were under the ownership of the old owner, this makes the new owner vulnerable to penalties and interest.  CRA will assess late filing penalties and also could assess you with penalties for wilful deceit and gross misrepresentation

GST is considered a Crown Debt and CRA shows no mercy when it comes to collections of GST. If there was money was not paid for GST owing or payroll taxes prior to your ownership, it is possible that CRA will seize your bank account to cover past debts that were generated prior to your ownership of the business.

CRA is at an unprecedented level of mean aggression, so small business needs to beware of this fact. A new business owner is a prime target for the past practices of the old business owner.

Because when a business is sold the prior years can be challenged, it means that the new buyer may want to think about whether he wants to buy the assets instead of the shares of the business.

In the buy sell agreement, it may say that the old owner is responsible for taxes but what about the penalties and interest and if they decide to challenge the assessment who covers this expense? For example if a business is assessed deemed income that was not reported, you can challenge the CRA position however if it is a GST debt then you must pay the tax first then make your objection later.  Don’t count on the previous owner easily agreeing to cough up doe…. They may be unwilling or unable to pay, a factor that leaves the new owner on the hook for the bill.

If the company for sale has a poor set of books or unfiled tax returns, a wise buyer will take tax liability into serious consideration. They should look at a hold back on final payment pending tax returns being statute barred.

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October 23, 2009 by Dan White.

Revenue Canada steps up hunt for eBay tax dodgers

This is bad news for people who thought that eBay income was tax free.
This is good news for Tax Audit Solutions, because they have a strategy to absolutely minimize the damages.

CRA is desperate for money, and are leaving no stones unturned.

(I have to insert a joke here….. A bunch of Terns… “seagulls” ate a whole bunch of marijuana seeds. There was no tern unstoned.!)

Anyway on a serious note. If you know anyone who is in some king of tax problems, let me know.

Best Regards

Dan White

and here is what CBC published on Wednesday Oct 21, 2009

_________

Revenue Canada steps up hunt for eBay tax dodgers

Last Updated: Wednesday, October 21, 2009 | 9:13 PM ET Comments213Recommend104

By James Fitz-Morris, CBC News

The Canada Revenue Agency is stepping up its efforts to track down eBay merchants who haven’t paid taxes on profits made from selling goods on the popular auction website.

To date, only 50 Canadian eBay merchants have come forward to pay their back taxes since July, when Revenue Minister Jean-Pierre Blackburn gave high-volume eBay sellers one last chance to pay their taxes without penalty.

Under Canadian tax law, profits on goods someone sells are considered income, no matter what the venue. A recent court decision forces eBay to hand over the names, addresses and sales records of its high-volume merchants to tax officials.

Citing privacy concerns, eBay wouldn’t reveal the number of merchant records it has sent to the CRA, but did confirm it’s in the thousands.

The company says it informed its users ahead of time that their records were being passed on to tax authorities.

The revenue agency told CBC News it received 9,939 files from eBay. So far, the federal agency says it has processed only nine of the proactive voluntary disclosures and that those nine represent about $275,000 in previously undeclared income.

Audits launched

The agency also says it has begun launching audits of merchants whose names were released by eBay but have not come forward.

High-volume sellers, according to the court order, are those who made at least $20,000 and had 24 sales in one year or who made more than $100,000 in a year, regardless of the number of transactions.

EBay Canada began providing the revenue agency with information and sales records last November.

The move followed a Court of Appeal decision in April 2008 that upheld a Federal Court judgment requiring eBay Canada to provide tax officials with full account information on sellers.

If an individual or business does not comply with Canadian tax laws, they may be forced to pay any outstanding taxes, plus interest, and could face fines and other sanctions.

Taxpayers who came forward under the voluntary disclosures program will not be penalized or prosecuted if they make a full disclosure before the revenue agency starts any audit or compliance action.

Posted in Tax Topics | Print | No Comments »

October 21, 2009 by Dan White.

 Ontario announces HST transition rules

Well, Our government has done it again, they have taken a good thing and turned it into a problem for business. This change is going to be a nightmare for record keepers. There are going to be a lot of tax problems created.

Let’s take a look here. the transition is in the middle of the year. We are doing PST for a half year. We are doing RST for a half year and we are doing HST for a half year. We have two types of accounting; accrual and cash, both need to be adjusted to suit the change. The tax returns will be now much more complicated to do … all for one freaking year….. then it will get easier. So what we have is tax problems needing soluitons for just one year.

As you know we are soon to release our new LazyBooks accounting software. So in order to simplify our clients bookkeeping, we are building transition software into the program. The lofty goal is to have this so our clients don’t have to do much more than a few clicks of a mouse to make the transition. The software will need to have date sensitive logic, which will have the ability to activate the tracking process on January 1st 2010. It will have to track and adust for numerous anomolies.

Any business that uses the industry standard accounting packages is going to have some very interesting problems. And just try and do the tax returns for 2010! Ha! this will be a tax time fiasco.

This transition to HST should have just been a cut bait. Stop the clock on December 31 2009. Start 2010 collecting HST. Do a one time accrual adjustment and Bob’s your uncle.

Somehow we have a government that is completely out of touch with reality. Show me a small business and I will show you a business that does not have the time or resources to deal with this kind of tax complexity.

While I love the HST in principle, I really frown on how this is being implemented. Not to mention, that we should be having a HST rate of less tahn 13%, simply because the transiton to HST should not be used as a tax cash grab by the government.

When this is all over and we go into the year 2011 the transition will just be a bad memory of a government gone completely Tax wild.

Herein … following… is Osler Hoskin &Harcourt LLP’s version of the new transition rules.

 Dan White

_____________

Osler Hoskin & Harcourt LLP

D’Arcy Schieman

Canada
October 15 2009
Osler Hoskin & Harcourt LLP logo

Today, the Ontario and British Columbia governments each released “General Transition Rules” for the Ontario and B.C. Harmonized Sales Tax (HST). We view this development as a positive step towards a truly national HST, with consistency between the provinces and a reduction in the potential for double tax and tax preferences that have historically plagued businesses operating in multiple provinces within Canada. We await similar commitments from Saskatchewan, Manitoba and Prince Edward Island, as well as Québec’s final move from the nearly-parallel Québec Sales Tax. We anticipate that all of this will occur, particularly with some financial encouragement from the federal government.

This Update focuses on the General Transition Rules released by the Ontario government (Ontario Rules). The General Transition Rules for B.C. largely parallel those for Ontario. A member of the Osler Commodity Tax team would be pleased to discuss particular differences between the rules for these two jurisdictions.

