Kustom Design Group Goes Back to Basics

News Release | December 5, 2010 | For Immediate Release

Kustom Design Group Goes Back to Basics
Tax planning strategies to help tax payers make the most of their annual personal tax reliefs and allowances

Calgary, Alberta (December 5, 2010) – During the month of December the Kustom Design Group of Companies will be concentrating on the major income tax thresholds across Canada, and executing tax planning strategies with Calgary couples (married or common-law) and business owners to help them save tax dollars and reduce personal tax rates.

“If you want to maximize your tax savings as a couple you must plan together as a couple,” said Kustom Design CEO Michael Lepitre. “Planning together allows you to look at splitting income, tax deductions and tax credits to lower your overall household tax.”

Lepitre said that married or common-law couples have the option to utilize a very powerful strategy to save on taxes—splitting incomes/deductions or credits, and therefore tax planning must be done as a couple to get the full opportunity of tax saving.

“It is also important for couples to file their tax returns together to make sure that they aren’t missing any crucial information on each other’s returns, which could lead to a tax return filed improperly.”

Kustom Design’s tax planning strategies are designed to educate people on how to reduce the amount of taxes they pay, and help them understand how to leverage the effectiveness of family and/or business tax planning and income splitting.

“Because there are many ways to get paid from your business, it is important to look at your business when doing your personal tax planning,” said Lepitre. “We must determine whether funds you’ve received from your business are shareholder loan, dividends or wages and they must look at any income splitting opportunities.”

December is the most essential month for tax planning, and often many tax payers last chance to reduce personal taxes. Lepitre said that Kustom Design’s tax planning strategies will hopefully assist with helping improve Canada’s cooperation in battling tax havens and insistent international tax planning schemes, as well as increase the effectiveness of everyone’s overall actions.

About Kustom Design Group
The Kustom Design Group of Companies is a group of interconnected businesses that make up a full service accounting and financial firm. Based in Calgary, Alberta, and renowned for our expertise and experience in accounting and financing, Kustom Design knows that professional integrity is crucial. Our team of professionals offer year-round personal or business service that is tailored to each of our client’s financial needs through the funding, and wide selection, of accounting services, products and strategic planning.

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Media Contact: New Wave Media | Ashley Feist | (403) 457-0919 | http://www.new-wavemedia.com/

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Traveling to the U.S. for extended periods of time - Snowbird Calculations Part 2

Here is an example from our associates at Shea, Nerland, Calnan:

Mr. and Mrs. Sunshine are residents of Canada and have a winter home in Florida.  For the past several years Mr. and Mrs. Sunshine have spent a portion of the winter months in Florida and also some time in the US during other parts of the year.

In 2008, Mr. and Mrs. Sunshine spent 3 months (91 days) in Florida during the winter and an additional 3 weeks (21 days) in the summer.  In 2009, Mr. and Mrs. Sunshine spent 4 months (122 days) in Florida during the winter and a further 2 weeks (14 days) in May.  In 2010, Mr. and Mrs. Sunshine spent 6 weeks (42 days) traveling in the US and another 11 weeks (77 days) at their home in Florida.

Based on the above, the “substantial presence” test would be applied as follows:

Years                  # of days in US                    Multiplier                    Formula Days
2008                       112                             1/6                          18.66
2009                       136                             1/3                          45.33
2010                       119                             1                             119.00
                                                                                              183.00

Mr. and Mrs. Sunshine will therefore be deemed to have been in the US for 183 days during the current year and will meet the Substantial Presence Test.  Although this will effectively result in their being classified as resident aliens, they may be able to use an exception to avoid being liable for US income taxes on their worldwide income.

Even if you find yourself at 183 days or higher you may be able to avoid having to file a U.S. tax return and being double taxed by filing a Close Connections Form (8840) with the IRS.  You must prove that you have a closer connection to Canada by demonstrating that all your ties really are to Canada.  They will look at things like the address of your permanent home, belongings, vehicles, license, businesses, banking relationships and where your income comes from.

So if you are traveling to the U.S. regularly, make these calculations in advance and do your best to stay under the 183 days!  As we continue on this Cross Border series we will begin to move into investing, acquiring and selling real estate and doing business in the U.S. so watch for the next blogs!

