There are very few areas where you will find common sense, logic and justice as subverted as you will when you deal with the tax system in our country.
Today I had to explain to a client that although he had valid grounds to dispute his re-assessment, there was no law that prevented collection of the taxes arising from the re-assessment before his appeal and/or objection were complete.
“But I don’t owe the money, they made a mistake, why should I have to pay?”
I have no other answer than – that is what the law says. Of course I explain that if he is successful in his appeal then any excess amounts paid will be refunded but that is little comfort to someone facing an $80,000 bill. It is incredibly hard to watch people time and time again look confused and crushed that the law allows these injustices to happen. People have no respect for laws that are unfair and the more you learn about the tax system, the less you respect it.
Paying taxes while an objection is being processed only applies in certain situations but for those where it does, they face the prospect of potentially being bankrupted before their appeal is even heard. All I can do is warn the taxpayer and hope we get a nice collection agent who agrees not to exercise their power to collect…
Monday, September 28, 2009
Friday, September 18, 2009
The Taxpayers' Ombudsman
Today I met with Mr. Paul Dubé, the Taxpayers’ Ombudsman. For anyone who thinks the office of the Taxpayers’ Ombudsman is a joke, think again. This man has a vision and with it the belief and determination to make real changes. He knows that there are significant problems with how the Canada Revenue Agency (CRA) treats taxpayers and he is genuinely there to help. It was an absolute pleasure to see he was most definitely not another “ineffective politician” type.
The Taxpayers’ Ombudsman office was created in 2007 and is intended to address service issues and complaints that arise from dealing with the Canada Revenue Agency. While the idea of “service” from the tax collector may seem a little odd, Mr. Dubé was quick to highlight that what his office does goes far beyond dealing with complaints about rude behaviour from CRA agents. He is there to fight for your rights as taxpayers (see my post below).
I really think Mr. Dubé and his team can significantly help to improve the way the CRA operate and we all need to get the word out about what the Taxpayers’ Ombudsman is doing. If you think you have a complaint or want more information, the staff are all very friendly and it’s all free! Call 1-866-586-3839 or go to www.taxpayersrights.gc.ca
The Taxpayers’ Ombudsman office was created in 2007 and is intended to address service issues and complaints that arise from dealing with the Canada Revenue Agency. While the idea of “service” from the tax collector may seem a little odd, Mr. Dubé was quick to highlight that what his office does goes far beyond dealing with complaints about rude behaviour from CRA agents. He is there to fight for your rights as taxpayers (see my post below).
I really think Mr. Dubé and his team can significantly help to improve the way the CRA operate and we all need to get the word out about what the Taxpayers’ Ombudsman is doing. If you think you have a complaint or want more information, the staff are all very friendly and it’s all free! Call 1-866-586-3839 or go to www.taxpayersrights.gc.ca
Thursday, September 17, 2009
Did you know you have Taxpayer Rights?
It surprises some people to learn that there is a Taxpayer Bill of Rights:
1. You have the right to receive entitlements and to pay no more and no less than what is required by law.
2. You have the right to service in both official languages.
3. You have the right to privacy and confidentiality.
4. You have the right to a formal review and a subsequent appeal.
5. You have the right to be treated professionally, courteously, and fairly.
6. You have the right to complete, accurate, clear, and timely information.
7. You have the right, as an individual, not to pay income tax amounts in dispute before you have had an impartial review.
8. You have the right to have the law applied consistently.
9. You have the right to lodge a service complaint and to be provided with an explanation of our findings.
10. You have the right to have the costs of compliance taken into account when administering tax legislation.
11. You have the right to expect us to be accountable.
12. You have the right to relief from penalties and interest under tax legislation because of extraordinary circumstances.
13. You have the right to expect us to publish our service standards and report annually.
14. You have the right to expect us to warn you about questionable tax schemes in a timely manner.
15. You have the right to be represented by a person of your choice.
If your rights haven’t been respected or you do not feel the service you received from the CRA is in accordance with these rights, you can make a complaint. Think of it as a service contract as you would with any other organization that provides a service to the public. Contrary to how it may feel sometimes, CRA agents do have boundaries and taxpayers need to know about them. If the public don’t enforce their rights they won’t be any good to us! You can read more about your rights at http://www.cra-arc.gc.ca/gncy/frnss/tbrbll-eng.html or give me a call if you need help to make a complaint.
1. You have the right to receive entitlements and to pay no more and no less than what is required by law.
2. You have the right to service in both official languages.
3. You have the right to privacy and confidentiality.
4. You have the right to a formal review and a subsequent appeal.
5. You have the right to be treated professionally, courteously, and fairly.
6. You have the right to complete, accurate, clear, and timely information.
7. You have the right, as an individual, not to pay income tax amounts in dispute before you have had an impartial review.
8. You have the right to have the law applied consistently.
9. You have the right to lodge a service complaint and to be provided with an explanation of our findings.
10. You have the right to have the costs of compliance taken into account when administering tax legislation.
11. You have the right to expect us to be accountable.
12. You have the right to relief from penalties and interest under tax legislation because of extraordinary circumstances.
