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All Taxpayers in Canada Need Reliable a Tax Accountant

When the tax deadlines loom every year, Canadians are busy looking for a tax accountant in order to help reduce their tax load. Certain legislative changes in the past few years have allowed a specialized tax accountant to be more involved with CRA tax troubles. Knowledge and expertise of a specialized tax accountant comes in handy when there is a dispute with the CRA concerning tax assessment.

tax accountant is bound by a code of ethics in his or her profession. Constrained by law to disclose confidential information regarding a client, the tax accountant will not disclose clients information to any third party without written consent from clients.

Canadians require the services of a tax accountant when the CRA starts to challenge them with taxes problems. It is not easy to fight your own battles when it comes to negotiation and settlement of taxes. If you run a small business operation, the services of a good tax accountant will be invaluable. He or she will be able to help you find a way through the labyrinth of tax rules and provide the financial guidance that you require to manage your small business operations. A reliable accounting firm will not only handle audits and settlement of taxes for you but it will also keep you apprised of all the latest changes or developments in tax laws.

How do you go about finding a reliable tax accountant?

All business entrepreneurs can begin by asking their business associates about good accounting firms. It is crucial that you select a tax accountant who is familiar with your business requirements and your tax situation. For example, if your business is software or internet related, then you will have to seek accounting firms who are familiar with software skills and fluent in the language of e-commerce. If you are an exporting firm, then the accountants have to be conversant with all export laws and strategies.

It is not easy to be conversant with all laws pertaining to the filing of your taxes, even in a self reporting system of taxes. A good Tax accountant will be able to help in performing due diligence and in the correct filing of taxes. CRA cannot be given the excuse about ignorance of laws for not filing the taxes or filing them incorrectly.

CRA expects all taxpayers to be aware of the tax filing deadlines so that they can file on time. The accounting firm will be able to prepare and take care of prompt filing. A tax accountant will also keep a taxpayer informed about several credits that are available to the individuals. These credits can be claimed on the T1 Personal Income Tax Returns Forms. The credits help in the reduction of the final tax figure that is due to the CRA. There is a tendency among taxpayers to under claim some Tax Credits that are most challenged by the CRA as some accountants may not be asking the right questions and thus the chance of being denied the tax credits by the CRA increases.

Dealing with CRA Tax Problem

When the taxes cannot be paid on time and the returns cannot be filed, people have to be prepared to face a certain problem – the CRA tax problem. The lives of many Canadians are riddled with all kinds of tax problems. A high number of taxpayers are going bankrupt in Canada as a result of the scale of their tax problems. The excessive costs of interest charges and penalties are of a high magnitude that people are finding it difficult to bear.

CRA will do their utmost in recovering the tax dues that are owed to them. As a taxpayer, you have to be aware of what actions you have to take to handle a CRA tax problem and the steps you have to take to reduce the penalties and interest costs. The expert advice that is given by all experienced tax representatives and tax accountants is that the best way of handling a CRA tax problem is not to sleep on it. It is not at all wise to procrastinate when you deal with CRA.

When you seek professional help to tackle a CRA tax problem, you will be aided by a group of tax experts who will be working on your tax case as technical consultants and accomplished negotiators. Most tax accounting firms construct your financial records forensically so that they could be ready for an audit. They prepare themselves for all questions that could be asked in a typical tax court.

To prepare yourself for a possible CRA tax problem, you have to get your tax accountants to work closely with tax representatives for all matters pertaining to the Income Tax Act. A tax representative is well versed in both fields. A tax representative, therefore, becomes a unique kind of accountant so that you are allowed to be represented in Informal Procedure tax court proceedings.

Most tax accounting firms and representatives have to be covered by the rules of their respective professional regulatory bodies. They will prepare the necessary accounting records to set up your tax position concerning the CRA tax problem. They also make sure that the CRA is following the Taxpayers’ Bill of Rights. This is possible when they work on a direct basis with the staff of the CRA in case it goes overboard in its dealings with the taxpayer.

If you do not take professional help, you will not have any protection if you have tax returns which are not filed or income which has not been declared. When taxes are not filed, the CRA tax problem can still be sorted out by correcting your tax affairs voluntarily. There is a possibility that you will not be prosecuted or penalized heavily if you make a valid voluntary disclosure before any action is taken by CRA. The worst damage could be the payment of the tax amount along with the interest charges as penalties could be waived when you take timely and voluntary disclosure action.

CRA tax problem could be alleviated through the policies taken out by CRA itself where they have promoted voluntary acquiescence with the tax laws through tax amnesty programs. This is an encouragement to all taxpayers, both individuals and corporations, to report or voluntarily disclose any previous income or Goods & Service Taxes which have not been reported.

Responsibilities of a Tax Representative

tax representative has to cover for his client as a tax consultant, accountant, and an expert witness; all rolled into one. An authorized tax representative has to protect the interests of his or her clients. The representative has to agree that there will be no information disclosed concerning a client to a third party and also will not disclose any information that is provided to him or her by the CRA to anyone else in the absence of the taxpayer’s consent.

The tax representative has to make sure about the privacy of all the transactions that are conducted on behalf of a client or a taxpayer. All the documents have to be disposed of properly so that the confidentiality of a taxpayer is protected. The representative has to comply with all applicable legislative provisions like the Income Tax Act or the Goods & Services Tax Act and the Excise Tax Act. It has to be remembered that the CRA has the right to revoke the privileges of an authorized tax representative if he or she fails to comply with the terms and conditions governed under the contract of negotiation between the CRA and the taxpayer.

The tax representative has a responsibility of providing accurate information to CRA. There is a penalty if false information is provided intentionally under subsections 239(1) of the Income Tax Act.

When selecting a tax representative, you require someone who is specialized in tax resolution as tax dealing is a very broad topic. A specialist as a tax representative could be a good option based on any tax situation. If any tax activities involve some element that can be described as tax avoidance and the representative happens to be a specialist who is conversant with all CRA procedures, it would help the taxpayer a great deal.