Traveling to the U.S. for extended periods of time - Snowbird Calculations Part 1

Traveling across the border for a few weeks is one thing, but staying there for longer periods of time could bring unwanted heat from the IRS.  We are not talking about retirement in the U.S. as that is completely different and would most likely require becoming a U.S. citizen and filing tax returns (1040) with the IRS each year.

Most people are escaping the cold in Canada when they go.  There are many “Snowbirds” that spend their winters in the U.S.  The key to avoid having to report to the IRS is the 183 day rule, also known as the “Substantial Presence Test”.  The more years in a row you travel to the U.S. the more complicated this becomes.

If you do not travel to the U.S. every year then it can be a simple calculation.  If you only travel their for an extended period of time once then simply keep your stay under 183 days and you are fine.  However if you travel to the U.S. each year then there is a 2 and 3 year calculation that you must go by.  If you are across the border 2 years in a row, then you take the current year’s total days in the U.S. plus 1/3 of the prior year’s days in the U.S. and the total of these must be less than 183.  If you are across the border for 3 years in a row, then take the current year’s days in the U.S., plus 1/3 of the prior year’s days, plus 1/6 of the days from 2 years prior and this must equal less than 183.  Here is a chart to understand this:

Year 1 (This yr):       1 day = 1 day

          Year 2 (1 yr ago):    1 day = 1/3 day

          Year 3 (2 yrs ago):   1 day = 1/6 day

I will be discussing this in detail and will be giving an example on my next blog.  Please check back for part 2!

Cross Border Brings Complications Part 2

Another issue that can arise is when couples split and one moves to the U.S. while the other stays in Canada.  It is imperative to do an inventory of all your assets, liabilities, income and expenses before the move happens as there are many tax considerations in moving to the U.S.  Of course, you should always know your assets, liabilities, income and expenses at any given time for many purposes!  Always keep in mind that if you are leaving Canada you will most likely have tax consequences.  For example, many assets that you owned while living in Canada can incur tax when you leave.  CRA can tax you as if you sold the asset, even though you want to keep the asset.  This is a disposition or departure tax that can arise on many assets that you own and want to keep when you leave Canada.  Of course, if you plan ahead you can avoid the majority of taxes.  As always, the more you plan in advance the better your chances of eliminating taxes!

There are many other considerations.  For example, your will that you created with a lawyer here in Canada may not be valid in the U.S because the wording isn’t consistent with the laws of a state. Another consideration is that if you spend too much time in the U.S., even if you are just visiting, you may need to file appropriate filings to the IRS. There are other considerations on investing across border as there are many different rules depending on what type of investment it is.

Much planning is needed for any cross border situation.  The more you plan in advance, the better off you are.  Kustom Design does not specialize in cross border, however we work with other firms who do specialize in this area and we do have some knowledge in this area from these strategic alliances.  Keep in mind that things are changing rapidly, thus it is necessary to be connected to professionals that are focused in this area.  Kustom Design is always current in Canadian tax knowledge and we are in alliance with other firms that stay current in cross border knowledge. 

In the next blogs we will go into some basics of traveling, investing and doing business in the U.S. Whether you are a Canadian thinking about leaving Canada, or you are from the U.S. or another country and have recently come to Canada, don’t hesitate to contact us on your questions or comments!

Cross Border Brings Complications, Part 1

Many people never do anything out of Canada so they don’t have to be concerned with the complications of planning cross border.  However, there are many people that spend time in the U.S. and in other countries, invest across border, do business across border, and more.  Many people just get caught in the moment and move forward without seeking professional guidance.  If you are traveling out of the country for any extended time, investing across border or doing business across the border there are key details you must know.  The key point that I want to make here is that whenever you are doing anything cross border, it is imperative to see a professional or multiple professionals that can help to ensure you plan for any tax and reporting consequences that you may have to deal with.  For this blog and the next (parts 1 & 2), we will be mostly talk about cross border in the sense of Canadians dealing and traveling to the U.S. and as always the details in the blogs are date sensitive to the current dates that the blogs are written on.

