Understanding the Taxpayer Bill of Rights Part 3: Commitment to Small Business

The next section of the Taxpayer Bill of Rights deals with Small Business.  We will now review these 5 items on the Taxpayer Bill of Rights.

1.The Canada Revenue Agency (CRA) is committed to administering the tax system in a way that minimizes the costs of compliance for small businesses:

As much as they say they try to minimize the costs of compliance for a small business, it is not an easy task.  CRA must balance this with their responsibility to administer and collect.  It is not advisable for a small business owner not to have an accountant who can advise them in the area of tax and reporting responsibilities.  Although CRA says they want to minimize it, it definitely seems to be heading the other direction!

2. The CRA is committed to working with all governments to streamline  service, minimize cost, and reduce the compliance burden:

The best example we can see of this is when the CRA collects taxes and gives the provinces their portion.  This is not the case in Alberta.  Although we don’t see great evidence of this, we can assume they do work with other governments to streamline things.  They do want to collect their taxes quicker, which hopefully makes it simpler for the small business!

3. The CRA is committed to providing service offerings that meet the needs of small businesses:

The CRA offers various online services for electronic filing and accessing information through an online CRA account.  As with any electronic service it can bring technical difficulties, however it can still be effective once in place and running smooth, particularly the access to your information online.

4. The CRA is committed to conducting outreach activities that help small businesses comply with the legislation we administer:

This mostly means they put on courses and put out publications for people to understand their opinions and methods.  Sometimes this can assist, but never just take it as fact!  It is always better to have your own tax advisors, accountants and lawyers that don’t work for the CRA!

5. The CRA is committed to explaining how we conduct our business with small businesses:

In my experience they sometimes do explain very well and other times they don’t.  I’ve worked with some auditors who are quite thorough and explanative, while I’ve worked with others who do their thing, won’t really answer your questions, and they just send a Reassessment.  It really depends on who you are dealing with as to what explanation you will get! 

So as you can see, the Taxpayer Bill of Rights is an important piece of legislation.  It is imperative that you know your rights, otherwise how will you know if they are trampling your rights and what to do about it.  If you believe that CRA is not staying in honor of any of these Rights, then lodge a complaint and go to the Ombudsman.  If we don’t do something to hold them accountable, who will? 

CRA also publishes a guide to explain this Taxpayer Bill of Rights from CRA’s side…( http://www.cra-arc.gc.ca/E/pub/tg/rc17/rc17-09e.pdf).   If you have any questions on the Taxpayer Bill of Rights or my blogs, please do contact me!

Understanding the Taxpayer Bill of Rights Part 2

Here’s the continuation of my discussion on the Taxpayer Bill of Rights.  We ended the previous blog with the 5^th taxpayers’ right so let’s move on to #6.

6. You have the right to complete, accurate, clear, and timely information:

This is another tough one as there is not a clear definition of what timely information is!  This is typically up to the Ombudsman or a judge to decide.  Getting it in writing ensures the information should be complete and accurate.  The word clear is also an issue here as a lot of things put out by the CRA are not clear to taxpayers! 

7. You have the right, as an individual, not to pay income tax amounts in dispute before you have had an impartial review:

This is a very important one!  If you have an amount in dispute through the appeal or Notice Of Objection then you do not have to pay it, until or unless it is resolved as owing.  However, interest may continue to accrue if the amount in fact has to be paid later. Also, if you are waiting for a refund for something else or another year they cannot hold it due to other amounts in appeal!

8. You have the right to have the law applied consistently:

In all my years doing accounting, I have rarely seen this to be true.  If you find this to be an issue, the Ombudsman must be notified in writing with the facts and details.

9. You have the right to lodge a service complaint and to be provided with an explanation of our findings:

Pretty self explanatory.  To lodge a complaint follow this link -- http://www.cra-arc.gc.ca/gncy/crsc/menu-eng.html

10. You have the right to have the costs of compliance taken into account when administering tax legislation:

So yes, if you hire accountants, lawyers or advisors you can deduct the cost.  Our motto at Kustom Design is that when you hire us, we’ll save you more in tax than you pay us for our accounting fees!