Tax accounting firms assign a tax representative who is a licensed accountant as well as a tax specialist. The chances of facing an audit by the CRA will reduce if your representative is a tax specialist and a licensed accountant who can handle the toughest tax returns. Even if there is an audit by the CRA, the tax representative will be in a position to explain how the numbers have been arrived at on the returns.

The track record of a tax representative is of high importance. The credentials of a tax consultancy firm have to be high. An interesting standpoint with these tax consultancy firms is that they can be aggressive in their dealings with the CRA as they do not have the fear or the risk of losing their licence. If the consultants deal regularly with CRA, the taxpayer should not have any hesitation in placing full trust in their capabilities.

The tax representative can act as an expert witness also and defend a taxpayer in General Procedures in tax courts. The function of a tax representative as an expert witness is to help the court by providing an independent opinion about tax matters within his or her expertise. The evidence given by the expert witness when called to testify is an independent testimony and cannot be influenced by the CRA.

CRA Garnishment Toronto

What is garnishment?

Garnishment is a legal process by which a creditor can reach a third party to receive what the debtor owes him. If someone in Toronto fails to pay the money he owes, the creditor can go to a court for garnishment order against the debtor.  They can legally seize debtor’s money in his bank account, his salary or even other money he own in order to repay the debts.

Does a Toronto creditor always require court order?

The Toronto creditor does not require a court order if the debtor is in assignment of wages to credit union; or if the debtor owes unpaid taxes to the Canada Revenue Agency or CRA. The Canada Revenue Agency may directly notify debtor’s employer and may ask for immediate starting of CRA garnishment Toronto.

What does wage levy mean?

The wage levy is an enforcement action that is initiated by the CRA against someone for the purpose of unpaid taxes. It is just like the wage CRA garnishment Toronto.

What happens if there is a wage levy or wage garnishment?

If there is a CRA garnishment Toronto or a wage levy the employer will receive a garnishment order to withhold the specified amount from the wages of debtor.

In Toronto, what is the maximum amount for garnishment by a creditor?

The maximum amount for CRA garnishment Toronto is 50% of debtor’s gross monthly wages. However, if CRA puts a bank levy in addition to a wage garnishment, it can sometimes amount to 100% because the remaining 50% deposited in bank accounts will be taken away by the CRA.

What are the exceptions from CRA garnishment Toronto?

The social assistance and employment insurance cannot be garnished in the event of the CRA garnishment Toronto.

What is the process of garnishment?

A creditor has to apply to a court for garnishment. He will have to get the judgment order from court validating the debts and then will have to get the enforcement order for garnishment. He can also hire companies that will investigate debtor’s income and public documents for any property ownership. If the debtor has sufficient funds the creditor may initiate the CRA garnishment Toronto.

How can I stop CRA from garnishing my wages or seizing my bank account?

Anyone can have financial issues that may leave him unable to pay his taxes within the required period of time. You can always contact us to seek reliable and professional advice. We will guide you in the best possible way and will negotiate on your behalf with the CRA. We can get you such a payment plan that is in accordance to your capabilities. We can settle lower monthly payment plans for you with a little or no interest charges. You can always rely on us to stay protected against the CRA garnishment Toronto.

Filing Canadian Corporation Income Tax to CRA

Who is Liable to File the Corporation Income Tax?

All Canadian corporations, whether they are non-profit organizations or inactive corporations, are required to file T2 returns. It is obligatory for these Canadian corporations to file the corporation income tax returns every tax year whether there is any tax payable or not by a corporation.

Determining the Tax Year of a Corporation

The tax year of a corporation is also called the fiscal period that is 371 days or 53 weeks. The tax year cannot exceed the defined time frame. It is very important to determine the tax year of a corporation. The tax year of a corporation can be declared on the first T2 return of the corporation after its incorporation. You must make sure that you attach the financial statement for the corresponding tax year. At the time of filing the first corporation income tax return, the date of incorporation will be your tax year start date and for all subsequent returns your new tax year will start right after the end of your current tax year.  You choose the fiscal year end for your business when you setup the corporation.

T2 Return Filing Period of Your Corporation

All corporations are required to file their return no later than the six months after the ending of their tax years each time. If the tax year of a corporation ends at the month’s last day, you should file your corporation income tax return by the last day of six months after your tax year’s ending. If your tax year ends on any other day of the month and not the last day of the month, you should file a T2 return by the same day six months after the ending of your tax year.  If a corporation has profits, its T2 payment will be due two to three months after the ending of its fiscal year.

For example if Dec 31st is the last day of a corporation’s tax year, the following June 30th will be the due date for its return filing. The due date for filing the return for a corporation with tax year ending at September 23 will be March 23. You should always file your corporation income tax return within the required period of time to save yourself from facing any inconvenience or penalty.

Filing T2 Return and Reporting

All of the corporations for which the tax year end after 2009 and have the gross revenue of over $1 million are required to file their T2 returns online. In the case of non-compliance by the corporation for which the tax year ends after 2011, it will be subject to penalty. A corporation will have to file its tax return with CRA in order to report its corporation income tax. You will have to use your business numbers to file the provincial corporation taxes with the federal income tax return of the corporation. All of the corporations are liable to file their returns each of their tax year whether there is tax payable or not.

Reliable Corporation Income Tax Services

Although there are various options available for the corporations to file their own returns, when it comes to filing the return it is better to let the professionals handle it. The corporation income tax return of Canada is extremely complicated and can take a lot of your precious time if you do not have the required knowledge and experience. The slightest oversight or mistake in the return can cause serious issues.

Experienced tax accountants with proper knowledge and experience will make sure that the tax payable stays as low as possible. In addition, the tax accountants will make sure of accurate tax calculations and on time filing of return; they will also guide you through proper tax deductibles. Finally, in case of tax audits, experienced tax accountants can really make a difference in the final audit results.