To start with, let’s talk about some of the main issues that seem to arise when dealing and traveling cross border.  If you or your spouse have dual citizenship or have assets in the U.S. you most likely will have to file a U.S. tax return.  Many don’t file and it can catch up with them later down the road.  Many people just deal with the tax authority where they currently live, CRA in Canada the IRS in the U.S., and many people don’t even understand that there is a tax treaty between Canada and U.S. that determines how many things work for cross border assets, transactions, traveling and more!  Many people get double taxed by not understanding what the treaty offers.  For example the IRS tends to tax capital gains made on RRSPs if the holder is residing in the U.S. Worse, if the holder returns to Canada and discharges the RRSP, the holder gets no tax credit for tax already paid in the U.S. However, in a situation like this, it is possible to defer taxes by invoking the Canada/U.S. Treaty to stop the double taxation. The Canada/U.S. Treaty has been revised multiple times since its 1980 inception and will continue to evolve.  The Treaty can override sections of the Canadian and U.S. Tax Acts to help ensure double taxation doesn’t happen.

In Response to "BoC rejects Gold as Currency"

Read article, "BoC rejects Gold as Currency" -- http://www.kustomdesign.ca/

Governor Mark Carney of the Bank of Canada stated that “gold has no role to play in the international monetary system,” following a speech on financial reform in Geneva.  If gold has no role to play, why are all the central banks flocking to gold right now?  Why has China ramped up it’s gold reserves dramatically over the last few years? Because Gold has always been there and has always played a role in every financial system that stood over time.  Every time gold has been taken away from the backing of a currency, we end up with a Fiat Monetary System that never lasts over 100 years before crashing!

In another article in the Gazette we find that Robert Zoellick, president of the World Bank, tried to offer an alternative to the present conflict-plagued monetary system in which gold could be used as a reference point for market expectations for inflation and future currency values. Now this makes more sense as gold brings stability to a financial system. 

Read more: http://www.montrealgazette.com/business/fp/Carney+rejects+return+gold/3803098/story.html#ixzz14q01v5Za

Since we can see that currency that is not backed by something of value such as gold always crashes, why would we now want a global monetary system that is not backed by something of absolute value???

Donating Stocks to avoid capital gains while getting a donation credit

Giving should always be part of your financial and tax plan.  When you give you receive, and although that should never be the motivation of giving, it is an important fact.  Many people have realized that donating to charities can save significant tax savings.  Donating can save taxpayers hundreds of thousands of dollars in taxes by giving strategically. 

Giving stocks is not new, however over the last few years the rules are different in that their used to be a capital gain triggered when you donated a stock.  Now when you donate qualified stocks to a registered Canadian charity there is no capital gain triggered, yet you still receive the full donation credit for the value of the stock.

This can be particularly beneficial in the case of Flow Through and Super Flow Through Shares that have been acquired, considering there was already tax benefits for acquiring the Flow Throughs in the first place!  Although it is typically better to donate personally, many would ask what to do if they have stocks owned by a corporation.  In that case you could still donate the stock and receive a tax deduction for your corporation (instead of a tax credit) and the corporation would not trigger a capital gain.  This would also free up room in your capital dividend account to issue yourself or other shareholders tax free dividends.

BC talking about scrapping the HST

On the surface, or so it might appear from Premier Campbell’s televised speech to the province last week, the government is comfortable letting the public decide whether to scrap the HST.  This is quite rare as most governments don’t allow the general public to vote on tax policies, never mind the option of scrapping the HST! 

However at the same time BC is looking at a 15% personal income tax cut, which could make BC have one of the lowest, if not the lowest personal tax rate in the country.  Many people are complaining about the HST and there is a referendum on it next fall.  It looks as if the government is hoping that the personal tax savings will help people forget about the HST. 

The main issue with scrapping the HST is that BC may have to pay back over $1 Billion to the Federal Government.  This would mean that the tax cuts that they are proposing would be offset in the future by tax increases to pay the debt to the Federal Government.

In my opinion taxation in Canada should be one or the other: a consumption tax (such as the GST or HST) or income tax.  I don’t think we should have both.  Even though we at Kustom Design make our income off reporting peoples’ and corporations’ tax returns, I would suggest that the consumption tax would be the better method, thus simplifying everything for everyone! 

