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

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

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/

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.

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

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

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
–
• •

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

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.

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.

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

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

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.

If CRA has any question as to how you were able to live on such a low net income, you will be subjected to a NIGHTMARE of paperwork. They will ask questions that you have no need to answer. They will give you a form to fill out that could end up causing you to pay taxes on absurd assumptions.

At the first indication of an Auditor’s interest in this direction, do not answer any further questions and then get professional help and do it immediately.

As a result of this new vendetta by CRA we are no longer allowing home visits by CRA auditors. We used to allow them if the taxpayer was not home and then only to have them verify business use of home.

Now due to this new aggressive tax grabbing behavior by CRA,  we will work with diagrams, sketches, written overviews and photographs.

CRA auditors often are surprised to learn that if the taxpayer has a Tax Representative, they don’t need to have an interview with the auditor and the auditor has no right to enter a principle residence without a court order, which is not easy to get.

We here at TAS are shoring up our arsenal to confront this tax grab head on. There are lots of ways to put a stop to this and we will exercise all of them. It is unfair, unwarranted and it is clearly abusive. CRA better back of this with our clients. It is outrageous.

Simply stated; “I am dumbfounded that CRA would go to such levels to increase their cash flow.” This kind of behaviour by CRA is what is going to create even greater Canadian ire against CRA tax audit abuse.

As a result of this new agression, we are modifying our audit ready bookkeeping system, to stop Net Worth Audits before they get started. We are also building in HST automated calculations across the categories and the tax jurisdictions in Canada.

Be sure to check out the TAS website for more information. www.taxauditsolutions.ca

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.

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

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.

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

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

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

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/ ////”"”"????????……

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.”

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.

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.
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