In order to stay secure and to avoid any inconvenience or a penalty, you should hire an experienced and certified tax accounting firm. Tax 911 Now is a reliable tax accounting firm in Canada that can make sure that you pay the accurate taxes at the right time and with no problems with your accounts or corporation income tax liabilities.  Call 1-877-918-2991 today for your initial free consultation.

Dealing With A Bank Freeze by Canada Revenue Agency

 

When taxpayers have tax debts owing to the Canada Revenue Agency (or CRA for short) the CRA collection agents will begin to pursue legal collection action to recover the tax debts. One method that the CRA collection agents like to use to collect debt is by freezing a bank account commonly known as bank freeze.

 

Unexpected Bank Freeze

A frozen bank account can be extremely shocking and can cause tremendous financial stress. Many people feel frustrated when they find out that the bank has frozen all of the funds in their bank accounts. In general, however, bank freeze is a legal action aim for collection of tax debts. Taxpayers usually get pre-warning about the tax owing and potential legal enforcement actions: first you will be notified in writing that a tax debt is owed;  then you will be sent another letter demanding payment of the tax debts;  finally, a “Requirement to Pay” letter is issued to your bank, demanding the bank to freeze your bank accounts.  Legally, the bank must freeze the bank account as instructed to be in compliance.

Damage of Bank Freeze

Once the CRA put on a bank freeze, your mortgage will for sure default and you will not be able to take money out even to buy groceries.  You may have to open new bank accounts with another bank. In general, once the CRA has frozen a bank account. The credibility or trust you built over years will be compromised. The banks become cautious in dealing with you. After all, the CRA is one of the most powerful agencies in the country. Most banks will stop renew mortgages or offering credit and may even close your line of credits if you have them. Tax debts to CRA are the worst kind of debts banks want to get involved.  Sometime, people with tax debts problem do take the path of filing for bankruptcy when facing the pressure of CRA legal actions.

 

Prevention of A Bank Freeze

If you have a large tax debt and have received tax debts notice from CRA asking for payment and your bank account has not yet been frozen by CRA, it is advantageous to act before the bank freeze occurs. Take action now doesn’t mean you need to come up with all the funds to pay off the tax debt. Acting now to get professional help to deal with your tax problem before the tax debts problems get out of control. Even if your bank account has been frozen you still have a chance to get them released.  Getting a bank account unfrozen is difficult but can be achieved through various tax venues.

 

Call Tax 911 Now if you have just received the notice that you own taxes. We can start the process of negotiating an affordable tax payment plan. Or if your bank account has been frozen and you do not have the funds to pay, contact us. We can negotiate with CRA collection agent to release your bank freeze and coming up with a plan to deal with your tax debt.  Contact Tax 911 Now at 1-877-918-2991 Today!

Tax Lawyer or Tax Attorney: Do You Need One?

Tax Lawyer or Tax Attorney: Do You Need One?

Many people, once in tax troubles, assume that in order to solve their tax problems with Canada Revenue Agency, they will need to engage a tax lawyer or tax attorney. However, what they do not know is that specialized Tax consultants are equipped with tax knowledge and experiences to deal with majority of your tax issues. Most times there is no need to hire a tax lawyer or tax attorney.

 

To start with, for example, if you have unfiled back taxes, you do not need tax lawyer or tax attorney to file your taxes. In fact, lawyers are not trained and recognized by CRA as tax filing specialists.

The procedure for filing back taxes is straightforward. For other kinds of tax problems beyond the tax filings, you may want to contact a specialized tax consultant who specialize in tax problems resolution services.

Specialized tax consultant will go over with you your tax situation in full. This review will allow the tax accountant to assess your situation. Most spcialized tax consultants do not charge for this initial consultation, and many ask you to bring CRA letter with you. After assessing your circumstances, the spcialized tax consultants will discuss your options. It is possible that a better alternative to a straight filing may be available to you.

 

Out of the most common tax problems or tax services, such as tax audit, unfair assessment, tax appeal, wage garnishment, bank freeze, unreported income, unfiled tax returns, tax debts owing, voluntary disclosure, tax payer relief, tax payment plan, etc. Tax 911 Now’s specialized tax consultants have the expertise and experiences to resolve them all effectively.

 

When You Do Need a Tax Lawyer or a Tax Attorney?

Some tax lawyers dramatized the advantage of “client privilege” claiming if CRA demands information from professional service providers, only tax lawyers or tax attorney can protect clients’ information. The statistics do not support the claim, however, just do the research online. The chance of CRA forcing accountants to disclose information without clients’ permission is close to the winning of a lottery. CRA, to be direct and more effective, prefers to deal with taxpayers directly.

 

There are times, one or two out of a hundred, clients do need tax lawyers or tax attorney because their cases are so severe and they need to go to tax court. Tax lawyer or tax attorney is required to represent the clients in court in such a case as per the legal requirement.  In such case, we do have our partner tax lawyers working with us to better help you.

 

For the rest of clients, their issues are still within CRA’s administrative system and thus do not require legal representation. In fact, Canadian Income Tax Acts dictate that, within the CRA’s administrative system, the same policies or rules apply to everyone. It does not get more flexible because of the involvement of a tax lawyer or tax attorney. As a matter of fact, Tax 911 Now’s specialized tax consultant have been working with clients who got better results from us rather than their former tax lawyers.

 

What To Look For In Specialized Tax Consultants

 

What should you look for in a specialized tax consultant ? It’s important to choose a firm that understands people, and an experienced tax consultant that recognizes the need to help you find effective solutions to your tax problems. Good tax consultant should be able to see past your present problematic situation, create a sound strategy to combat your tax problems then act to help you clean up your tax problems with Canada Revenue Agency.

 

Don’t hesitate any longer, contact a specialized tax consultant today, and make a fresh start. Freedom from tax problems can give you a brand new start to life! Call Tax 911 Now at 1-877-918-2991 Today!