I. Introduction of Hst

As announced in the 2009 Ontario Budget, the new HST will generally apply to the provision of goods and services in the same manner as GST currently applies. That means that property and services that are currently subject to the 5% GST will now generally be subject to the 13% HST. For those businesses that are currently permitted to claim input tax credits in respect of GST paid on their expenses, the HST will represent a significant cost savings over the existing Retail Sales Tax (RST). No credit was available for RST paid on taxable goods and services, whereas a full input tax credit will now be available for HST paid on taxable goods and services.

As we noted in the Osler Update of April 1, 2009 which was released at the time of the Ontario Budget, many of the most important details that will affect businesses, such as transitional rules, were not announced in the Budget. Instead, the Ontario government stated at that time that the transitional rules would be introduced subsequently, after input from an Implementation Panel that would be established to assist with the transition to the HST. Those transition rules (i.e., Ontario Rules) were announced today The Ontario Rules relate to both transitional rules for the HST that will be proposed to be enacted in the federal Excise Tax Act (ETA) and provincial measures that will be proposed to be enacted to wind down the applicable provisions of the Ontario Retail Sales Tax Act (RSTA).

In particular, the transitional rules provide guidance in determining which tax - the existing RST or the Ontario component of the HST - will apply to transactions that straddle the July 1, 2010 implementation date for the HST.

The following dates are significant under the Ontario Rules:

* July 1, 2010 - Implementation date for the HST:
* May 1, 2010 - The HST will generally apply to consideration that becomes due, or is paid without having become due, on or after this date for supplies made on or after July 1, 2010;
* October 14, 2009 - The HST will not apply to consideration that becomes due, or is paid without having become due, on or before October 14, 2009. Certain businesses and public service bodies may be required to self-assess the Ontario component of the HST on consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010 for property and services provided on or after July 1, 2010;
* October 31, 2010 - Any outstanding RST will become payable by this date.

II. Introduction of transition rules under the ETA

The Ontario Rules contemplate triggering HST on goods, services, intangibles and leases by reference to both the date of the particular supply and the date on which consideration is due or paid.

Tangible Personal Property

Date of Delivery and Ownership

The HST will generally apply to a supply of goods by way of sale to the extent that the goods are delivered, and ownership of the goods is transferred, to the recipient of the supply on or after July 1, 2010.

Consideration Due or Paid On or After July 1, 2010

The HST will generally apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.

Consideration Due or Paid On or After May 1, 2010 and Before July 2010

The HST will generally apply to consideration that becomes due, or is paid without having become due, on or after May 1, 2010 and before July 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.

Consideration Due or Paid After October 14, 2009 and Before May 2010

Persons who are not consumers - such as businesses and public service bodies - may be required to self-assess the Ontario component of the HST on consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.

The requirement to self-assess HST will generally apply only to:

* selected listed financial institutions;
* non-consumers acquiring property or services for consumption, use or supply otherwise than exclusively in the course of their commercial activities;
* non-consumers acquiring property or services for consumption, use or supply exclusively in the course of their commercial activities but in circumstances where the property or services will be subject to an input tax credit restriction or recapture; and
* non-consumers that use simplified procedures available under the ETA for calculating their net tax (e.g., public service bodies).

A person who is required to self-assess in these circumstances (Self-Assessor) will be required to account for the tax either:

1. in its GST/HST return for the reporting period that includes July 1, 2010, if the due date for that return is before November 2010, or
2. in any other case, in prescribed form and before November 2010.

Services

The HST will generally apply to a supply of a service to the extent that the service is performed on or after July 1, 2010. The HST will generally not apply, however, to a supply of a service if all or substantially all (90% or more) of the service is performed before July 2010. The rules described above for tangible personal property, determining tax by reference to the date on which consideration is due or paid, will with appropriate modifications generally be applied to the provision of services. There are also specific transitional rules for funeral and cemetery services, passenger transportation services and freight transportation services, which we would be pleased to discuss with interested parties.

Leases and Licences

The HST will generally apply to a supply of property by way of lease, licence or similar arrangement (including commercial leases and non-residential rental property) for the part of a lease interval that occurs on or after July 1, 2010. The HST will not, however, apply to a supply of property by way of lease, licence or similar arrangement if the lease interval begins before July 2010 and ends before July 31, 2010. The rules described above for tangible personal property, determining tax by reference to the date on which consideration is due or paid will, with appropriate modifications, generally be applied to the provision of leases and licences.

Intangible Personal Property

The HST will generally apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for a supply of intangible personal property by way of sale. There are also specific transitional rules for memberships, admissions and passenger transportation passes. We would be pleased to discuss these rules with interested parties.

Real Property (Other than Residential Housing)

The HST will generally apply to a supply of real property (other than residential housing) by way of sale in Ontario if both ownership and possession of the property are transferred to the purchaser on or after July 1, 2010. Detailed rules regarding the transitional rules for new residential housing are described in the Ontario Government’s Information Notice No. 2, which was issued on June 18, 2009.

Property and Services Brought into Ontario from Other Provinces

The Ontario component of the HST will generally not apply to property and services that are brought into Ontario if they are acquired by a GST/HST registrant for consumption, use or supply exclusively in the course of its commercial activities.

If a person is not engaged in commercial activities, specific rules apply. The Ontario component of the HST will generally apply on a self-assessment basis to goods that are brought into Ontario on or after July 1, 2010, and to such property that is brought into Ontario before July 2010 by a carrier where the property is delivered in Ontario to a consignee on or after July 1, 2010.

The Ontario component of the HST will also generally apply to consideration that becomes due, or is paid without having become due, after October 14, 2009 for the part of a service performed on or after July 1, 2010 (unless 90% or more of the service is performed before July 2010), if the service is supplied in a non-participating province to a resident of Ontario who acquires the service for consumption, use or supply primarily in the participating provinces. Consideration that becomes due, or is paid without having become due, after October 14, 2009 and before July 2010 for a supply of such a service will be deemed to become due on, and not to have been paid before, July 1, 2010. For consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010, this rule will only apply to non-consumers.

The Ontario component of the HST will also generally apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for intangible personal property that is supplied by way of sale in a non-participating province to a resident of Ontario who acquires the property for consumption, use or supply primarily in the participating provinces.

