Frequently Asked Questions

If you've got questions, we've got answers!

Does the government have a tax amnesty or tax pardon program?

Yes. Canada Revenue Agency’s tax amnesty or tax pardon program is called the Voluntary Disclosure Program. This program allows people with unpaid taxes who are not under investigation or being audited to pay the money owing with interest but without penalty or prosecution. A qualified tax accountant can register you for the Voluntary Disclosure Program during your first consultation. People who have not filed their taxes or who have cheated on their taxes for a number of years think about their situation all of the time. This is on their mind all of the time and they lose sleep over their situation constantly. By coming forward with a voluntary disclosure with CRA, their problem will be solved and they will have peace of mind. When new clients come into our office, we file the disclosure in the first meeting. This provides some peace of mind to the client and the taxpayer has 90 days to complete all submissions to CRA.

I haven’t paid my taxes for a few years. Can I qualify for tax amnesty?

You can qualify for the tax pardon or Voluntary Disclosure Program if you are not being audited and are not under investigation by Canada Revenue Agency. If your spouse is being audited or a company that you own, then it is too late.

Do you need a lawyer to file the voluntary disclosure?

No. You do not need a lawyer to file the voluntary disclosure. However, if the accountant has never met you before and has no knowledge of your business then he or she has no information that can be used against you. The accountant cannot be used as a witness against you, because he does not know you or your activities prior to the first meeting. Once the accountant meets the client, then all information must be disclosed to the accountant and therefore the taxpayer has fully disclosed everything to CRA. Not only can we file your voluntary disclosure with CRA just as a lawyer does, but we can prepare all of the tax returns that are outstanding along with any adjustment that are required. Most lawyers will simply prepare the voluntary disclosure. We will prepare everything.

I haven’t paid my taxes for several years and the government has frozen my bank account. What do I do?

You will need to contact a collections officer at Canada Revenue Agency right away to tell them that you are going to do something about your taxes owing. You also need to contact a qualified tax accountant to help you prepare the tax returns for the years that are owing to make sure that you are only paying the amount that you should. Canada Revenue Agency bases your debt on what they assume you have earned during the years you have not paid. They do not know what deductions might be able to be put against those earnings to decrease the amount owing.

The government has garnisheed my wages because I haven’t paid my taxes. What do I do?

You need to have a Chartered Professional Accountant contact a Canada Revenue Agency collections officer as soon as possible. We will explain what has happened to your file and tell you the amount of money that you owe the government in taxes and penalties. A qualified tax accountant can then work with you to complete the tax returns for the years that you have not paid to make sure that all your deductions are applied for and that you pay the government the correct amount.

What can happen if I don’t pay my taxes?

Canada Revenue Agency can freeze your bank account, garnish your wages, garnish your receivables if you are a company, and put a lien on your property. They can also prosecute you through the courts.

What do I do if the government has put a lien on my property for taxes I haven’t paid?

You need to immediately contact a collections officer and make arrangements to pay the taxes you owe. A tax accountant can help you prepare the detailed reports you need to help you calculate the taxes owing, so that you are paying no more than you should plus your accumulated interest and penalties. Usually, liens are put on a property if CRA is completely ignored by the taxpayer. The taxpayer ignores phone calls, letters etc. If the collection officer is communicated with, then payment arrangements can be made.

What does it mean to file a no-name voluntary disclosure?

A no-name disclosure allows the tax payer to file for voluntary disclosure without revealing his or her name. The tax payer then has 90 days to prepare the information the government needs to avoid prosecution. The file is considered closed after 90 days. If you do not file the voluntary disclosure within the 90 days, you are not allowed to re-apply even though you applied under a no name basis.

What is the Voluntary Disclosure Program?

This is a Canada Revenue Agency Program designed to help people get their taxes paid up and get back in the system after not filing tax returns or filing incorrect tax returns for several years. The program allows tax payers to make up the unpaid taxes plus interest, but waives most of the penalties and any threat of prosecution. You can apply through a qualified tax accountant who can then help you get your taxes in order for the years you did not submit returns. The voluntary disclosure program is a one time gift from the Canada Revenue Agency. You cannot apply under the voluntary disclosure program a second time unless there is an extraordinary circumstance that is beyond your control.