 

Understanding Tax Evasion vs. Tax Avoidance

Understanding Tax evasion vs. Tax Avoidance

Tax Evasion is illegal; it is the evasion of taxes by taxpayers including individuals and businesses such as corporations. Under tax evasion taxpayers intentionally misrepresent the true income or tax owing status to the tax authorities to reduce their tax liability. Such act may include false tax filing, such as report less income, profits or gains than actual or inflating expenses or deductions.  The extent of tax evasion is measured in the amount of unreported income, which is the difference between the reported income and the actual income.

Tax avoidance, on the other hand, is not illegal. It is when taxpayers use tax laws to reduce tax liability. Both tax evasion and avoidance are tax noncompliance in different degree, as they cover activities that intend to play with the tax system, although such classification of tax avoidance is disputable, given that avoidance is not illegal.

Canada Revenue Agency CRA Response to Tax Evasion

The degree of tax evasion depends on several factors, such as the amount of income an individual or a corporation has. Normally, when the amounts involved are minimal, the efforts to evade income tax decline. The extent of evasion also depends on the CRA’s tax administration effectiveness.

CRA has been improving its technology, procedure and staff training to combat tax evasion. CRA also adopted various means to reduce tax evasion and increase the level of tax enforcement. Tax auditors are required to identify tax evaders, collect the taxes interest and penalties and often those evaders become published on mass media or CRA website so they can become examples for their fellow Canadian taxpayers to comply with the tax rules.

 

Level of Tax Evasion and Punishment

Just like many other countries, Canadian tax authority considers tax evasion a crime, and the guilty party is liable to fines and/or imprisonment.  Dishonestly misreporting income in a Canadian tax return is not necessarily considered a crime. It is also a reality that the extent of evasion depends on the severity of punishment for evasion. As long as you have undeclared income you could face penalties or prosecution for tax evasion. The Canadian Income Tax Act Section 238 and 239 set out details on tax evasion and the penalties for tax evasion in Canada.

The offenders who are guilty under section 239 of the Income Tax Act will be subject to a fine of up to double the amount of the tax that was evaded and/or imprisonment for a term not exceeding two years.

Income tax evasion can lead to criminal charge and it is a serious act. It should be avoided at all costs. If you have been hiding for years from the CRA for unreported or under reported income, you may want to consider cleaning up your tax problems voluntarily. With experienced tax professionals’ help, your damage will be greatly reduced. The worst nightmare happens when after many years of hiding, all of sudden CRA starts investigation. You could lose everything overnight. Take risk free action immediately before it is too late. Contact Tax 911 Now, the experienced tax professionals for a private, confidential, free no obligation consultation! Call 1-877-918-2991 today!

Tax Court CRA Tax Appeal Case for Small Business

The following is a typical tax appeal case in the tax court. This tax court case demonstrates how small business owners can run into problems with Canada Revenue Agency for nearly two decades of legal battle.
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Date: 2011-03-03

741290 ONTARIO INC., vs. HER MAJESTY THE QUEEN,

AMENDED REASONS FOR JUDGMENT

[1] These appeals were begun under the informal procedure of this Court, to challenge the correctness of some 94 unspecified assessments made under the provisions of the Income Tax Act (the Act),[1] the Employment Insurance Act[2] and the Canada Pension Plan[3] in respect of amounts required by those statutes to be withheld from wages paid to employees of the appellant between April 1992 and July 1999.

[2] By the Order of Rossiter J., as he then was, made on October 23, 2007, the appeals were quashed insofar as they related to assessments under the Employment Insurance Act and the Canada Pension Plan. On June 19, 2008, at the request of the appellant, McArthur J. ordered that the remaining appeals proceed pursuant to the general procedure.

[3] The appeals from the assessments under the Income Tax Act came on for hearing before me on December 9, 2009, and it quickly became apparent that the only issue that the appellant sought to pursue was not revealed by the Notice of Appeal. I granted leave to the appellant to file a Fresh As Amended Notice of Appeal, and that was done.

[4] By the amended pleading the appellant has limited the issue to the validity of the penalties assessed under subsection 227(9) of the Income Tax Act. Specifically, it is asserted that those penalties are subject to a defence of due diligence, and that the question of due diligence has been resolved in the appellant’s favour by a judgment of O’Connor, J of this Court. By that judgment O’Connor, J. allowed the appeals of Stella Pinnock and Stainton Pinnock from assessments made against them as the directors of 741290 Ontario Inc. under section 227.1 of the Income Tax Act in respect of amounts that should have been, but were not, remitted as withholdings from the wages paid by it to its employees.[4] The relevant part of paragraph 153(1)(a) and sections 227 and 227.1 are attached as Appendix “A”.

[5] Stella Pinnock and her husband, Stainton Pinnock, have been the directors of the appellant since its inception in 1987. From then until November 1998 the appellant operated Van Del Manor Nursing Home in Toronto under a license granted by the province of Ontario under the Nursing Homes Act. In November 1998 the Ontario Ministry of Health determined that the building could no longer be operated as a nursing home. After that Ms. Pinnock operated it as a retirement home for a brief period. Since September 1999, the premises have been leased to the City of Toronto, which operates it as a seniors’ home. The nursing home license was sold by the appellant’s bank.

[6] Mrs. Pinnock gave evidence for the appellant. From the outset the Pinnock’s had difficulty meeting their payroll. Mrs. Pinnock blamed this on a number of factors. The payroll was substantially higher than they had expected, based on the financial statements that they had seen prior to buying the business. The Ministry of Health required them to make substantial repairs, renovations and upgrades to the building, at considerable cost, in order to continue to use it as a nursing home. They also were required to increase the number of staff employed beyond the level that they had expected and that the income would support. The appellant was paid on a per patient basis by the Ministry of Health, and according to Ms. Pinnock’s evidence the payments were always made after the month end, when the money was required to pay current expenses. In short, the expenses of operating the business were higher than the Pinnock’s had foreseen, and there was an acute shortage of working capital from the outset.