11. You have the right to expect us to be accountable:

Notice the wording on this – we have the right to expect them to be accountable…but do we have the right for them to be accountable?  Seems to be trick wording here!  If we look at the actual definition of accountability we can see clearly that they are not always accountable.  That being said, they usually are as clear as they can be why they have made a decision on tax matter, right or wrong.  They also do publish some annual reports to both public and parliament.

12. You have the right to relief from penalties and interest under tax legislation because of extraordinary circumstances:

This is a good one as there is sometimes the possibility to have things like penalty & interest waived, to allow you to file late returns without being penalized, and even to get refunds past 3 years back in some circumstances.  The details of applying for this relief can be found here (http://www.cra-arc.gc.ca/gncy/prgrms_srvcs/txpyrrlf/menu-eng.html).   If you are denied the first time, you can even file a further request.

13. You have the right to expect us to publish our service standards and report annually:

This one is pretty straight forward.  The annual service standard report can be found at www.cra.gc.ca/agency or (http://www.cra-arc.gc.ca/gncy/nnnl/menu-eng.html)

14. You have the right to expect us to warn you about questionable tax schemes in a timely manner:

This one is more for their benefit than yours.  They will warn you about things that are good and bad and you won’t know the difference.  They actually use this as a tactic to scare people from tax planning as tax planning and using tax programs can significantly reduce their revenues.  Keep in mind they are a collection agency and are paid to collect as much money as they can, which includes discouraging people from planning to save tax!

15. You have the right to be represented by a person of your choice.

Many times it is advisable to have a lawyer or accountant represent you when dealing with CRA, particularly when it comes to audits.  To give rights to a representative to handle your CRA matters you will need to fill out and submit a RC59 to CRA (http://www.cra-arc.gc.ca/E/pbg/tf/rc59/README.html). 

Understanding the Taxpayer Bill of Rights Part 1

In my next blogs I will help you understand your basic rights as a taxpayer.  Many people do not even know the Taxpayer Bill of Rights even exists in Canada, never mind read it.  So here it is (please click on the link below):

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:

This means that you can take advantage of all tax credits, tax deductions and options available to you for saving taxes.  You can do everything within the guidelines to save tax, and yes there are a ton available.

2. You have the right to service in both official Languages:

This is simple, you can have service from CRA in either or both English and French.

3. You have the right to privacy and confidentiality:

Unfortunately this is a tough one as you don’t always know when they are breaking your confidentiality or privacy.  In the case that you do find them breaking this rule, you must immediately write to the Tax Payer’s Ombudsmen (http://www.taxpayersrights.gc.ca/)

4. You have the right to a formal review and a subsequent appeal:

This means you can object and have a formal review of your case.  If they disagree with your claim or reassess you and you don’t agree with it, you need to object.  You may want to call for any clarification before you file the Objection.  A Notice of Objection can be filed within 90 days of an assessment or Reassessment that you don’t agree with.  If after the initial review is done and you still don’t agree with their decision, you can appeal further to the tax court and even on to higher courts!

5. You have the right to be treated professionally, courteously, and fairly:

Sometimes they do, sometimes they don’t!  If you are not being treated in a professional, courteous and fair manner then you can go to their superior for a complaint.  If the complaint is not resolved at that level then go directly to the Tax Payer’s Ombudsman.  Remember it is best not to speak to CRA directly, but to do everything with them in writing.  If you do have to speak to them, always get their full name and badge/bond number!

We will discuss more of your rights on my next blog!

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!

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!

Taxpayers’ Rights

It’s only fitting to end the tax season with some helpful information for taxpayers. So this week’s blogs would be all about tax, tax and more taxes! Let’s start by reviewing what rights you are entitled to as a taxpayer.

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.

I would like to encourage you to get familiar with your rights as taxpayers to make sure that you are treated professionally, courteously and fairly especially during this tax season. Whether you are simply filing your personal income tax returns, getting tax information or are being reassessed, it is important that the CRA respects all the service rights you are entitled to according to the Taxpayer Bill of Rights.

http://www.cra-arc.gc.ca/E/pub/tg/rc4417/rc4417-09b.pdf