The Ontario component of the HST will generally apply to consideration that becomes due, or is paid without having become due, after October 14, 2009 for the part of a lease interval that occurs on or after July 1, 2010 (unless the lease interval begins before July 2010 and ends before July 31, 2010), if the lease interval is with respect to intangible personal property supplied by way of lease, license or similar arrangement in a non-participating province to a resident of Ontario who acquires the property for consumption, use or supply primarily in the participating provinces. Consideration that becomes due, or is paid without having become due, after October 14, 2009 and before July 2010 for a supply of such a property will be deemed to become due on, and not to have been paid before, July 1, 2010. For consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010, this rule will only apply to non-consumers.

Imported Goods

The Ontario component of the HST will generally apply to commercial goods brought into Ontario from a place outside Canada on or after July 1, 2010; however, commercial goods that are brought into Ontario by a GST/HST registrant for consumption, use or supply exclusively in the course of commercial activities of the registrant will not be subject to tax.

The Ontario component of the HST will generally apply to non-commercial goods that are imported by a resident of Ontario on or after July 1, 2010.

Imported Taxable Supplies of Services and Intangibles

The Ontario component of the HST will generally apply to consideration for an imported taxable supply of a service made to a resident of Ontario who acquires the service for consumption, use or supply primarily in the participating provinces, to the extent that the consideration is for the part of the service that is performed on or after July 1, 2010.

The Ontario component of the HST will generally apply to consideration for an imported taxable supply of intangible personal property that is made by way of lease, licence or similar arrangement to a resident of Ontario who acquires the property for consumption, use or supply primarily in the participating provinces, to the extent that the consideration is for the part of the lease interval that occurs on or after July 1, 2010.

Other Supplies

The Ontario Rules provide specific rules for Direct Sellers, Continuous Supplies, Combined Supplies, Budget Payment Arrangements, and Progress Payments/Holdbacks. We would be pleased to discuss these rules with interested parties.

III. Elimination of RST

General RST Wind-down Rules

On July 1, 2010, the existing Ontario RST will generally cease to apply to:

* a sale of goods where the goods are delivered, and ownership of the goods is transferred, to the purchaser on or after July 1, 2010;
* a sale of services to the extent the services are performed on or after July 1, 2010 (however, the RST will apply where all or substantially all of the service is provided before July 1, 2010);
* a supply of property by way of lease, licence or similar arrangement for the part of the lease or licence interval that is on or after July 1, 2010 (however, the RST will apply if the lease interval begins before July 1, 2010 and ends before July 31, 2010);
* a sale of property or a service delivered or performed on a continuous basis by means of a wire, pipeline or similar conduit or satellite or other telecommunications facility to the extent the property or service is delivered, performed or made available on or after July 1, 2010;
* goods brought into Ontario or imported by a resident of Ontario on or after July 1, 2010; and
* a sale of an admission for entry to a place of amusement on or after July 1, 2010. Notwithstanding these general RST wind-down rules, the RSTA will apply where consideration for a sale of goods, services or admissions becomes due or is paid:
* on or before October 14, 2009; or
* after October 14, 2009 and before May 1, 2010, except with respect to:

1. goods, services or admissions purchased for use exclusively in the course of commercial activities; or
2. goods, services or admissions for which the self-assessment rules in respect of consideration due or paid after October 14, 2009 and before May 1, 2010 will apply.

Any applicable RST not otherwise payable on or before October 31, 2010 will become payable on October 31, 2010.

Final RST Returns

Final RST returns will generally be required to be filed with the Ontario Ministry of Revenue on or before July 23, 2010.

Where an amount is collected or becomes payable as (or on account of) RST after June 30, 2010, the vendor will be required to account for that amount in a supplemental RST return to be filed on or before the 23rd day of the following month. All supplemental RST returns will be required to be filed no later than November 23, 2010.

RST Refunds and Rebates

Generally, refunds and rebates of RST will remain available until the earlier of the expiration of the existing time limits or June 30, 2014. The following exception will be provided where a person purchases property that is subject to RST before July 1, 2010, but returns it on or after July 1, 2010 and before November 1, 2010:

* if the property is returned and a full refund is given, the RST will be refunded;
* if an exchange is made resulting in neither a refund nor an additional payment, there will be no RST refund and the Ontario component of the HST will not be payable;
* if an exchange is made resulting in a partial refund, the Ontario component of the HST will generally not be payable on the replacement property and the purchaser will be entitled to recover the RST applicable to the amount refunded; and
* if an exchange is made resulting in an additional payment, no RST will apply but the HST will apply to the additional payment.

If the RST did not apply to property that was purchased before July 1, 2010, and it is exchanged on or after July 1, 2010, the Ontario component of the HST will apply to the full consideration for the replacement property.

If property is returned on or after November 1, 2010, no RST adjustments will be available at the point of sale. However, the purchaser may make an application for a refund of RST for tax paid in error.

Assessments, Objections, Appeals and Enforcement

Assessment, objection, appeal and enforcement provisions under the RSTA will generally apply to past transactions where the applicable limitation periods have not expired.

Transitional RST Inventory Rebate for Residential Real Property Contracts

An RST rebate will be available to provide relief with respect to the RST embedded in construction materials used in residential real property contracts that are subject to the HST.

This rebate will be available to a real property contractor for the RST paid on construction materials that are purchased or produced for the contractor’s own use, held in inventory at the end of the day on June 30, 2010 and used in a residential real property contract to which the HST will apply. The rebate will not be available with respect to inventory for which the RST is otherwise recoverable by the contractor or any other party.

IV. Development of HST legislation and policy

Further specific transitional rules are expected to be announced over the coming months. Osler’s Commodity Tax team has significant experience working with provincial and federal officials in connection with the development of legislation and policy. We would be pleased to speak with interested parties about the further implementation of the HST.

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

October 8, 2009 by Dan White.

The key point to understand is how CRA likes to interpret things in their favour.
The court here points out that more than 5 employees does not mean at least 6 employees. That is not what the law says.
If you consider that 5 full time employess and one part time employee is not the same as at least 6 employees and could have a huge tax consequence on the taxpayer.
In this case it could mean that an individual having an offshore corporation, could suddenly find themselves disallowed for a huge tax deduction.
I am glad the courts are there to keep CRA in line.
Dan White

Canada: How The CRA’s New Assessing Position Can Reduce Your FAPI

08 October 2009
Article by Soraya M. Jamal and Robert W. Nearing of McCarthy Tétrault LLP

The Income Tax Act (Canada) contains a foreign accrual property income (FAPI) regime that imputes “passive income” earned by a non-resident corporation (a controlled foreign affiliate) to its Canadian-resident controlling shareholders on an annual accrual basis, whether or not such income is distributed to the non-resident corporation’s shareholders. Passive income earned by a controlled foreign affiliate includes income derived from an “investment business.” Generally, an “investment business” will be any business that is carried on in a taxation year by a controlled foreign affiliate, the principal purpose of which is to derive income from property and other specified sources. However, such a business will not be an “investment business” if it can be established that ─ amongst other things ─ the controlled foreign affiliate, throughout the period during which the business is carried on, employs “more than five employees full time” (or the equivalent thereof provided by related corporations, certain members of partnerships, and, pursuant to a recent amendment, certain shareholders, corporations and partnerships) in the active conduct of the business.