[7] The appellant’s major income source was the monthly payments made to it by the Ontario Ministry of Health. These, Ms. Pinnock said, were amounts paid for specific purposes or activities such as patient care or nutrition, and they had to be applied to those purposes. The appellant’s employees were paid every second Thursday. For reasons that Ms. Pinnock attributed to delays by the Ministry of Health in making its payments, the appellant was frequently in the position of being unable to meet its gross payroll, which is to say the payroll including the statutory deductions that an employer is required to make for income tax, employment insurance premiums and Canada Pension Plan contributions. Frequently it did have sufficient funds, however, to meet the net payroll only, and on these occasions it did so by paying the employees their net pay for the period, but it did not remit the income tax and other deductions to the Receiver General within the time fixed by section 108 of the Income Tax Regulations[5] (the Regulations) for doing so.

[8] In January 2000, the Minister assessed Stainton Pinnock and Stella Pinnock pursuant to subsection 227.1(1) of the Act for the unremitted withholdings, interest and penalties. They appealed from those assessments to this Court, relying on the saving provision found in subsection 227.1(3), which reads:

227.1(3) A director is not liable for a failure under subsection 227.1(1) where the director exercised the degree of care, diligence and skill to prevent the failure that a reasonably prudent person would have exercised in comparable circumstances.

[9] Those appeals were heard by O’Connor J on September 29, 2004, and he gave judgment orally at the conclusion of the hearing allowing the appeals. His Reasons for Judgment are brief. He refers to the extent to which decisions made by the Ministry of Health affected the appellant’s profitability by imposing requirements to spend money on the maintenance of the building and by limiting the number of patients that could be accommodated, and to the financial problems caused by union demands. He found Mr. and Mrs. Pinnock to be credible witnesses, and to have attempted in good faith to resolve their financial difficulties by negotiating with the Revenue Agency officials, and by liquidating their personal savings to invest in the business.

[10] Schedule B to the Reply to the Notice of Appeal filed by the respondent lists some 93 assessments issued by the Minister between April 13, 1992 and July 14, 1999 in respect of withholdings either not remitted at all, or remitted late. By the time of the hearing the appellant no longer disputed the particulars of any of these assessments, either as to its failure to remit withholdings or as to the computation of the interest and penalties under the Act. It contested only the penalties for late remittance of the withholdings, on the basis that Stainton and Stella Pinnock were, at the material times, the alter ego of the appellant as they were the only directors, and so theirs were the controlling minds of the corporation. The appellant argues that if they, the only directors, exercised the degree of care, diligence and skill that a reasonably prudent person would, in comparable circumstances, have exercised to prevent the failure to remit on time, then it must follow that the corporation exercised sufficient diligence to be exculpated from the penal provisions of subsection 227(9). This submission, of course, necessarily depends upon the proposition that failure to remit the statutorily required withholdings is a strict liability offence rather than an absolute liability offence, and that the degree of diligence required of directors by subsection 227.1(3) is at least as great as that required to exculpate the company under subsection 227(9).

[11] The appellant argues that it would be incongruent and lacking in consistency for Parliament to have provided a defence of due diligence for directors from their potential vicarious liability under section 227.1 for the failure of a corporation to remit amounts withheld under section 153, and yet not provide a similar defence for the corporation from its potential liability to a penalty under subsection 227(9). The argument is that since the directors are the directing mind of the corporation the legislation must be presumed to require the same standard of conduct from the corporation itself as is required from the directors.

[12] In my view the matter is not so simple as that. The reasons of the majority of the Supreme Court of Canada in Toronto (City) v. C.U.P.E. Local 79[6] were written by Arbour J. At paragraph 23 she notes that there are three conditions that must be met for issue estoppel to apply:

(i) the issue to be decided must be the same as that which was decided in the prior case;

(ii) the earlier decision must have been a final one; and

(iii) the parties to both proceedings must be the same, or their privies.

While abuse of process by litigation is a more flexible doctrine than issue estoppel, it is clear from Arbour J.’s discussion of it at paragraphs 35 to 54 that the requirement of identity of issue in the two proceedings is as necessary to abuse of process as it is to issue estoppel.

[13] The rationale underlying both doctrines includes avoiding unnecessary expense to the parties to relitigate a matter that has already been decided, conserving judicial resources, avoiding the possibility of collateral attack on a prior judgment that would otherwise be final, and protecting the integrity of the judicial system from the harm to public confidence in it that would be occasioned by inconsistent judgments in respect of the identical issue. None of these concerns arise if the issues in the first and second proceedings are not identical.

[14] The appellant’s argument in this case assumes that if failure to remit amounts deducted is not an absolute offence, admitting of no defence whatsoever, then the degree of care that a corporation must show in order to establish a defence for purposes of the penalty imposed by subsection 227(9) of the Act must be identical to the degree of care that a director must show in order to avoid vicarious liability for the default of the corporation under subsection 227.1(3). I understand this proposition to be founded on the basis that subsection 227.1(3) uses the expression “due diligence” and that phrase has been used from time to time to describe the defence available to those charged with a strict liability offence.[7]

[15] I know of only one case in which the question whether the failure to remit as and when required is an absolute or a strict liability offence has arisen. That is Weisz, Rocchi & Scholes v The Queen, [8] a decision of Bowman, A.C.J., as he then was. His conclusion was that the offence of late remitting had not been established by the evidence, and so there was no need to decide whether, if it had been established, the appellant would have been entitled to avoid liability for the penalty by proof of due diligence. He did, however, add in obiter that although the question was one for another day, if he had been required to decide it he would have found that a due diligence defence was available.

[16] For purposes of this appeal, I am prepared to assume that a “due diligence” defence is available. Nevertheless, for the reasons that follow, I conclude that neither res judicata nor abuse of process by relitigation based on the judgment of O’Connor J. is available to the appellant, and that the defence of due diligence, assuming it is available at all, has not been established.