Why Do People Bother With A Voluntary Disclosure? I Won't Get Caught After All This Time…
We encounter many different reasons why tax payers finally make the decision to do a Voluntary Disclosure and have their tax affairs corrected. 
  • Guilt
  • A guilty conscience can impact a person’s life so significantly that it can cause disruption to sleep, panic attacks, depression, drug & alcohol abuse, etc. There are many taxpayers who would possibly never get discovered by CRA but ultimately decide to do a VDP to have a clear conscience. It can be draining to worry and stress about your tax problems. Coming clean with the VDP is a way to stop the worrying. It’s a way to fix what has been done and move forward with your life.
  • Fear
  • Fear can be a very strong motivator for change. Imagine being afraid that CRA is calling every time your phone rings. Or avoiding getting the mail in case that brown envelope you have been dreading has finally arrived. This is no way to live your life. Many taxpayers decide to file a Voluntary Disclosure so that they can know that they are on side with CRA and don’t need to live with the skeletons in their closet.
  • Audit Risk
  • Whenever a business is audited, the auditor will often ask for a list of all the consultant and sub-contractor names, social insurance numbers, addresses, etc. Then the auditor will compare the expense claimed in the business to the income reported by the consultant or sub-contractor. So while you may not think that you will be caught, the other side of your transaction might be and that can lead back to you.
  • Family
  • People don’t want to hurt the ones they love. When taxpayers realize that their actions could destroy their family, they are often anxious to make amends and remove any threat that may exist against their family. Sometimes a taxpayer realizes that their actions could cause them to lose their house. Others realize that if caught they will leave their spouse with nothing in retirement. Others find that their children cannot get OSAP because they have no Notice of Assessment to support their income. And others are newlyweds that cannot get a mortgage because they too have no Notice of Assessment to present to the bank. 
  • Business planning
  • Sometimes taxpayers decide to correct or file their returns in order to be able to move forward with their business plans for the future. For a taxpayer with a thriving business, how could you ever sell it without any financial statements or tax returns to show a potential buyer? How can you borrow money from the bank without any statements to present? How can you grow and start having advertisements when one quick search by CRA would unravel everything? Sometimes you just need to deal with the past so that you can move forward with the future.
  • High chance of getting caught
  • Some taxpayers would never file a Voluntary Disclosure but now the time has come that if the VDP is not filed, the CRA will likely contact the taxpayer and penalties, and possibly criminal charges will apply. We have seen taxpayers come in who have had their entire office contacted by CRA and want to get their VDP in before they too are contacted. We have seen this with commission employees, waitresses, police officers, real estate agents, etc.
How Does The Cra Know My Business?
The CRA is very powerful and has many tools at its disposal for catching delinquent taxpayers. Once the CRA has contacted you about your unfiled or incorrect return, you are no longer eligible to file a VDP and penalties and criminal prosecution can apply. If you do not file an accurate and complete tax return with CRA, these are some of the ways that they find out:
 
1. T4/T4A: This is a tax slip that is issued for individuals who provide a service. A T4 slip is prepared for employment income and a T4A can be a wide variety of reasons (link to when you need a t4A) http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/rtrns/t4a/slps/whn-eng.html.When a T4 or T4A is provided to the CRA, the government will expect this income to appear on your personal tax return. If it does not, this slip also has your address on it so they know exactly where to mail you a letter requesting you to file.
 
2. T5018 Statement of Contract Payments: This slip is commonly provided to individuals that work in construction. It is a straight-forward slip that provides the total amount of payments that a business paid you. For example, if you do full time work for one company, they may provide you with this slip showing the amount of income earned in the year. They provide one copy of this slip to you and the other to CRA. Then when the CRA does their annual matching program, they will see that you did not report this income on your personal tax return. This may result in you receiving requests to file in the mail and ultimately the CRA will likely notionally assess (LINK TO ARB ASSESSMENT PAGE) you based on this income.
 
3. Cash deposits: The bank notifies CRA when large cash deposits are made. We have seen taxpayers contacted by CRA as a direct result of these transactions. Some have had a relative from abroad bring them money. Other deposits were as innocent as cash gifts received from a wedding. No matter the source of the cash deposits, if you cannot support them, the CRA is going to assume that this money is income. And it will be up to you to prove them otherwise.
 
4. Court documents: We have seen taxpayers audited based on testimonies made in court. Many court cases are public documents that the CRA does examine for audit leads.
 
5. Media Appearances: If you appear in the newspaper or are interviewed on TV, the CRA is watching. It is common for the CRA to use media outlets as a source of leads. We have seen taxpayers get notices for audit shortly after appearing in the media. If you are making a public appearance promoting your business, that business better appear on your tax return and it better be accurate.
 
6. Land transfers: The CRA is privy to seeing what properties are purchased and sold. If you sell a property and do not include the income from it on your tax return, there is a high chance that you will eventually be contacted regarding this transaction. We are seeing taxpayers being contacted years after the fact when supporting documentation no longer exists to support the transaction as a principal residence or capital gain rather than business income. In Toronto, condominium flipping is a current hot topic. We are regularly seeing taxpayers contacted who did not report the sale of their condo on their taxes and have now been contacted for unreported income.
 
7. Postal Code: Where you live often correlates to your income level. For instance, if you live in a neighbourhood with a very high average household income, but report only a small fraction of that income on your return, the question has to be asked, how are you affording to live in this neighbourhood? Perhaps you are living off investment income, or have multiple mortgages on the property, but if your income level is an outlier compared to your neighbours you may be on the receiving end of a net worth assessment audit at some point in your future.
 
8. Snitch line: The Canada Revenue Agency allows for anonymous tips against fellow taxpayers. This is commonly used by ex-spouses, ex-business partners, etc. It just takes one phone call by someone with a grudge to unravel your offside activities. The CRA is now paying commissions based on a percentage of the tax collected as an incentive for leads.
 
9. Spider software: The Canada Revenue Agency is no stranger to the internet. If you have a website promoting a business and no income on your tax return relating to that business, the CRA can find out about this. They use spider software to search the web for tax cheats. 
 
10. Other Party Audited: This idea was discussed above. If a party you do business with is under examination by CRA it can lead to you. If the CRA looks at the amount of money paid to your company, then the equal amount should be included in your revenues. As an example, if a company has an expense for $50,000 for services to your business and you do not have nearly that much income, there is a good chance that you will be the next one audited.

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