Tips on Audit Proofing your Business Part 5

I cannot stress how important notes are when it comes to your source documents and bookkeeping, this is why I’ve mentioned it a few times in this blog series.  Because audits always happen years after the fact of the transactions, you must be able to go back in history and know exactly what happened.  So if you are not on top of your paperwork regularly (daily-weekly-monthly) you should not expect things to go well if you are audited.  At the end of each day, look at your receipts and make notes on them.  Make notes in your bookkeeping, or for your accountant to do the bookkeeping.  The more notes the better.  For example if you are claiming meals and entertainment expenses then ensure you note who you took out for the meals and entertainment or your claim will most likely be denied in an audit.

For claiming home office expense, ensure to have proof of your office/business usage and the square footage that proves the percentage of expenses.  This is something that CRA looks at frequently in audits.  For example if you have a house that is 2000 square feet and you are using 200 square feet for business purpose, then you can deduct 10% of your home overhead costs.  These costs include rent or mortgage interest, insurance, property tax, utilities and other over head costs.  Ensure you can prove this in the case of an audit.

One more tip for you at this time, it is best not to pay for business expenses with cash as cash is not very traceable.  If you lose the receipt you don’t have any statement or anything else to back the claim. 

Typically in most audit situations the CRA auditor will reassess whatever they can and the onus is on you to substantiate your claim.  Many claims by CRA may not be correct, however it is up to you to appeal if you don’t agree.  If you are reassessed you have 90 days from the date of that reassessment to file a Notice of Objection (appeal).  If the appeal doesn’t go in your favor and they still disregard your claim, you can appeal further to the tax court within 90 days of their denial of your Notice of Objection.

As we now wrap up this blog series you can see that there is a lot to think about in the case of an audit.  Be detailed and be able to prove everything.  If you have questions or concerns in regards to any of my blogs, please don’t hesitate to contact me.

Tips on Audit Proofing your Business Part 4

We are now getting close to wrapping up this series and you can see the theme is “be able to prove every expenditure and deposit”  The fact of the matter is that if you can’t prove expenses or deposits, CRA can just deem what they want whether it is true or not!  So you must always keep good back up documentation for every transaction, not just statements but receipts as well!  Keep a good record of all deposits, using a deposit book as well!

In my last blog we began to talk about Employee vs. subcontractors.  Employees must go on payroll and T4’s must be issued for employees.  Subcontractors do not go on the payroll, however a T4A should be filed at the end of the year (due the following February) stating how much was paid to the subcontractor.  

Let’s look a little closer at payroll.  Getting in trouble with payroll can close your business down.  The penalties and interest on late payroll remitting can cripple a business as the rates are so high!  To ensure you stay out of payroll trouble you can simply not have any employees, just subcontractors, or if you do have employees then ensure you always have accurate payroll remittance numbers and make your remittance on time!  You can use the Software produced by CRA, go on their website, or use approved accounting software to calculate your payroll remittances.  Payroll remittances are made on the 15^th of the following month.  So for example September’s payroll remittance is made on the 15^th of October, unless you have other arrangements in writing with CRA.

Subcontractors will remit their own taxes as they have their own business just like you do.  As mentioned they should have a Corporation with a GST number and they should invoice you in exchange for payment.  The invoice is your source document for proof in case you get audited.  In my last blog we listed the main factors CRA looks at to ensure that you have hired a real subcontractor and they are not an employee under the guise of a subcontractor.  If you want to hire and you don’t want employees due to the extra headaches and costs, then speak to us.  Even if it doesn’t look like the subcontractor can meet the criteria, we can help you set things up to ensure they are legitimate contractors.  Go to www.jobworksinc.ca for more info.

Tips on Audit Proofing your Business Part 3

We’ve been discussing some great tips on helping audit proof your business.  In reality the majority of businesses in Canada get audited at some point, unless they are short term in nature. Even the short term businesses do sometimes get audited.  So the key is to not hope for an audit, but be prepared in the case you do get audited!