[17] Assuming that failure to remit as and when required is not an absolute but a strict liability offence, it nevertheless requires a greater degree of “due diligence” than does subsection 227.1(3). The words of that subsection are precisely the same as those found in paragraph 122(1)(b) of the Canada Business Corporations Act,[9] and were considered by the Supreme Court of Canada in Peoples Department Stores Inc. v. Wise.[10] That Court’s conclusion as to the standard of conduct that these words mandate is found in paragraph 67 of the unanimous judgment:

67 Directors and officers will not be held to be in breach of the duty of care under s. 122(1)(b) of the CBCA if they Act prudently and on a reasonably informed basis. The decisions they make must be reasonable business decisions in light of all the circumstances about which the directors or officers knew or ought to have known. In determining whether directors have acted in a manner that breached the duty of care, it is worth repeating that perfection is not demanded. Courts are ill-suited and should be reluctant to second-guess the application of business expertise to the considerations that are involved in corporate decision making, but they are capable, on the facts of any case, of determining whether an appropriate degree of prudence and diligence was brought to bear in reaching what is claimed to be a reasonable business decision at the time it was made. (emphasis added)

Can this be said to be the same standard that applies to the obligation of an employer to remit to the Receiver General the amounts that it has withheld from its employees’ earnings for their income tax liability as required under section 153? I think not.

[18] There is a marked contrast between the standard of conduct required by the “reasonable business decision” test under subsection 227.1(3) on the one hand and what is required by section 227 on the other. Subsection 227(4) creates a trust in favour of the Crown, whereby the employer holds the amounts deducted for income tax from payments of remuneration “… in trust for Her Majesty and for payment to Her Majesty in the manner and at the time provided under this Act.”

[19] It is certainly reasonable that an employer should not be penalized under subsection 227(9) where the failure to remit in time is caused by an event beyond the employer’s control, such as a failure of the post office to deliver a remittance mailed in time, or an error made by a bank clerk in transferring funds. However, subsection 227(4) does not permit the employer, in any circumstances, to make a business decision to use the funds for some purpose of its own, no matter how dire its financial plight may be or how brief the period for which it intends to use the funds. The funds belong to the employees, not to the employer. In my view, any failure to remit withholdings when they are due that results from a deliberate decision of the employer, whether that decision is made by a director or by an employee, would necessarily be culpable. Consequently, the issues that arise under subsection 227.1(3) and subsection 227(9) are different. Neither issue estoppel nor abuse of process by relitigation can apply in this case.

[20] Was the failure of the appellant to remit its withholdings as and when prescribed under the Act the result of an event beyond the control of the corporation, or did it result from a deliberate decision? Mrs. Pinnock certainly tried by her evidence to paint a picture of a corporation that was in default only because of unforeseeable problems caused by the actions of others. The expenses were greater than she and her husband had anticipated because they were not properly revealed to them before they purchased the business, and because the Department of Health made too many demands on them to spend money on upgrades and repairs. Labour costs were inflated by staffing requirements that were imposed on the appellant by the Department of Health, and by the demands of unionized workers. The payments from the Department of Health always came after the month end, when the money was required before that in order to meet the payroll and the accounts payable. Their attempts to raise additional capital were thwarted by the banks that would not extend additional credit to the appellant after its line of credit was exhausted, and by the refusal of the Department of Health to approve a prospective investor.

[21] It is clear from the evidence of both Mrs. Pinnock and Ms. Ebanks, a CRA Collections Officer, as well as from the Amended Notice of Appeal, that the appellant habitually failed to remit the payroll withholdings as and when required under the Act, and that its failure to do so was caused entirely by the fact that it did not have the necessary funds to meet the gross payroll, and so elected to pay the net payroll to the employees and not pay the withholdings. This practice was the subject of adverse comment by the Supreme Court of Canada in Royal Bank of Canada v. Sparrow Electric Corp.:[11]

(B) The Nature of Section 227(4) and (5) Statutory Trusts

25 Section 153(1)(a) ITA places an affirmative duty upon employers to deduct and withhold amounts from their employees’ pay cheques, and remit those withholdings to the Receiver General on account of the employees’ tax payable. By virtue of s. 153(3) ITA, these withholdings are deemed to become the property of the employee:

153 …

(3) When an amount has been deducted or withheld under subsection (1), it shall, for all the purposes of this Act, be deemed to have been received at that time by the person to whom the remuneration, benefit, payment, fees, commissions or other amounts were paid.

In a perfect world, these deductions would be made, a cash fund would be set aside by the employer, and the withheld amounts would be promptly remitted to the Receiver General when due. The deducted amounts, lawfully the property of the employee, would in this way be transferred to Her Majesty to be set against his overall tax payable.

26 As a practical reality, however, these deductions are often not remitted as required under the ITA. Instead, the withholdings are commonly made solely as a book entry, and therefore the deduction of taxes from wages becomes merely a notional transaction; no cash is actually set aside for remittance and, often, the deductions are not transferred to the Receiver General: see, e.g., Re Deslauriers Construction Products Ltd., [1970] 3 O.R. 599 (C.A.), at p. 601. It is at this point which a business becomes indebted to Her Majesty for the amount of moneys only fictionally deducted. I hasten to add, however, that while it can be said Her Majesty at this point becomes de facto, if not de jure, a creditor of the non-remitting employer, the arrangement is dissimilar to an ordinary debtor-creditor situation in two fundamental respects. First, in contrast to usual negotiated credit arrangements, this transaction is of manifestly a non-consensual nature. Second, by virtue of s. 153(3), the debtor can in law be considered to be utilizing an asset which is the property of its employees. In this sense, it is not inaccurate to characterize the non-remittance of payroll deductions as a “misappropriation” of the property of another. Indeed, the authorities, correctly in my view, commonly refer to the conduct of the tax debtor in this manner: Roynat, supra, at p. 646, per Twaddle J.A.; and Pembina on the Red Development Corp. Ltd. v. Triman Industries Ltd. (1991), 85 D.L.R. (4th) 29 (Man. C.A.), at p. 48, per Lyon J.A. dissenting.