13. You have the right to expect us to publish our service standards and report annually.
14. You have the right to expect us to warn you about questionable tax schemes in a timely manner.
15. You have the right to be represented by a person of your choice.
If your rights haven’t been respected or you do not feel the service you received from the CRA is in accordance with these rights, you can make a complaint. Think of it as a service contract as you would with any other organization that provides a service to the public. Contrary to how it may feel sometimes, CRA agents do have boundaries and taxpayers need to know about them. If the public don’t enforce their rights they won’t be any good to us! You can read more about your rights at http://www.cra-arc.gc.ca/gncy/frnss/tbrbll-eng.html or give me a call if you need help to make a complaint.
Tuesday, April 21, 2009
What to do when you haven't filed your returns...
Its tax time again and I’m sure many people are frantically rushing to get everything ready and filed by the deadline next week. I just finished preparing a presentation about what to do if you have outstanding returns and it occurred to me that there must be people across the country who didn’t file last year and maybe even for a few years before and I wonder what they are thinking at this point. I know how easy it is to fall into the pattern of not filing and I think that many people who miss one year simply get scared into not filing again for the following years. Looking at the penalties and interest that you can have to pay upon filing again it is easy to understand why people get scared. The CRA charges interest on overdue taxes at a rate 4% higher than commercial rates and this can almost double your debt over a few years.
Taxes are a part of our lives and of course when one person doesn’t file, the burden is then placed on all taxpayers to make up their share. I know we need penalties and deterrents in place to make people file but I really think that the interest charges applied by the CRA are too high and act as an unfair barrier to those who are struggling to pay their tax debts.
I think that the CRA should have more programs to help people to deal with the large debts that they will inevitably face when coming forward to correct previous non-filing errors. The voluntary disclosure program is the main CRA initiative to have taxpayers come forward and start filing but this program has overly strict rules for qualification and really doesn’t help to significantly reduce the interest that taxpayers will face if they choose to start filing again this year.
If you have been surprised by the large interest charges on your account, drop me an email and tell me your story. For everyone out there who is scared to file a return this year, look at the CRA website and at least find out exactly what penalties and charges you will have to deal with before you make a decision. Unfortunately, the amounts will only get higher if you leave it another year. I am hoping to have the presentation about late filing on my website shortly at www.troublewithtaxes.com
Good Luck!
Taxes are a part of our lives and of course when one person doesn’t file, the burden is then placed on all taxpayers to make up their share. I know we need penalties and deterrents in place to make people file but I really think that the interest charges applied by the CRA are too high and act as an unfair barrier to those who are struggling to pay their tax debts.
I think that the CRA should have more programs to help people to deal with the large debts that they will inevitably face when coming forward to correct previous non-filing errors. The voluntary disclosure program is the main CRA initiative to have taxpayers come forward and start filing but this program has overly strict rules for qualification and really doesn’t help to significantly reduce the interest that taxpayers will face if they choose to start filing again this year.
If you have been surprised by the large interest charges on your account, drop me an email and tell me your story. For everyone out there who is scared to file a return this year, look at the CRA website and at least find out exactly what penalties and charges you will have to deal with before you make a decision. Unfortunately, the amounts will only get higher if you leave it another year. I am hoping to have the presentation about late filing on my website shortly at www.troublewithtaxes.com
Good Luck!
Wednesday, March 4, 2009
Something to think about before going green…
Anyone who has been audited will tell you that the CRA is obsessed with paper. You need the original receipt to prove an expense or nine times out of ten an auditor will deny your claim. So how does this fit with the new “go green” focus that many companies are now employing?
With e-bills and paperless bank statements, taxpayers have fewer hard records to leave a paper trail for the auditor to examine. Technology has a funny way of crashing right when you need it so unless you have all your online paperwork backed up, when the time comes you may be unable to access the valuable proof you need to claim your expenses. There is no word yet as to whether the CRA will take on the green challenge and accept online documentation. Generally, I have had trouble even with proving online banking transfers as the CRA question what exactly the payment relates to. Although logic says I probably wasn’t sending money to a hydro company for fun, without the bill showing the account and period the amount was for, it could cause trouble in an audit.
So a word of caution in this paperless age, save a tree and you may be digging yourself into a hole!
With e-bills and paperless bank statements, taxpayers have fewer hard records to leave a paper trail for the auditor to examine. Technology has a funny way of crashing right when you need it so unless you have all your online paperwork backed up, when the time comes you may be unable to access the valuable proof you need to claim your expenses. There is no word yet as to whether the CRA will take on the green challenge and accept online documentation. Generally, I have had trouble even with proving online banking transfers as the CRA question what exactly the payment relates to. Although logic says I probably wasn’t sending money to a hydro company for fun, without the bill showing the account and period the amount was for, it could cause trouble in an audit.
So a word of caution in this paperless age, save a tree and you may be digging yourself into a hole!