Historically, the Canada Revenue Agency’s (CRA) assessing practice has been to treat any business with less than six full-time employees and whose principal purpose is to derive “income from property” as an investment business.1 The basis for the CRA’s assessing practice was a number of cases that interpreted the phrase “more than five full-time employees,” as used in connection with the small business deduction for Canadian corporations.2

Recently, however, the CRA has confirmed that it is changing its assessing practice for purposes of the FAPI regime3 such that a controlled foreign affiliate will now meet the “more than five full-time employees” exclusion in the investment business definition where the controlled foreign affiliate employs five full-time employees and one part-time employee in the active conduct of the business.4 Consequently, a Canadian shareholder of a controlled foreign affiliate that employs five full-time employees and one part-time employee in the active conduct of its business will not be subject to FAPI imputation, provided other requirements are satisfied.

This change to the CRA’s assessing practice was prompted by the recent Tax Court of Canada decision in 489599 B.C. Ltd. v. The Queen.5 In this case, the issue to be determined was whether a taxpayer satisfied the “more than five full-time employees” requirement at a time when it employed five full-time employees and two part-time employees. The Tax Court of Canada concluded that the expression “more than five full-time employees” can be satisfied with the employment of five full-time employees and one part-time employee.

In reaching this conclusion, the Tax Court declined to follow the Federal Court Trial Division’s decision in Hughes & Co. Holdings Ltd. v. The Queen,6 wherein the Federal Court held that “more than five full-time employees” means at least six full-time employees. Notwithstanding that the Hughes decision has been followed in other cases, the Tax Court’s view in 489599 B.C. Ltd. was that the Hughes case was incorrectly decided because the Federal Court had relied on irrelevant precedents, adopted a method of statutory interpretation that was inconsistent with that established by the Supreme Court of Canada, and misinterpreted Parliament’s intention with respect to the language used in the expression. Furthermore, the Tax Court found that it was not bound by the Hughes decision as the Federal Court’s interpretation of the expression was obiter. In finding that the phrase “more than five” should not be equated as meaning “at least six,” the Tax Court stated that had Parliament intended the provision in question to apply only to those businesses that employ at least six full-time employees, Parliament would have used such language.

Consequently, taxpayers who have imputed FAPI based on the CRA’s past assessing practice should consider filing amendments to past returns based on the CRA’s assessing practice.

Posted in Tax Topics | Print | No Comments »

October 4, 2009 by Dan White.

CRA foiled in Tax Grab.

Alberta Power foils the tax man who tried to claim that the sale of an asset was “income” but fortunately Alberta Power had the financial strength to fight CRA in Tax Court and justice prevailed.

Alberta Power (2000) Ltd. (Alberta Power), a subsidiary of ATCO Ltd. (ATCO), has received confirmation from the Tax Court of Canada ordering Canada Revenue Agency (CRA) to reverse its 2006 reassessment of Alberta Power’s 2001 tax return.

The impact of the judgment is a $13.7 million recovery of income tax and related interest expense reassessed by CRA in 2006. In addition, Alberta Power will receive interest income of approximately $3.1 million earned on such amounts paid to CRA. These adjustments will result in a $8.8 million increase in ATCO earnings after non-controlling interests. CRA will be required to refund to Alberta Power approximately $28.0 million including interest and net of consequential adjustments to other taxation years arising from the judgment.

The reassessment treated the proceeds received from the sale of the H.R. Milner generating plant to the Alberta Balancing Pool as income rather than as a sale of an asset. Alberta Power successfully argued that its treatment of the proceeds as a capital receipt was correct.

Dan White

Posted in Tax Topics | Print | No Comments »

October 3, 2009 by Dan White.

This is typical of our government attitude. We are quickly becoming a country where we elect our dictatiors. It is really quite disgusting.

Read on to see what Peter Hilier has to say about this issue.

Dan White

OPINION: What you don’t know about lawful access By:  Peter J. Hillier  On: 01 Oct 2009 For: Network World Canada Creator

The Investigative Powers for the 21st Century Act creates too much opportunity for abuse by intelligence and security organizations.

Why telecom carriers are naïve about the Technical Assisatnce for Law Enformcent in the 21st Century Act

The Government of Canada has gone down the lawful access road on two previous occasions, prior to the introduction in June of Bills C46 and C47. The previous Liberal bills did not get past first reading due to impending elections and changes of government.

The crafters of the previous submissions had a tremendously difficult time getting the telecommunications providers on board given the investment they would be forced to make in order to provide the backbone for Big Brother without some compensation.

Bill C-46, the Investigative Powers for the 21st Century Act (IP21C) and Bill C-47, the Technical Assistance for Law Enforcement in the 21st Century Act (TALEA) aim to give Canadian law enforcement, national security agencies and other “authorities” broader powers to acquire digital evidence to support their investigations. This includes provisions to allow police access, without a warrant, to the personal information of users including names, addresses, telephone numbers, email addresses and internet protocol addresses. Bill C-46 ensures police can obtain warrants for current and historical transmission data, but also allows police to remotely activate existing tracking devices on cellphones and cars. It also included requirements for the telecommunications providers to decrypt date for production of evidence if they have the ability to do so.

In its current form, the legislation is not balanced. It creates too much opportunity for abuse by intelligence and security organizations, let alone law enforcement agencies. Where is the evidence that expanded surveillance powers they contain are essential and that each of the new investigative powers is justified?

To this end, the Bill is more reflective of an intelligence gathering legislation than it is a piece of law enforcement law. The federal Privacy Commissioner, in conjunction with her provincial counterparts, has warned the crafters of the legislation to be cautious in moving forward with the legislation as is.

Now that the appropriation bill C-47 has been split from the legislative piece, C-46, the telecommunications providers see the opportunity for the federal government to foot the bill for the implementation of technology, as well as a per request fee to respond to requests from law enforcement agencies, etc. The telecommunications providers have seemingly acquiesced to the Crown and have the attitude that it will be introduced into law sooner or later; we may as well be prepared. Ironically, they are not.