27 The economic reality of this sort of misappropriation of statutory deductions is artificially to increase the working capital of the tax debtor. By foregoing a cash payment to Her Majesty in the amount of the payroll deductions, the tax debtor is able to utilize the freed resources elsewhere in its business. The effect of non-remittance was summarized by Lyon J.A. in his dissenting reasons in Pembina on the Red Development, supra, at p. 48:

… either the tax debtor used the misappropriated deductions for its own purposes or the pool of moneys available for distribution to the tax debtor’s creditors … has been increased by the amount which the tax debtor failed to remit to the Receiver-General.

28 It is against the backdrop of this unfortunate factual scenario that the provisions of s. 227(4) and (5) can be seen to have been enacted. While it can be said that at the point of withholding the employer becomes the trustee of a fund which is in law the property of its employee, s. 227(4) has the effect of making Her Majesty the beneficiary under that trust. I agree with the observation of the mechanics of s. 227(4) made by Twaddle J.A. in Roynat, supra, at p. 646, where he states:

Although [s. 227(4)] calls the trust created by it a deemed one, the trust is in truth a real one. The employer is required to deduct from his employees’ wages the amounts due by the employees under the statute. This money does not belong to the employer anymore. It belongs to the employees. The employer holds it in a statutory trust to satisfy their obligations.

The conceptual difficulty arises, of course, when the tax debtor fails to set aside moneys which are to be remitted. At this point, the subject of Her Majesty’s beneficial interest becomes intermingled with the general assets of the tax debtor. As Twaddle J.A. rightly observed in Roynat, supra, at p. 646, “Her Majesty’s claim … then be[comes] that of a beneficiary under a non-existent trust”. In short, the misappropriation of statutory deductions conceptually problematizes the legal vehicle — the concept of the trust — which Parliament has invoked in order to regain the moneys lawfully owed to Her Majesty.

[22] Faced with a chronic insufficiency of working capital, and unable to meet its gross payroll in full from time to time, the appellant chose to solve the problem by appropriating the withholdings rather than by resorting to the mechanisms available under the statutes designed to deal with the problems of insolvent corporations. This misappropriation is surely conduct beyond the threshold of culpability under subsection 227(9) of the Act, no matter whether the offence be considered “strict liability” or something else. For this reason, like Bowman C.J., I need not decide whether the offence is one of absolute liability or not. Certainly, the appellant in this case has no basis on which to claim that it used all reasonable means, or even its best efforts, to avoid the failure to remit on time.

[23] The appeals are dismissed, with costs to the respondent.

Signed at Ottawa, Canada, this 3rd day of March, 2011.

“E.A. Bowie”

Bowie J.
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What You Need to Do Now to Fix Your Tax Problems Rather than Going to Court

If you sense that you will run into troubles with the tax man or you have been alerted by the tax man, then you cannot afford to wait any longer! Do something to resolve your tax problems.

It makes far more sense, and will be less costly in the long run, to resolve your tax problem with the tax man right away, rather than dealing with the financial burden of going to court.

The first step is to stop procrastinating and running. Take action today!

Hire someone who is qualified and has the experience to help you solve tax problems. Many people try to handle their tax problems themselves, resulting in frustration and negative results because they do not understand the complicated tax system well.

Our initial consultation is FREE and CONFIDENTIAL. You will get comprehensive analysis of your tax problems and recommended solutions in the first meeting. Then you can decide what to do from there. There is no obligation required.

CRA Tax Penalites

 

Filing taxes late: There’s a high cost


Thousands of Canadians file their taxes late. Be prepared to pay hefty penalties and to lose some government benefits if you do.

Millions of Canadians filed their tax returns before the April 30th deadline, but there are thousands that end up filing late, or not filing at all.

If you do not owe money, there is no late filing penalty. You will still be able to file later and still receive your tax refund. However, if you owe money and file late for whatever reason, you will end up triggering penalty fees, face interest payments and become ineligible for certain government benefits.

Here are few things to know if you’ve filed your taxes late:

Interest and penalties
There are two different kinds of penalties levied by the the Canada Revenue Agency (CRA).

There are late filing penalties when you owe taxes and don’t file your return on time. The penalty is 5 per cent of the amount owed, plus an additional 1 per cent of the balance owing for each month that your return is late – to a maximum of 12 months.

For example, if you owe $2,500 and file six months late, you will be charged 11 per cent – or $275.
On top of the late filing penalty, you will also be charged interest on any amount owed. Interest is compounded daily, and interest rates can change every 3 months.

If you filed a late return this year, and you were also charged a late-filing penalty in one of the previous three years, your late-filing penalties will double. The CRA will charge a penalty of 10 per cent of the taxes you owe, plus an additional two per cent for each full month that your return is late, up to a maximum of 20 months.

News Source: theStar.com

CRA’s Hefty Late Filing Penalties

First time late filing penalty: if you owe tax and do not file your return on time, CRA will charge you a late-filing penalty. The penalty is 5% of your tax balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months. In another word, if you have late tax unfiled, for the very first year, you will have 17% of tax owing for the penalties alone.

Repeating late filing penalty: if the late filing is a re-occurring event within three years, then the penalties become nearly tripled. The late-filing penalty becomes 10% of your tax balance owing, plus 2% of your tax balance owing for each full month that your return is late, to a maximum of 20 months. That is a late filing penalty of 50% of your tax owing.

The Compounded Daily Interests

In addition to the late filing penalties, CRA charges much higher interest than banks on your tax balance and penalties. The interest is compounded DAILY. Use rule of thumb, if assumed interest is 7%, which is not abnormal for CRA for many years, then tax owing doubles in about ten years. When the interest is compounded daily, the interest keeps running when you sleep.