Being prepared for an audit means that you can prove all your transactions with back up documentation and that all flow of funds have good paper trail.  One of the things that CRA almost always looks at in an audit is to confirm deposits going into the Company are either reported as income or elsewhere.  If the deposits into the corporation do not match the income reported, you will have to prove where the other deposits came from.  If you cannot prove where these deposits came from CRA may just deem it as income to the company.  An example of this is shareholder loans.  If you loan funds to your company, keep a good paper trail for proof of the transaction(s).

Another major area that CRA audits is the Shareholder Loan Accounts of corporations.  This is the account that has both incoming and outgoing funds.  Every time you, as a shareholder or director, put funds into the Corporation this shows up in the shareholder loan account.  Every time you pull funds out of the corporation this typically shows up in the shareholder account, until the Corporation’s year end where it may be cleared to dividends, wages etc.  If you cannot document that the payments to you are payments of shareholder loan then CRA could deem it as personal income to you the shareholder.  This is especially the case if they find the shareholder balance to be negative, meaning that you owe the corporation.  You are typically not allowed to owe the corporation any funds for more than 6 months.  In the past many people have set up loans from their corps with interest which used to stand up, but today CRA will just deem it as income to the shareholder or director! 

Tips on Audit Proofing your Business Part 2

The next tip for business owners is to ensure the business pays for its own expenses and the owners pay for there own expenses. As soon as you cross that line it is up to CRA scrutiny as to what happened. Instead of paying for expenses for your company, simply write a cheque to the company and let the company pay its own expenses. Same thing on the other side, don’t let the company pay for the owner’s personal expenses.

The next tip is to always make notes on your transactions. This is imperative as audits always happen years after the fiscal year(s) being audited. For example you may get audited in 2012 for the year 2009 and if they find things in 2009 they may go back further and audit years prior to 2009. For many people it is hard to remember what happened a couple months ago, never mind years ago. Notes in your bookkeeping and on source documents always help. Better to make a note and not use it, instead of not having a note when you need it.

Another tip is to ensure that vehicles are owned and expensed by the correct entity. If you are a shareholder of the corporation and you own a vehicle that is used for the business then you should not just have the corporation pay for your vehicle expenses. If you own the vehicle personally then you should track your mileage used for business and have the company reimburse you based on that mileage.(Currently acceptable: 52cents per km for the first 5,000 km and 45 cents thereafter) The reimbursement is an expense for the company, but not income to you. If you do it any other way an audit could cause you reassessment for personal use of vehicle expenses or the denial of company vehicle expenses.

In the case where the corporation owns the vehicle, then it is best to own your own vehicle personally to separate the 2. Simply use the business vehicle for business and the personal vehicle for personal. Many business owners, however, only own 1 vehicle that is used both for the business and them personally. In this case a mileage log should be kept to determine business vs. personal usage. Another thing to remember about vehicle expense deductions is that whoever owns the vehicle, should pay for the expenses. If you own the vehicle, you will either want to get reimbursed for business mileage or you may want to sell the vehicle to the business so it can pay for the expenses. Either way, if you use the vehicle for both personal and business use, you should keep a mileage log to determine personal vs. business usage. Mileage logs do typically stand up in audits.

Tips on Audit Proofing your Business Part 1

I’ve been asked by people before if they could audit proof their business. That question is interesting as no business is audit proof in that there is always a great chance that CRA will audit your business. However, that being said, there are many things you can do to keep your business from being reassessed after an audit. The key here is that if CRA finds things wrong when you are first audited, then you may be audited again in future years. If they don’t find any issues the first time they audit the company, then they may never come back as they can see the company has proper backup documentation and paper trail and accurate reports.

Many business audits start with either a payroll or GST audit. Payroll audits may be simple trust examinations, where they just want to look at who the company is paying, and if all the remittances are being made to CRA. It could also be a full payroll audit that would look at much more, such as did any employees receive taxable benefits, did the owners receive benefits, are the shareholder loan accounts accurate and much more. GST audits on the other hand will look at all your income and expenses that incur GST and determine if you reported your GST accurately. Any of these audits can lead to a full audit if the auditor determines that one may be needed. In a full audit they may go through your entire business in great detail, not something any business would want!

