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.

Step 3: Legally Minimize Taxes Paid part 3

Here are more ways you can save tax.

• Trust Structures – Trust structures can protect your assets and pass them to the next generations. Trusts can be used for effective tax minimization through income splitting.
• Tax Shelters – Generate new tax credits and support humanitarian causes. Tax shelters help the less fortunate while helping you to save taxes at the same time.

Other Tax Saving Strategies include Tax Deferral Strategies and Flow Through Shares.

• A Tax Deferral Strategy is an arrangement where you get tax benefits immediately but will most likely pay it back at a later date. Aside from its tax benefits, the tax deferral strategy allows individuals to support Canadian humanitarian initiatives.
• Flow Through Shares are common shares of Canadian resource companies issued to finance the exploration an development of resource properties. To encourage investment by these companies, the federal government allows exploration and development expenses incurred to be flowed-through to investors and deducted for tax purposes.

It is more important now than ever to be able to find ways to save on your taxes. There may be a lot more ways for you to save on your taxes so make sure you consult with a professional. Consulting with a professional and having him help you set up a tax plan will ensure that you make use of all available tax saving strategies applicable to you.