CRA has been systematically auditing and re-assessing taxpayers in this regard over the past 8-10 years and penalties under these circumstances are severe. If CRA audits and/or re-assesses you as having been involved in a charity scheme they can assess gross negligence penalties of up to 50% of the amount of the tax debt that they allege that you owe.
Because these charity schemes were rampant in the early 2000s, thousands of Canadians have found themselves in this position and have filed an Objection with CRA with respect to their new tax debts and the gross negligence penalties that have been assessed. Some of these Notices of Objection have been rejected and have made it all the way up to the Supreme Court.
Because there are so many related cases where there is a case that is in the court process that is similar to yours and you have filed an Objection, you may receive a letter that indicates that your Objection is being held in abeyance pending a judicial ruling on a similar case. You may not receive this letter and after filing your Objection, for many years, may not hear a thing from CRA and upon follow-up be advised that your Objection is under review.
So what happens when CRA takes many years to render a decision on an Objection and then rejects it? They have added interest all these years – compounded daily. You can take CRA to tax court to have a judge make a final decision or you can file an application for relief of penalties and interest under the Taxpayer Relief provision. One common ground for Taxpayer Relief is an error on the part of CRA. CRA taking an unfair amount of time to render a decision on an Objection can be grounds. The challenge is that if your Taxpayer Relief application is successful you will only be granted relief of penalties and interest retroactively for 10 years from the date that you file your Taxpayer Relief application.
For this reason it is vital that your application for Taxpayer Relief is submitted right away.
There have been countless instances where, on Objection, CRA has agreed to withdraw gross negligence penalties that they initially assessed against you.
If you know or are accused of having been involved in a charity scheme, it is highly recommended that you seek professional guidance as the consequences of doing nothing or trying to move along on your own could be severe. Charity tax schemes in Canada are common and many Canadians are duped into participating in them each year. What is most important is not that you may have unwittingly been involved in one but that you minimize the damage at the lowest cost in dollar and reputation.
For more information about charity schemes, Notices of Objection or Taxpayer Relief, please visit www.taxsolutionscanada.com or call 1-888-868-1400.