As discussed in my prior blogs, you do not have to speak with CRA, you can request everything in writing and in the case of an audit you can authorize a representative, such as an accountant, to handle your audit. If you are ever going to send any documentation to CRA, do not send originals!!! Always send copies, because if they lose any of your documentation (hey have lost people’s documentation before!) then the onus is on you to still prove the numbers you reported on your tax returns. Now let’s get into some tips…

The first tip for audits is to never give CRA any of your printouts, handwritten papers, or any other personal documentation that may be mixed in with your business paperwork. Many people put notes and other things in their paperwork which can cause CRA to dig deeper to find more things to audit. Keep your notes and other documents to yourself. If you are audited, you should go through your documentation and pull out such documents.

More tips on my next blog! 

Tips when Dealing With CRA Part 6

In my previous blogs, I have discussed 9 tactics used by the CRA and how to deal with them.  There are a few more that you should know about. Read on . .

10. Notional Assessments – If you don’t file for  a period of time CRA may come up with an amount that you owe.  The amount that they come up with is typically much more than you would owe.  You must contest these amounts and get your filing up to date so CRA has accurate numbers and don’t go off of the ones they made up!

11. Corporate Director’s Liability – A shareholder of a corporation does not take the liability, but the director does.  By signing on as a director you are taking the responsibility of all CRA debts even if the corporation closes.  To avoid this, the director of the corporation can be someone who doesn’t own title to any assets that CRA can lien, nor have any income that CRA can garnish.

12. Loss of Documentation – Occasionally CRA loses documentation.  If you have given them originals it is too late at this point.  If you have to prove your case you now can’t because you don’t have original documents.  To solve this issue, never give CRA original documents instead give them copies when they request documentation from you.  Alternatively you could meet them somewhere with your documentation so they can review it on the spot, without taking it.  Even better, let them meet with your accountant!

CRA does have a lot of power and can access all kinds of information on you.  You must know your rights, which are found on the taxpayer bill of rights.  You must know how to deal with them.  You must also know that you can have an authorized representative that can deal with them on your behalf.  And again, do everything in writing with them!

Tips when Dealing With CRA Part 5

We have been discussing some of the tactics used by CRA and how to deal with them. So far we’ve gone through 5 of them. Here are some more:

6. Confusion – Because the CRA is so big and has so many departments in different cities, you may find that more than 1 person is dealing with your file or you may find your file gets passed from one department/city to another without you even knowing it. You also may find that one CRA agent will tell you one thing, but another CRA agent tells you something different. This is yet another reason to deal with CRA in writing. Putting things in writing clarifies things and can assist in holding parties accountable.

7. Coercion – CRA may Coerce you to pay even when you don’t think you owe anything. A CRA collector is just doing their job – collect from people. If you don’t agree with their assessment, appeal! If your file is in appeal, they are not allowed to collect the amount from you as it is not confirmed as owing until the appeal is completed. You can utilize the Taxpayer Bill of Rights to help in understanding your rights here.

8. Garnishees – If amounts are confirmed as owing CRA could garnish your pay cheques. If you do owe an amount to CRA, then make arrangements with them. If you make arrangements and stick to your arrangements then they will not typically garnish you. This is mostly for people on payroll (employees)

9. Liens on property – CRA may go as far as putting a lien on your property so if you ever sold it, they would get paid. To avoid this don’t own properties in the name that has the liability. If you do work that can incur liability then have your spouse own the property or own it in a trust.

I will discuss more on my next blog!

Tips when Dealing With CRA Part 4

In my next 2 blogs I would like to discuss some of the tactics that CRA uses. Some of these tactics are in phone calls and conversations with CRA, some are even done in writing. For example when CRA is going to reassess a tax shelter, they will write in the letter to the taxpayer that they are going to audit the taxpayer’s participation. Of course people will read this as if they are going to get audited, when in reality the CRA has all the details of their tax shelter participation. Tax Shelters are monitored by CRA through the Tax Shelter Identification number. This allows the CRA to monitor every tax shelter and who is participating, how much and when! People who participate in tax shelters sometimes get scared when CRA uses their tactics, but others that don’t continue on saving tax year after year. The CRA can be tricky so you must watch out for the potential tactics they try and use.