They have not yet thought through the impacts past the routine requests by law enforcement agencies to gather evidence on child exploitation, because that, after all, is the basis for the entire legislation. With that, the telecommunications providers assume if they apply a fee to each request, the municipalities and Crown will not over burden them with requests for fear of cost overruns. Given the expanded powers of this legislation, this is a terribly naïve mindset.

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October 3, 2009 by Dan White.

The article below was written by Jamie Golombec. You just have to respect him as a writer. He “gets” it when it comes to the unfairness of the tax system.

In this article he hits the nail on the head about the unfairness of the employment expenses.

It is clear that it makes more sense to be a business than an employee if you have to pay your own expenses. Of course qualifying as a business is complex and is the biggest target market for CRA.

Dan White

No way to ski by expenses rules

Ski instructors case shows that employees are treated unfairly

Jamie Golombek, Financial Post  Published: Saturday, October 03, 2009
Related Topics

If you’re an employee, you are no doubt well aware of the discrimination imposed on you by the Income Tax Act. Compared with your self-employed neighbour, the Act severely restricts your ability to write off myriad legitimate expenses.

This unfairness came to light yet again last week when the Canada Revenue Agency responded to a question posed by a taxpayer as to whether ski equipment is deductible as an employment expense by ski instructors who earn salaries and commissions.

Under the Tax Act, an employee may only deduct “the cost of supplies that were consumed directly in the performance of the duties of … employment and that the … employee was required by the contract of employment to supply and pay for.”

CRA’s Interpretation Bulletin IT-352R2 “Employee’s Expenses, Including Work Space in Home Expenses,” discusses employment expenses and states specifically that “supplies” will “not include special clothing … worn by employees in the performance of their duties …and any types of tools.”

Since ski equipment is not a supply “consumed directly in the performance” of the job, the cost of the skis were ruled not deductible.

There are additional deductions permitted for commissioned employees who may be required to pay their own expenses and work away from an employer’s place of business, but those specifically exclude capital expenses other than for automobiles and airplanes.

Even if the ski instructors were commissioned employees, the CRA views the cost of ski equipment as a capital expense and therefore not deductible.

This inequity is not new and even reached the Supreme Court of Canada in a 2004 decision, which concluded that a broker who paid $100,000 to purchase a client list from a departing broker was not permitted to deduct any of it as an employment expense. As the Court wrote: “That employees are treated differently than taxpayers earning income from business … is not novel nor readily seen as fair … This seemingly inequitable result … is the result of the structure of the [Income Tax] Act.”

The 2006 federal budget attempted to address this inequity by introducing the non-refundable Canada Employment Credit. As Jim Flaherty, the Finance Minster, said at the time: “This new tax credit gives Canadians a break on what it costs to work, recognizing expenses for things such as home computers, uniforms and supplies.”

To claim the credit, no expenditures need actually be made. Rather, this credit is available to anyone who reports employment income. The amount for 2009, on which the credit is based, is the lower of your 2009 employment income or $1,044.

Since it is a tax credit, the actual tax savings are calculated with reference to the federal credit rate for 2009, which is 15%, equating to a maximum credit of $157.

Considering that a decent pair of boots, bindings and skis can run well over a thousand bucks, the credit is small solace to these alpine workers.

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.

Read more: http://www.financialpost.com/personal-finance/story.html?id=2061608#ixzz0SsJfxvOr

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October 2, 2009 by Dan White.

Bit of a rant here..

I just can’t understand how we can still breath with all this smell of bull in the air.

FEDERAL TAX: “Individuals and Businesses Can Now Pay Their Taxes Online”-Jean-Pierre Blackburn

Wow! kick up your heels….. we were just dying to find an easier way to pay CRA. No way Jose!

CRA works to stream line their operation. They are equally masters of efficiency and propaganda

It is not that CRA can not find out where you bank, but don’t make it easy for them it is not in your best interest.

Dan White

By: Marketwire .
Oct. 2, 2009 10:26 AM

(See Dan White Comments below)

JONQUIERE, QUEBEC — (Marketwire) — 10/02/09 — The Honourable Jean-Pierre Blackburn, Minister of National Revenue and Minister of State (Agriculture and Agri-Food), announced the launch of a new online service at the Canada Revenue Agency (CRA).

(COMMENT: By Dan White: I guess being minister of revenue is not a full time job?)

“Taxpayers and businesses can now send payments to the Canada Revenue Agency instantly from their accounts at participating financial institutions using the new My Payment service,” said Minister Blackburn. “This new service is yet another achievement aimed at reducing the paperwork and compliance burdens for Canadians.”

(COMMENT: By Dan White: or is it about reducing the paperwork for CRA? not that I am not in favour, I just like honesty instead of propaganda)

The new My Payment service is safe and uses the existing security of your online banking services. It is also private-no sensitive tax or banking information will be shared between the CRA and a financial institution.

(COMMENT: By Dan White: I guess telling them where you bank so they can seize your account if the need be, is not sensitive?)

Minister Blackburn added that “My Payment ends the inconvenience of timing payments to arrive on the right day by mail by crediting CRA accounts at once for payment transfers. The service also ends the hassle of monitoring outstanding cheques to avoid non-sufficient-funds transactions, by only allowing payments when funds are immediately available from your account.” This service will equally benefit businesses of all sizes and individual taxpayers.

(COMMENT: By Dan White: And when what the last time Canadians said they have this problem?)

My Payment is accessed using a portal on the CRA Web site. The service lets individuals and businesses send payments electronically through a secure link with Canadian financial institutions who offer Interac® Online payment service. Currently, those institutions include the following: BMO Bank of Montreal, Scotiabank, TD Canada Trust, and RBC Royal Bank. This new service will be available on October 5, 2009.

(COMMENT: By Dan White: Now let me see…. I link onto CRA site, I connect to my bank account. hmm if this was a business, my response would be: “Are you out of your mind?”)

Transactions completed through My Payment can contain several payments for a combination of both individual and business accounts at the CRA. Payments can be made from a personal or a corporate bank account at a participating financial institution.

For more information about My Payment, or to use the service, go to www.cra.gc.ca/mypayment.

FACT SHEET

My Payment - a new service for businesses and individuals

My Payment is an electronic payment service, accessed through the CRA website, that allows individuals and businesses to send payments directly to the Canada Revenue Agency (CRA) from an account at a participating financial institution(i).

My Payment is fast and easy to use. The service is provided through Interac® Online and its many benefits include:

- Immediate payment - no accounting for the time it takes to mail a cheque.

