Accountants and tax preparers are human. Like all professionals, there are good accountants and bad accountants. This article is about bad accountants – not those who are sometimes careless, late, incompetent or not up to date. This is about aggressive accountants who think they will be heroes if they drive their client’s tax bill down more than anyone else.
Don’t get me wrong – I am like most taxpayers and want to pay as little tax as possible – but I do want to stay on the right side of the law. Canada Revenue Agency and our federal government recognize this. The way they have set up the Income Tax Act and the Excise Tax Act (GST/HST) allows for fair tax planning, but heavily penalizes those who get involved in aggressive tax planning, tax evasion or fraud.
A fundamental problem is that we, the taxpayers, may be experts in our own fields, but most of us are not accounting and tax experts – hence we spend hard-earned money on accountants to handle our taxes.
Yes, there are very fancy tax planning strategies that find some obscure loop holes – however most are strategies that CRA then shuts down. In reality, success (defined as strategies that can be successfully defended if CRA attacks) at this level of creative thinking is reserved for a handful of really smart tax lawyers and CPAs. And even they blow up some times. Hopefully they have fully informed their clients of the risks and the clients can afford to fight CRA if attacked and pay if they lose in court.
For most taxpayers, we cannot afford the $1,000 ++ per hour that the really top tax planners rightfully charge. And these strategies are beyond nearly all regular accountants and tax preparers. This leads me to the topic for today: if it looks too good to be true, it probably is.
Regular accountants and tax preparers have no “secret recipe”. The honest ones know this and get the returns filed, following the tax rules everyone knows about. I am not saying that knowing these rules is easy nor that following them is simple. The tax process is full of sneaky little tricks that can blow up on you. That is why I use a very solid tax professional to do my annual return.
Your problems begin when a new tax accountant promises that he can save you more tax than you have ever had saved before. Many times taxpayers do not ask enough questions as to why and how and instead accept what seems to be a great windfall.
These individuals use some simple tricks that are flat out wrong, illegal and will blow up your credibility with CRA, if not land you with huge penalties and even jail time:
- Not disclosing all income
- Entering expenses as business deductions when they are personal expenses
- Claiming a home office when you are not eligible (e.g. is the space exclusively used for business? Do you routinely meet clients in that space?)
- Creating false business expense invoices (the police call it fraud when they arrest you)
- Selling fake charity receipts (a common ruse for employees who have very few other tax deduction loopholes)
- Selling tax shelters (Global Learning and Gifting Initiative (GLGI), Canadian Humanitarian Trust (CHT), Canadian Organization for International Philanthropy (COIP). Did you know CRA has a special unit to investigate these and has closed down schemes left, right and centre with court approval?
Here are just 2 examples:
- Toronto tax preparer sentenced for fraud – forged expenses and books for 42 clients: http://www.cra-arc.gc.ca/nwsrm/cnvctns/on/on140917-eng.html.
- Tax preparer given an 18-month conditional sentence and a $377,024 fine for filing false tax returns: http://www.cra-arc.gc.ca/nwsrm/cnvctns/ab/ab141006-eng.html.
When CRA comes after you, your trust in your accountant is not a viable defence. Even if CRA goes after them – it doesn’t take away your debt, penalties or the fact that CRA will be coming after you. If you have been a victim of a bad accountant or tax preparer you will likely need the help of a professional company experienced in reducing the damage (interest and penalties) as well as obtaining a fair repayment schedule for the proper taxes you would have owed.
If CRA has not yet come after you and you are now a little suspicious that it was too good and maybe not all that proper, you also need to see a professional tax solutions company. This is the best time to get it dealt with before CRA comes after you as there is a program that can eliminate all the penalties and usually most of the interest: the Voluntary Disclosure Program (VDP). Just remember, VDP is a one-off shot. If you get it wrong you will lose this opportunity.
If you know or even think that your books have been cooked, please call Tax Solutions Canada right away. We can help get your problem sorted out: 1-888-868-1400.