Here is a short list of some of the tactics to look for and what do to do about them:

1. Ignorance – If you don’t know the rules, too bad! This seems to be how all of our regulators work in today’s day and age, so before you start a business, acquire an asset or do anything that has a potential larger tax consequence, seek professional advice. (Kustom Design is here to assist you, so please do come consult with us)
2. Fear – They will say things to you and provide written correspondence in ways that will keep you in fear of trying to do anything that saves tax! It seems that much of our system is now keeping people living in fear. Don’t live in fear, know your rights and always stand up for yourself! Surround yourself with others that are living in freedom of fear! We are here to help you stand up for your rights!
3. Intimidation – The CRA will try and intimidate you with their position of authority. Don’t let them! They are just people like you and I. If you know your rights and know that you haven’t done anything wrong, then don’t let them intimidate you.
4. Threats – CRA collection agents may threaten you with what they will do to you if you don’t pay. If you are in this position then you must communicate with them. Typically if you communicate with them in this position you can negotiate a deal with them that will hold back any potential of threats becoming reality.
5. Delay – CRA does their work after the fact. So if you incurred income in 2007, CRA may not contact you about this year until 2009. Then they can drag it out for months and even years as they do not always have the manpower to chew everything they’ve bitten. If they are delaying things, this may or may not be good for you. In precedent setting cases where CRA has really delayed and won in court, the taxpayer typically doesn’t pay more than a 1-3 years of interest because CRA took so long in dealing with the issue. If you determine that the delay is not good for you, like if you are waiting for a refund, then contact them regularly until it gets taken care of. Contacting them regularly puts the pressure on!

Watch for my next blog as we will go through some more of the tactics that CRA uses and how to deal with them.

Tips when Dealing With CRA Part 3

In reading my prior blogs you should now understand that CRA is a collection agency for the government and that if you don’t agree with their decisions they make when “administering tax” then you can appeal their decision to the authorities (courts). The CRA never does have the final decision, unless you let them! You should also now be clear that you can’t believe everything they state on their website because of the disclaimer, and you can’t take what you get from them on the phone as fact. If you need a ruling on something that does not have a precedent set, then get it in writing. Because tax law is so complicated, you should almost always seek professional help. Kustom Design is always up to date on the current tax laws and we are here to work with you on structuring your assets and transactions. The bottom line is that you do not have to be scared of dealing with CRA, you just need to know how to deal with them.

If CRA calls you by telephone you are not obligated to speak with them. You can have them deal with your authorized representative, or just tell them to put their request in writing. As a matter of fact it is typically better that you don’t speak to them as they are under a protocol to assess any tax amount owing and charge penalty and interest…and then of course collect it. Some CRA agents may try and trap you in what they say, so again it is better not to speak with them, unless you have no other option. If you do speak with them it would typically only be in regards to something specific, like a payment plan. If you do have to speak with CRA, ensure you get their full name and badge number. If you are having difficulty dealing with the agent assigned to you, you can ask to speak with their supervisor. The majority of CRA agents are bonded and they can bring trouble upon themselves if they trample on your rights found in the taxpayer bill of rights. Unfortunately, as mentioned prior, many CRA agents do not even know the taxpayer bill of rights and neither do the people, so CRA sometimes gets away with trampling on people’s rights!

Right now Canada is in a major deficit position, which means they are spending more than they are taking in. Because of this issue we have seen the CRA become more aggressive with people while raising some penalties through the roof, creating new penalties, freezing bank accounts, putting liens on assets and more. All we see on the news is how the Government is handling the financial situation quite well compared to the rest of the world, but what we don’t see in the media is how they are doing it. The Bank of Canada is printing more currency and the government is forced to collect more and new taxes! Do we think it’s going to get any better as our government is projecting more deficits for the coming years? We must know our rights and how to deal with CRA so we can protect ourselves, our assets and our future generations. Watch for my next blogs where we will share more on dealing with the CRA!