What You Need to Do Now is to stop procrasnating, start taking actions. You can not afford to wait any longer!

What We Can Do to Help You

To control your damage right away, we will do a quick, sometimes, on the spot assessment, if you have unfiled taxes for years and you do not owe taxes. Then we will quickly help you to reconstruct all the financial information and locate all your missing pieces of tax information to report your tax returns properly.

If we determine that you have unfiled back taxes and large tax debts owing for many years and thus the interests and late filing penalties are alarmingly high. Then we may need to help you to file under the Voluntary Disclosure Program or Tax Amnesty immediately to avoid the risk of being caught by CRA and thus lose the opportunity to file under the protective Voluntary Disclosure Program to reduce the severe damage. The penalties alone may force you into bankruptcy.

Why You Should Work with Tax 911 Now

Unlike these accountants or the tax filers with seasonal appearance in the malls, we can not only fix your back tax problem, we can also help you to negotiate with CRA for the matters before and after the filing.

Before the filing, we can help you to file Tax Amnesty program to completely remove your penalties and/or some of the interests.

After the tax filing, if CRA challenge you or audit you, we have the expertise to represent you and fight for you on the returns;

If the tax bill is too high, then we can negotiate a tax relief for you to reduce the tax penalties and interest, or we can help you to negotiate an affordable payment plan so no legal collection actions will be taken against you by CRA.

We are different because we can provide much more comprehensive services to protect you in many aspects and all stages of your tax dealing with CRA.

Our Unlimited Free Consultation & Service Guarantee

To begin with, we offer RISK FREE no obligation initial consultation just to help you to understand the depth and complexity of your tax problems. We will also provide you the recommended steps to take to fix your tax problems. Then it is completely up to you to decide what to do from there.

If you do decide to engage us to fix your tax problems, we will provide price match guarantee within the entire tax negotiation industry.

CRA Tax Appeal & Objection

There are times taxpayers believe that the CRA has unfairly assessed them. If errors are not corrected, The taxpayers will end up paying extra taxes that they do not owe. Some are very significant. If you believe that you should not owe the amount of taxes that CRA has assessed and the amount is big, then you should stand up for your right as the taxpayer.

There are deadlines for you to file a tax appeal.
If you do decide to file a tax appeal, then you need to file it within the timelines dictated by tax law, which is 90 days after you receive the Notice of Assessment or Reassessment.

The CRA has to cease legal collection actions once you file a tax appeal.
The CRA can take legal actions to collect their taxes, such as income garnishment, liens against taxpayer’s property, they can direct sheriffs to sell taxpayers’ assets, freeze taxpayer’s bank accounts. Only tax appeal can effectively stop the legal collection actions.

Tax appeal is a serious and complicated matter.
In fact, the tax appeal process is so complicated that most accountants do not feel comfortable dealing with it on their clients’ behalf. For this reason, the help of experienced tax professionals is very important.

Seasoned tax professionals will be able to perform effective negotiation on your behalf with CRA.

The first step is to stop procrastinating and running. Take action today!

Hire someone who is qualified and has the experience to help you solve tax debt problems. Many people trying to do the tax appeal themselves quit halfway due to the complexity of the matter.

Get an experienced tax professional TODAY by calling Tax 911 Now team at 877-918-2991

We have won so many tax appeal cases for clients, who in turn shared their positive experiences and appreciation in their testimonials.

Our Free No Obligation Consultation & Rate Guarantee

To begin with, we offer first-time RISK-FREE consultation. There is no obligation and it is completely up to you to decide what to do from there.

Our tax services are offered in the following cities in Canada:

  • Toronto
  • Markham
  • Vancouver
  • Calgary

Get Tax Appeal Help TODAY by calling Tax 911 Now team at 877-918-2991

Tax Alert: CRA Tax Audit on Condo Flippers

 

In recent few months, major news medias warned the public about upcoming CRA (Canada Revenue Agency) condo tax audits. Financial Posts and The Toronto Star published that the Canada Revenue Agency is undergoing tax audits of condo sales to check for non compliance with the Income Tax Act.

The focus of the audit is to determine whether the profit from your condo sale is treated as “capital gains” (where only 50% is taxable) or as “income” (where 100% of the gain is taxable).  The CRA is particularly concerned with “assignment” transactions where the person buys a pre-construction condo but subsequently sales the right to buy the condo before its final closing.  In the past, builders are not required to disclose the names of the original purchaser but under new CRA rules they may have to disclose them.

People who have assigned multiple properties over the year or even the last few years will have difficulty persuading the CRA that these transactions should be treated as capital gains rather than income.

CRA is also going after people who take possession of the condo unit but sale it shortly after the date of closing, typically shorter than year and a half. Planning and preparation plays a key role in protecting yourself. Most taxpayers have no ideas how to prepare the needed documentation to gain advantage in winning the battle.

If the CRA believes that the transaction is to be reported as income rather than capital gains, the resulting financial consequence can be very costly.  For example, if your gain is $100,000  and CRA deems that this is to be classified as “income” then you must include the entire $100,000 as taxable income in the year of the sale.  If it is capital gains then only $50,000 is taxable.

In addition, CRA will also charge you interest on the taxes that you owe after a reassessment.  For people who did not report the transaction all together, may face hefty gross negligence penalties because of it.

The taxpayer will need to act quickly in gathering evidence and formulating a defence in time to respond to the audit proposal letter.

It happened in the past that taxpayers, out of innocence, had casual conversation with CRA auditor and got irreversible damage out of it. Because the goal of tax auditors, even if the nicest ones, is to get biggest tax revenue possible from you. Then everything you disclosure can be used against you.

It is very important that as soon as you receive CRA audit letter, treat it as high alert and immediately, see professional protection before it is too late. Contact us at 1-877-918-2991 or email Help@Tax911Now.ca or fill out the Contact Form to the top left right away if you are facing serious audit risks.