CRA garnishes your income or puts a lien on your property only as a last resort.
Generally, these measures are applied if you have not filed tax returns for a number of years and have ignored the many letters and phone calls that CRA has initiated. In some cases, CRA will take information from the past and do an arbitrary assessment based on what they feel the taxes should be. Their estimated numbers will not be in the taxpayer’s favour. They will then put a lien on your house, freeze your bank account and garnishee your wages in order to collect the amount they have determined that you owe. Once your bank account is frozen, the CRA can take the money and apply it to the taxes and penalties that are owing. CRA can also criminally charge an individual for not filing their taxes. This is very serious and the situation can be resolved if CRA is communicated with.
If you operate a business, the CRA can garnishee your receivables. After they have completed an audit, they will know who your clients are. They can send a letter of garnishment to your clients, and instead of paying the money they owe to you, your clients pay the money to CRA. This is very embarrassing for a business owner because their customers will know that they are having financial troubles.
If you receive any notice from the CRA, your best option is to get in touch with a collections officer. They will look at the information you bring, showing your assets, liabilities, equity, net worth, and living expenses. Once you have provided them with the details they need, they will work with you on a fair basis of paying your debt. The only time I have ever seen Canada Revenue resort to garnishment is when they are ignored.
If you are receiving notices from CRA or if you discover that they have put a lien on your house or frozen your bank account, you should consult a qualified tax accountant. A tax accountant knows the level of details that the CRA needs to satisfy their requirements. A tax accountant can also help you put together the years of uncompleted tax returns to make sure that you are applying the appropriate deductions and paying only what you need to pay.
Mark Feldstein Corporate Taxes, Personal Taxes CRA, garnishment
The Tax Payer Relief Provisions allow you to appeal to have penalties and interest waived if you have a good reason for not paying your taxes on time. The reasons have to be deemed extraordinary by CRA and require detailed documentation. The taxpayer has 10 years from the end of the calendar year in which the tax year or fiscal period at issue ended to make a request to the CRA for relief.
The minister may grant tax relief from penalties and interest due to extraordinary circumstances, actions of the CRA and inability to pay or financial hardship. Penalties and interest may be waived or cancelled in whole or in part where there are circumstances that are beyond the taxpayer’s control.
The following are examples of situations that may warrant tax relief:
- natural or man-made disasters such as, floods, fires, hurricanes, civil disturbances,
- serious illness or accidents,
- serious mental or emotional distress, such as a death in the immediate family.
You can apply under taxpayer relief if actions of the CRA caused the penalties and interest. For example,
- processing delays within a reasonable time whereby the taxpayer was not informed of the amount owing,
- errors in materials by CRA which led to a mistake,
- incorrect information provided to the taxpayer in writing,
- errors in processing,
- delays in resolving an objection or an appeal.
If a taxpayer can demonstrate financial hardship and there is an inability to pay the amounts owing, CRA may consider waiving or canceling interest in whole or in part to enable the taxpayer to settle their account. CRA will not cancel the interest and penalties because the taxpayer is having financial troubles. They will cancel the interest and penalties only if there is an extraordinary circumstance which is preventing payment.
Taxpayers can apply for taxpayer relief only on a prescribed form.
Mark Feldstein Personal Taxes interest owing, tax penalties
There are a number of situations that would lead to someone being accepted into the Voluntary Disclosure program. The program applies to people:
- who have not filed their personal tax return, trust return or corporate tax return or who have failed to report income. This includes foreign pension income that was never reported.
- who have not filed GST returns. Input tax credits may be claimed after four years for those who did not remit source deductions for employees.
- who have filed, but whose return includes mistakes or inaccuracies, for example, claiming too much in expenses.
- who have made fraudulent claims.
Other situations that might apply include people not reportinig income earned off-shore or from a cash basis. In situations like these, the chartered accountant may use a “No-Name” disclosure which allows the taxpayer to keep their identity unknown to the Canada Revenue Agency for 90 days without prosecution while the information is being submitted to the government. The taxpayer can correct any mistakes and submit a complete disclosure without interference from the government. After 90 days, the file is considered closed.
Overall, the system works well because it benefits everyone and it is not adversarial. There is a 10-year limit on eligibility for the Voluntary Disclosure program but the key is that the taxpayer must apply for amnesty before the government starts investigating for tax irregularities.
Mark Feldstein Tax Amnesty fraud, non-name disclosure, Tax Amnesty, Tax Evasion
Abosede Adeoye of Toronto was found found guilty of GST fraud on January 28, 2009. There were six counts of filing false GST returns. On April 30, 2009, Mr. Adeoye was sentenced to 90 days in jail, three years probation and fined $12,050. The fine represents 50% of the amount of false GST refund obtained and attempted to obtain.
CRA’s investigation revealed that Mr. Adeoye claimed $342,114 of business expenses and received a GST refund in the amount of $19,355 and he attempted to receive a GST refund of $4,595 for 1999 tax year. CRA’s analysis confirmed that Mr. Adeoye never operated a business.
Taxpayers who claim false returns are subject to a maximum penalty of 200% of the tax evaded and up to five years in jail. Mr. Adeoye could have come clean by applying under the voluntary disclosure program before CRA commenced their investigation. Penalties would have been waived and there would be no criminal prosecution.
Mark Feldstein Tax Amnesty, Tax Convictions CRA, fraud, Tax Amnesty, Tax Evasion