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Tips when Dealing With CRA Part 2

As per my last blog, please ensure you know your rights as a Tax Payer according to the Tax Payer Bill of Rights. Here are 3 other important facts in dealing with the CRA:

1. Don’t ever take what a CRA agent says on the phone as fact. Get it in writing! They can never be held accountable to what they say on the phone, and typically you are getting a junior agent that may have just started working at the CRA!
2. Don’t take what the CRA website says as fact! (see their disclaimer) Here’s a link and below is what is written in the disclaimer:

http://www.cra-arc.gc.ca/ntcs/dsclmr-eng.html

Disclaimer: Some of the information on this Web site has been provided by external sources. The CRA is not responsible for the quality, merchantability and fitness for a particular purpose of products or services available on external sites and listed or described on our menu; nor is it responsible for the accuracy, reliability or currency of the information contained on our Web site and supplied by external sources.

3. If you don’t agree with their assessment, appeal (See further in this blog for details)

APPEALING

Number 4 on the Tax Payer Bill of Rights states that you have the right to a formal review and subsequent appeal. So, if after they review your file you get reassessed, you can appeal their Assessment if you don’t agree with it. This assessment typically comes in 2 forms, a Notice of Assessment (N.O.A.) or a Notice of Reassessment (N.O.R.A.). Either one may be appealed as long as the appeal is within 90 days of the date on the N.O.A. or N.O.R.A. To appeal a decision you should file a Notice of Objection: http://www.cra-arc.gc.ca/E/pbg/tf/t400a/t400a-09e.pdf. Once your Notice of Objection is sent in you should receive a letter stating that they’ve received your Objection and that they will be reviewing your file. If after the review is completed, which sometimes takes a considerable amount of time, they state the Assessment still stands than you can appeal to the Tax Court of Canada. Their correspondence will come with the paperwork and steps to do so, however if you need assistance in your Notice of Objections or appeals, please don’t hesitate to contact us.

Please watch for my next blogs as I will continue to give you tips and information when it comes to dealing with the CRA.

Tips when Dealing With CRA Part 1

As I’ve just finished a full series on the Family Trust I was debating on what would be my next topic to blog on. After some thinking I came to the conclusion that one of the biggest issues many people face is dealing with CRA, the Canada Revenue Agency. Formerly they were called CCRA, Canada Customs and Revenue Agency and before that they were simply called Revenue Canada. The CRA is an agency that administers tax law for Canada, which means in essence they are a big part of implementing the tax legislation put forth by parliament. This is of course not their only function as they also administer other areas of benefits and tax programs to the public and they also currently work with international trade regulation. It’s interesting that this is what they are to do, but the majority of the public sees them as being a collection agency. The appearance of CRA does not seem to say anything different when they are harassing millions of Canadians for money even when they may not owe it!

The first thing you must realize when dealing with CRA is that they do not make the final decisions in regards to how tax legislation applies. Above the CRA is the Tax Court of Canada, The Federal Court of Appeal and the Supreme Court of Canada. So, in essence, the CRA is at the bottom of the totem pole when determining the law. The real issue is that many people do not know they can appeal further than CRA, nor do they know that they have specific rights as a taxpayer. You, as a taxpayer, have many rights that could be disregarded by CRA. Part of the problem is that it is not a requirement for CRA agents to know the tax payer bill of rights, and on top of that, many of CRA’s positions are transient as many employees either leave the CRA or move departments. I’ve asked numerous CRA agents if they know about the Tax Payer Bill of Rights and you would be surprised to find that many don’t know about it, and if they do, they haven’t had a chance to read it! You need to know your rights to ensure they are being upheld, here is the link to the Tax Payer Bill of Rights: http://www.cra-arc.gc.ca/E/pub/tg/rc4417/rc4417-09b.pdf

Now that you know your rights ensure you are never walked over by the CRA. If your rights are broken then you should contact your member of parliament, contact the Tax Payer’s Ombudsman and appeal any decisions you don’t agree with. There are good people that work at the CRA, however as a whole the CRA needs to collect as much from the taxpayers as possible as Canada is in a major deficit. Where do you think they get the loans from? Obviously not the United States as they are Trillions in debt! The fact is that the Bank of Canada is able to print amounts of funds based on a number of factors, including the basis of how much tax us Canadians can pay! …and we wonder why all the reassessments and audits are so rampant. In my next series of blogs, I will go into a number of tips in helping you deal with CRA.