Thursday, January 15, 2009
Innocent until proven Guilty?
In criminal law, you are presumed to be innocent until the prosecution proves you are guilty beyond reasonable doubt. In civil law, the burden is generally on whoever brings an action to prove their case on a balance of probabilities. The line becomes a little more blurry in tax law.
If you are actually charged with a criminal tax offence, you are protected by the Charter and presumed innocent until proven guilty. However, for general audits, assessments and re-assessments the burden is on you, the taxpayer, to prove the Canada Revenue Agency (CRA) is wrong. A normal assessment or re-assessment is presumed to be correct and the CRA do not have to prove they are right. If you don't object or fail to provide adequate evidence, the assessment will stand. Uncertainty or ambiguity is generally resolved in favour of the CRA.
One area in which this is seen very clearly is ‘Net Worth Assessments’. These usually occur when the CRA believes your tax returns do not show your correct income so they add up the value of what you own etc. and estimated what you must have earned to buy all these things. They then assess you for taxes on this amount. If this happens, you have to show where the money came from and prove that it wasn't income. This can mean obtaining valuations for your property to show it is not worth as much as the CRA claim, going through old bank records to trace deposits and finding proof of any loans you have received. It can be a huge task because not many of us keep good records of all our personal spending.
The CRA have expansive powers such as this to ensure compliance with the Income Tax Act. Net Worth Assessments allow the CRA to assess taxes on people who perhaps deal in cash or may have an illegal source of income they are not paying taxes on. The biggest problem with Net Worth Assessments is that the CRA can’t usually find any evidence to show how much you spent on groceries or alcohol or magazines from 5 years ago. Instead, they use Statistics Canada averages to estimate what you probably spent. If you can’t provide actual proof or receipts, as opposed to you just claiming you don’t drink or eat expensive foods, you will likely face problems in proving your case. Therefore, you are effectively presumed to be ‘guilty’ of earning the additional income and liable for taxes.
Do you think this is fair? It is generally accepted that forcing the CRA to prove their case would be unfair as the taxpayer has all the information about their personal income and the CRA does not. This poses a problem for the CRA if they have to prove that an individual has earned a specific amount of income and the taxpayer destroys all the evidence. However, given that the taxpayer apparently knows their own situation best, should there be extra weight given to their declaration as to where the income came from or what their expenses were, even if there is no additional proof? When there is no evidence, what should win - the taxpayer’s sworn statement or the CRA’s estimation?
If you are actually charged with a criminal tax offence, you are protected by the Charter and presumed innocent until proven guilty. However, for general audits, assessments and re-assessments the burden is on you, the taxpayer, to prove the Canada Revenue Agency (CRA) is wrong. A normal assessment or re-assessment is presumed to be correct and the CRA do not have to prove they are right. If you don't object or fail to provide adequate evidence, the assessment will stand. Uncertainty or ambiguity is generally resolved in favour of the CRA.
One area in which this is seen very clearly is ‘Net Worth Assessments’. These usually occur when the CRA believes your tax returns do not show your correct income so they add up the value of what you own etc. and estimated what you must have earned to buy all these things. They then assess you for taxes on this amount. If this happens, you have to show where the money came from and prove that it wasn't income. This can mean obtaining valuations for your property to show it is not worth as much as the CRA claim, going through old bank records to trace deposits and finding proof of any loans you have received. It can be a huge task because not many of us keep good records of all our personal spending.
The CRA have expansive powers such as this to ensure compliance with the Income Tax Act. Net Worth Assessments allow the CRA to assess taxes on people who perhaps deal in cash or may have an illegal source of income they are not paying taxes on. The biggest problem with Net Worth Assessments is that the CRA can’t usually find any evidence to show how much you spent on groceries or alcohol or magazines from 5 years ago. Instead, they use Statistics Canada averages to estimate what you probably spent. If you can’t provide actual proof or receipts, as opposed to you just claiming you don’t drink or eat expensive foods, you will likely face problems in proving your case. Therefore, you are effectively presumed to be ‘guilty’ of earning the additional income and liable for taxes.
Do you think this is fair? It is generally accepted that forcing the CRA to prove their case would be unfair as the taxpayer has all the information about their personal income and the CRA does not. This poses a problem for the CRA if they have to prove that an individual has earned a specific amount of income and the taxpayer destroys all the evidence. However, given that the taxpayer apparently knows their own situation best, should there be extra weight given to their declaration as to where the income came from or what their expenses were, even if there is no additional proof? When there is no evidence, what should win - the taxpayer’s sworn statement or the CRA’s estimation?
MeetUp Group
Just a quick update to let you know I have also created a "MeetUp" group for people with tax questions in the Ottawa area. If you want to join or come along to our meetings, we will be chatting about people's experiences with taxes and trying to find answers to any questions or problems people have.
http://www.meetup.com/Trouble-with-Taxes-Ottawa/
http://www.meetup.com/Trouble-with-Taxes-Ottawa/
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