- Safety and security - the payment is completed through your existing online banking service.

- Privacy - no personal information is exchanged between the CRA and your financial institution.

- Simplicity - payments to several CRA accounts can be made in a single transaction.

How do I use My Payment?

1. Select the My Payment option from the CRA Web site (www.cra.gc.ca/mypayment).

2. Compose your payment by listing the accounts and amounts you will be paying. You will need your account information as provided by the CRA.

3. Select the “Pay now” option and then choose your financial institution. You need to be registered for online banking with your financial institution.

4. Log in to your financial institution’s online banking with your usual login ID and password.

5. Choose an account from which to deduct your payment.

6. Confirm the payment. You will be automatically directed to a confirmation page.

7. Print or save a copy of your transaction receipt.

Is My Payment secure?

Yes. My Payment is secure for a number of reasons:

- You don’t need to enter any financial information, card numbers, or login information on the CRA site.

- The payment is completed through your existing online banking service.

- No personal information is shared between the CRA and your financial institution.

(COMMENT: By Dan White: It seems to me that the name address and location of my bank is rather personal)

To maintain security, keep your identification information confidential.

For more information, visit www.cra.gc.ca/mypayment.

(i) The following financial institutions currently offer Interac® Online as a payment option: BMO Bank of Montreal, Scotiabank, TD Canada Trust, and RBC Royal Bank.

® Trade-mark of Interac Inc. Used under licence.

Contacts:
Canada Revenue Agency
Noel Carisse
Media Relations
613-952-9184

Office of the Minister of National Revenue
and Minister of State (Agriculture and Agri-Food)
Sophie Doucet
Press Secretary
613-608-3252

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October 1, 2009 by Dan White.

 Quite interesting how there are getting to be more and more savings plans. As in most things in life, you can look at them and see the good and the bad.
Here is what is wrong with this.
You are giving the government control over more and more of your money.
Money in a government program is money where the government can change the rules at will.
And if you run into a tax problem, unlike an RRSP, CRA can just go in and take your money in the same way they take money from people’s bank accounts.
And as this is a plan where you place your AFTER TAX dollars….. you better make sure you understand just what the heck you are getting into.
For me, I love my country, I don’t trust my government.
This same government who says they don’t have to observe Canada’s laws…. eg…. charter of rights and freedoms, when they go out of the country…. It is interesting that they say we have no jourisdiction over the governments offshore policies, but they have jurisdiction over our offshore wealth.
Hmmmmm

Dan White

Registered Disability Savings Plans: A future of financial security

Wednesday, September 30th, 2009 | 11:50 am

Canwest News Service

If you or someone in your family is eligible for the Disability Tax Credit, there is a new registered savings program that you should know about: the Registered Disability Savings Plan (RDSP).

The RDSP was introduced by the Federal Government. This unique plan is designed to help Canadians to save and invest for themselves or a disabled family member in a tax-deferred environment.

“The RDSP is a welcome addition to existing government programs designed to help ensure the long-term financial security for people with disabilities,” said David Birkbeck, head of registered products strategy at Royal Bank of Canda.

Here’s what you need to know to make the most of an RDSP:

Who can qualify?

The beneficiary of an RDSP must be a resident of Canada with a Social Insurance Number, under age 60 and be eligible for the Disability Tax Credit (DTC). To qualify for the Disability Tax Credit, the individual must have a prolonged and severe impairment in physical or mental function, which is confirmed by a qualified medical practitioner and accepted by the Canada Revenue Agency (CRA).

Who can open an RDSP?

The following people can open an RDSP:

-A person with a disability, who is of the age of majority and has the legal capacity to manage his or her finances.

-The parent of a person with a disability who has not attained the age of majority.

-A guardian or other representative who is legally authorized to act on behalf of a person with a disability.

Tell me about making contributions

Contributions to an RDSP are not tax deductible, but they grow within the plan on a tax-deferred basis. There is no annual contribution limit, but there is a lifetime limit for total contributions of $200,000. Contributions can be made up until the end of the year the beneficiary turns 59.

Is there government assistance?

Contributions may be eligible for federal government matching grants (Canada Disability Savings Grant) up to $3,500 annually and the plan may be eligible for government bond amounts (Canada Disability Savings Bond) up to $1,000 annually. The money in an RDSP can be used for any purpose, as long as it is for the benefit of the plan’s beneficiary.

Within Registered Disability Savings Plans, RBC clients will have access to a wide variety of investment options including RBC Funds, RBC GICs and RBC Savings Deposits. There will be no annual administration or withdrawal fees. Clients will also have the opportunity to make regular, pre-authorized contributions.

RBC has also joined forces with Planned Lifetime Advocacy Network (PLAN), a non-profit organization which led the advocacy for the creation of the Registered Disability Savings Plan, to help educate and offer advice to Canadians. As PLAN’s preferred national RDSP provider, RBC is working closely with PLAN to assist Canadians with disabilities and their families.

For more information please visit: www.rbc.com/rdsp.

For more information on Planned Lifetime Advocacy Network (PLAN) or for more about RDSPs please visit: www.plan.ca or www.rdsp.com.

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October 1, 2009 by Dan White.

Windfall for CRA to the current tune of 7.6 million dollars and growing.
Some of you may know that I don’t have a lot of respect for the voluntary disclosure program because I am seeing that this can be guaranteeing your worst case scenario can really happen. VD as we have come to know it, is not that desirable. If you are not prepared for a full audit and if you don’t have all your ducks in order, you are just asking form more tax problems than you already have.

I don’t like offshore for evading tax…. I see offshore as for genuine business. If you are doing tax evasion…. it is not as simple as VD, if you are not doing tax evasion,,,,then simply don’t…. it is not a good idea…. Legal Tax Avoidence is quite another matter, but you need some serious advice to know the difference.

It also looks like the UBS deal is a great bunch of CRA propaganda to scare and bring offshore tax evaders in from the warmth to the frying pan.

Won’t you come into my parlour?, said the spider to the fly.

This is quite a situation…. read on to see wehat Gary Lamphier has to say…. very interesting reading.

Dan White

No teeth to tax watchdog’s war on cheats

CRA relies on ‘voluntary disclosures’

By Gary Lamphier, Edmonton JournalOctober 1, 2009

Back in August, I wrote a column that was highly critical of Jean-Pierre Blackburn, head of the Canada Revenue Agency.

“While the U.S. government has doggedly pursued Switzerland’s biggest bank (UBS) for helping a small army of Americans to dodge the Internal Revenue Service,” I noted, “the CRA has had zip to say about UBS’s well-publicized activities in Canada, or whether similar cases of suspected tax fraud are taking place here.”

My piece followed news of a watershed deal under which UBS agreed to cough up information on some 4,450 bank accounts held by suspected U.S. tax cheats. At one point, the accounts held $18 billion US of assets, or an average of more than $4 million each.

After years of haggling, the landmark U.S. accord finally punched a hole in the dam of Swiss bank secrecy. It followed an admission by UBS that it had taken part “in a scheme to defraud the U.S.” government by helping the bank’s rich clients evade the IRS. UBS agreed to pay a related $780-million penalty.

But let’s get back to Blackburn. My criticism of Canada’s chief tax collector seemed to hit a nerve.

After months of stony silence on the UBS issue, he suddenly emerged from his self-imposed cocoon, granting a flurry of interviews. He was also made available to me, although by then he had already stated his case to other reporters, so I declined.

In those interviews, Blackburn offered a stirring defence of his department’s plan to force UBS to spill the beans on its tax-dodging Canadian clients, just as the IRS had done with the bank’s U.S. clients.

Of course, U.S. authorities had already done much of the heavy lifting for Blackburn, helpfully identifying $5.6 billion of assets held directly by Canadians in UBS accounts in Switzerland, as far back as 2005.

The accounts were set up by UBS’s so-called “Canada Desk,” a clandestine operation of jet-hopping, suitcase bankers who bypassed the bank’s properly licensed Canadian subsidiary, directly wooing clients here in contravention of Canada’s banking laws.

Blackburn certainly talked a good game. He assured reporters the CRA was on the case, and its lawyers were ready to stare down the bankers from UBS, forcing them to disclose the names of Canadian clients.

“UBS tried to delay, but in the beginning of September, we will have a meeting between our lawyers and them to obtain that information,” he told Globe and Mail reporter Greg McArthur, who first revealed UBS’s secret Canada Desk last November.

“Is it a question of thousands of dollars or millions? I don’t know,” he said, in an apparent effort to play down the magnitude of the$5.6 billion of suspect assets already identified by U.S. authorities.

Fast-forward to Wednesday–the final day of September. In a bid to catch up on the progress of Blackburn’s campaign to lift the lid on UBS’s dubious activities in Canada, and its tax-cheating Canadian clients, I called Ottawa. Nope, the minister wasn’t available, I was told. But CRA spokeswoman Caitlin Workman gladly filled me in on the box score to date. I have to say, it’s not overly impressive.

Seems the CRA has managed to conduct just one meeting with UBS officials since Blackburn issued his declaration of war back in August. And although Workman couldn’t confirm it, the meeting was reportedly conducted by telephone, not face to face.

At present, no further meetings are scheduled, she added. She couldn’t explain why.

“It could be that we just don’t have a time yet. It doesn’t necessarily mean that there will be no more meetings, and the discussions are ongoing. But I’m just not at a point yet where I can say, ‘OK, tomorrow there’s a meeting.’ ”

In total, the CRA has received 57 “voluntary disclosures” thus far from Canadians who held accounts with UBS. “Of those 57, we have finished reviewing 20 of them. And from the 20 we’ve finished reviewing, we have assessed $7.6 million in unreported income, as of last Thursday,” she adds.

Got that? Of the $5.6 billion in reported assets secretly held by Canadian account holders at UBS in 2005–a full four years ago– the CRA has so far recovered$7.6 million of unpaid tax money. That’s a little over one-tenth of one per cent of the assets in question.

Upset yet?Hey, this gets better. For tax cheaters who hold money in such accounts, there is no legal means at present to compel them to come forward. Unless UBS discloses their names–which seems pretty unlikely–they could duck the CRA for years.

And if the cheaters do finally “come clean” half a decade from now, they won’t necessarily face any penalty for their tardiness, either.

“The minister has discretion to waive penalties for the previous 10 years,” Workman says. “For the entire period for which your (belated) disclosure is accepted, you will be free from criminal prosecution,” she adds.

“Because you’ve come forward voluntarily and been honest and above-board, even if belatedly, you won’t have the penalty owing, but will still have to pay the tax and the interest. It’s an incentive to come forward, and for the CRA, to recover that income.”

There you have it. Your tax-collection agency at work. Something tells me the lawyers for UBS and their tax-dodging clients aren’t exactly quaking in their boots.
© Copyright (c) The Edmonton Journal

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October 1, 2009 by Dan White.

Well here we go again, another Canadian perk under attack by CRA. If you lottery winning has a skill testing question, expect CRA to check the list of winners and assess you for the winning as your income.

You can be sure this is going to happen within the next three years.

This really sucks.
I guess on the other hand… I don’t enter lotteries, so I guess this will not affect me personally.
But it will really take the wind out of a winner, to get a bill after they have spent and given away their winnings.
Dan White

*
IT-213R Prizes from lottery schemes, pool system betting and giveaway contests
o Other formats

Income Tax Interpretation Bulletin
Prizes from lottery schemes, pool system betting and giveaway contests

NO: IT-213R

DATE: October 19, 1984

SUBJECT: INCOME TAX ACT
Prizes from lottery schemes, pool system betting and giveaway contests

REFERENCE: Paragraph 40(2)(f) (also subsections 52(4), 5(1) and 9(1), and paragraph 69(1)(c))

This bulletin cancels and replaces IT-213 dated May 12, 1975. Current revisions are designated by vertical lines.

Lottery Schemes

1. The amount or value of a prize received by a taxpayer from a lottery scheme is not taxable as either a capital gain or income unless, due to the circumstances applying to the lottery scheme, the prize can be considered to be income from employment, business or property or a prize for achievement referred to in paragraph 56(1)(n).

2. While paragraph 40(2)(f) specifies that no taxable capital gain or allowable capital loss results from the disposition of a chance to win or a right to receive an amount as a prize in connection with a lottery scheme, subsection 52(4) states that for the purposes of computing any tax consequences after receiving a prize a winner in a lottery scheme is deemed to have acquired the prize at a cost equal to its fair market value at the time of acquisition.

3. A lottery has been defined as a scheme for distributing prizes by lot or chance among persons who have purchased a ticket or a right to the chance. If real skill or merit plays a part in determining the distribution of the prize the scheme is not a lottery (unless it is based essentially on chance and the degree of skill is minimal). Again, when the chances of a prize are obtained wholly gratuitously, as for instance, a prize awarded to the winner of a game, the scheme is not a lottery.

Pool System Betting

4. Paragraph 40(2)(f) also provides that no taxable capital gains or allowable capital losses arise from the disposition of a chance to win a bet or a right to receive an amount as winnings on a bet in connection with a pool system of betting referred to in section 188.1 of the Criminal Code. The nature of pool system betting is such that the only winnings are in the form of cash from the respective pool. Consequently, no additional capital gain or loss tax consequences could arise on subsequent disposition of the winnings and thus it is not necessary (as described in 2 above, in the case of a lottery) to deem the winnings to have been acquired at fair market value.

5. A “pool system” of betting is defined in the Athletic Contests and Events Pools Act as a pool system of betting on any combination of two or more professional athletic contests or events. The fact that a degree of skill is involved in the selection of the outcome of the contest or event in the pool betting distinguishes it from a lottery scheme as described in 3 above.

Other Schemes

6. Where a prize has been won otherwise than through a lottery scheme or a pool system of betting, neither paragraph 40(2)(f) nor subsection 52(4) will apply. The tax implications of receiving these other prizes will vary, depending on the following factors:

(a) When the prize has been received as a gift, it is not included in computing income at the time of receipt. However, the recipient will be deemed to have acquired the prize at its fair market value pursuant to paragraph 69(1)(c), so that a subsequent disposition of the prize will result in a capital gain on any increase in value since the time of its acquisition. A prize can be reasonably considered to be a gift from the viewpoint of the recipient, even though chance and/or skill may have been involved in the win. Ordinarily a gift is not considered to have been made until the donee has received delivery of the gift and accepted it in a completed and irreversible transaction.

(b) The prize will be received as income where it is received by virtue of the recipient’s employment pursuant to subsection 5(1) and paragraph 6(1)(a), received by virtue of the recipient’s business pursuant to subsection 9(1) or received in respect of an achievement in a field of endeavor ordinarily carried on by the recipient pursuant to paragraph 56(1)(n) (see IT-75R2).

(c) Where the prize is not received as income as described in (b) and is not a gift as described in (a), no amount will be included in income upon receipt of the prize and the provisions of paragraph 69(1)(c) will not apply. Such a situation would arise where the contestant has incurred a cost towards winning the prize such as purchasing a ticket or paying an entrance fee entitling the contestant to participation in the contest. In such a case, while there are no tax consequences resulting from receipt of the prize, any subsequent disposition of that prize may result in a capital gain or loss. In computing any such gain or loss the taxpayer’s cost of the prize will be the original cost of the ticket or entrance fee rather than the fair market value of the prize as used in (a) above.

It should be noted that where “personal use property” is involved, the $1,000 exemption contained in subsection 46(1) may eliminate any capital gains on disposition of a prize as described in (a) and (c) above.

7. In some instances, a ticket (or entrance fee) of the type described in 6(c) above entitles the holder to something in addition to a prize, for example, some entertainment value. Where, in such a case, the portion of the ticket that relates to the prize is considered insignificant in relation to the total cost of the ticket, the fact that a portion of the cost has been incurred towards the prize may be ignored and the prize will be treated as a gift to the taxpayer as described in 6(a) above.

8. Where the winner referred to in any of the paragraphs above is a syndicate, the income tax consequences to the individual members of the syndicate are the same.

9. Some examples of the manner in which the rules in 6 to 8 above apply are given in the paragraphs which follow.

Employer-promoted Contests

10. Where an employer who was accustomed to awarding employees with a bonus has provided a scheme or giveaway contest in which the bonus or some amount in lieu of a bonus is divided among the employees as prizes following a draw, the scheme would not be a lottery and the prizes are considered to be employment income under subsection 5(1). However, if the employees and their families account for only a small percentage of the participants in a scheme, are not given a favoured position in relation to the other participants and they are subject to the same contribution requirements (if any) towards the scheme as other participants, the value of any prize won by chance is not employment income but is considered a win from a lottery scheme. Therefore, paragraph 40(2)(f) and subsection 52(4) will apply. IT-470, “Employees’ Fringe Benefits - After 1980″ and Special Releases to IT-470 discuss holiday trips and other prizes.

Television and Radio Programs

11. The value of a prize or other award received by a person for being at or participating in a radio or television program is generally not included in income when the person is not party to an employment or business contract, and

(a) it is awarded through a draw because, for example, the person is in a “lucky” seat or has a certain brand of merchandise at home, even though the person may have to demonstrate some minor degree of skill or knowledge before being eligible to receive the prize, or

(b) the prizes that go to winning contestants, the consolation prizes that go to losing contestants or the merchandise gifts given to all participants are all that the person receives for appearing in the program. On the other hand, if a contract exists, such as may be the case where a professional actor, an entertainer or some other person appears on a television show as a celebrity and receives a giveaway prize or wins a prize by skill or chance for appearing or participating in a contest on the show, the prize will be subject to tax as business or employment income.

In all cases cited in this paragraph, the capital gains implications will be established on the basis of the particular circumstances in each case through application of the rules given in 6 or 7 above.

Free Tickets in Lieu of Volume Rebates or Bonuses

12. Volume bonuses or rebates from suppliers are included in computing a purchaser’s business income. However, where a supplier provides customers with free tickets for a draw for a prize with the winning ticket to be drawn strictly by chance, the prize is ordinarily considered a gift. Its value is not included in the recipient’s business income and the application of paragraph 69(1)(c) to the deemed cost of acquisition of the prize is as set out in 6 above. On the other hand, if real skill or merit is involved in the win, it will be a question of fact to be determined in accordance with the circumstances in each case whether the prize is a gift or whether its value is business income to the recipient.

Annuities as Prizes

13. Where the prize in a lottery scheme is an annuity, for the purposes of determining the amounts to be brought into income, the initial adjusted cost basis of the annuity is considered to be the fair market value of the annuity when it was acquired in accordance with subsection 52(4). Should the annuity be a prescribed annuity contract, as defined in Regulation 304, the adjusted purchase price of the annuity will be its fair market value at the time it was acquired. For prescribed annuity contracts and those other annuity contracts not subject to the accrual rules, annuity payments are brought into income under paragraph 56(1)(d) and a deduction from income is allowed under paragraph 60(a) for a portion of the adjusted purchase price as determined under Regulation 300. For other annuity contracts, which are subject to the accrual rules, the income from the annuity is determined according to the provisions of paragraph 56(1)(d.1) and section 12.2 in which the adjusted cost basis is a determining factor. In the case of the application of paragraph 56(1)(d.1) and section 12.2, the income calculation should be furnished by the issuer.

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