CALL TODAY 1-888-868-1400

FAQs

Facebooktwittergoogle_pluspinterestlinkedinmail

General FAQs

+ What is the Canada Revenue Agency (CRA)?

The Canada Revenue Agency (CRA; formerly Revenue Canada and the Canada Customs and Revenue Agency) administers tax laws for the Government of Canada and for most provinces and territories, and administers various social and economic benefit and incentive programs delivered through the tax system. Led by the Minister of National Revenue, the CRA is one of the largest federal government departments, with 51 tax services offices and tax centers across the country, 43,000 employees nationally, and a $4.3 billion budget.

Those who experience tax problems quickly learn how powerful the CRA is and what they are capable of. The CRA has a frightening array of legal powers that it wields to collect revenue on behalf of the Canadian government. Powers include:

- Set-off: the CRA applies money owed to you by the government towards your tax debt;

- Garnishment: the CRA intercepts funds payable to you by a third party such as an employer, or other sources of income;

- Bank freeze: the CRA freezes your bank account, preventing you from accessing it and applies the balance towards your tax debt;

- Certifying tax debt in the Federal Court of Canada: the CRA legally registers your debt with the Federal Court of Canada and gets a certificate confirming the amounts you owe to the Crown. Once registered, the certificate has the same force and effect as a judgment obtained in a court and makes your debt a matter of public record.

- Seizing and selling your assets: the CRA gets a writ or memorial and seizes your assets and property such as your home, car, boat, art, cottage, or rental property. Seized assets are then advertised and sold by a court enforcement officer.

- Holding another party jointly responsible for your debt: the CRA holds a third party such as a spouse, business partner or related corporation jointly responsible for your tax debt.

- Criminal prosecution: the CRA pursues criminal charges against you for tax evasion.

Taxpayers facing tax problems should not underestimate the power of the CRA. No matter what your tax problem, the professionals at Tax Solutions Canada can represent you with the CRA. Our team includes former CRA agents, accountants, financial and legal professionals, who work with to resolve your tax problem quickly and efficiently.

+ Do I need a tax lawyer to negotiate with CRA for me?

In most cases no.

+ What tax problems and risks do you need to be aware of?

A tax problem can quickly become a tax emergency.

Unresolved tax issues with the Canada Revenue Agency (CRA) pose significant risks to taxpayers. The CRA has formidable powers that it exercises frequently to collect under the various tax acts. Taxpayers facing problems such as past due tax returns, undeclared income, or outstanding tax debt could face harsh consequences including:

1. Interest: Unpaid taxes can accrue significant interest, often increasing the tax debt many times higher than original amount. Interest charged by the CRA is compounded daily and is set at a rate much higher than that offered by financial institutions. In most cases, interest accrual cannot be stopped until the entire debt is paid in full.

2. Penalties: The CRA often levies financial penalties on filing errors and/or omissions, including late filing penalties, repeated failure to report penalties, and gross negligence penalties which can be as high as 50% of the understated tax. Penalties are meant to be punitive and the CRA usually applies them very liberally.

3. Prosecution: In cases of significant tax evasion, the CRA can pursue criminal prosecution and routinely publishes information on successful criminal convictions. Under the Income Tax Act and the Excise Tax Act, persons convicted of tax evasion can face fines ranging from 50% to 200% of the taxes evaded and up to two years imprisonment. Upon conviction on an indictment, a fine ranging from 100% to 200% of evaded taxes and up to five years in imprisonment can be imposed.

Finally, if convicted of fraud under Section 380 of the Criminal Code of Canada, an individual can face up to 14 years in jail.

4. Enforcement Action: The CRA has a variety of legal powers that it can exercise to collect an outstanding tax debt. These powers include:

- wage garnishments;
- bank account seizures;
- liens on your home, vehicle and other property;
- RRSP, RESP seizures;
- garnish company receivables; and
- pursue directors of corporations for corporate tax debts.

It is never beneficial to ignore outstanding tax debts. Tax Solutions Canada can help resolve your tax problems before it turns into a tax emergency. Our expert staff work with you to create a personalized solution that ends your tax problem taking into account your personal, professional and financial interests.

Contact us today to set up a confidential consultation.

+ Will CRA negotiate down my principal tax balance?

The CRA is not motivated to settle tax disputes in the same way as a business transaction. The CRA will not negotiate tax arrears based on cost of litigation or an offer for a lump-sum payment. Instead, it is the CRA’s policy that all tax disputes must be settled on a “principled” basis. This means that the CRA will not agree to settle a dispute unless there is a legitimate reason rooted in fact and/or law.

+ Will CRA remove penalties and interest?

The CRA has a few programs which can provide relief from interest and penalties, subject to a taxpayer’s eligibility. The Voluntary Disclosures Program allows taxpayers to come forward voluntarily to correct errors or omissions on their tax returns. In exchange the CRA waives penalties and significantly reduces interest.

The Taxpayer Relief Program provides amnesty for taxpayers who have significant financial hardship, are facing extraordinary circumstances or have suffered due to actions of the CRA.

Penalties and Interest Questions

+ What are CRA’s penalties?

There are a variety of penalties the CRA can impose on a taxpayer’s account. Some of the more common ones include:

o Late filing penalty – this is a penalty for filing late tax returns. The penalty is 5% of your balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

o Repeated failure to report income penalty – this is a penalty for repeatedly failing to report income in the past four years. The federal and provincial/territorial penalties are each 10% of the amount that you failed to report on your return.

o False statements or omissions penalty – this is a discretionary penalty that may be levied against you if you, knowingly or under circumstances amounting to gross negligence, have made a false statement or omission on your tax return. The penalty is the greater of $100 or 50% of the understated tax and/or the overstated credits related to the false statement or omission.

+ What are gross negligence penalties?

Also known as the “false statements or omissions penalty”, this is a discretionary penalty that may be levied against you if you, knowingly or under circumstances amounting to gross negligence, have made a false statement or omission on your tax return. The penalty is the greater of $100 or 50% of the understated tax and/or the overstated credits related to the false statement or omission.

+ What is CRA’s interest rate?

o The interest rate charged on overdue taxes, Canada Pension Plan contributions, and employment insurance premiums will be 5%.

o The interest rate to be paid on corporate taxpayer overpayments will be 1%.

o The interest rate to be paid on non-corporate taxpayer overpayments will be 3%.

o The interest rate used to calculate taxable benefits for employees and shareholders from interest free and low-interest loans will be 1%.

o The interest rate for corporate taxpayers' pertinent loans or indebtedness will be 4.52%.

Collection and Enforcement Action Questions

+ Does CRA need a court order to garnish me?

The CRA does not need a court order to legally garnish wages. They have the power to notify your employer directly and require wage garnishments to begin immediately.

+ If CRA has a lien on my house can they take it away?

Typically, CRA’s internal policy is that it will not seize and sell a taxpayer’s home, if it will result in the taxpayer having no place to live. The CRA can, however, seize and sell any property that is not the Taxpayer’s primary residence including vacation property and/or investment property.

+ Does CRA need a court order to take action against me?

Typically, CRA’s internal policy is that it will not seize and sell a taxpayer’s home, if it will result in the taxpayer having no place to live. The CRA can, however, seize and sell any property that is not the Taxpayer’s primary residence including vacation property and/or investment property.

Tax Audit Questions

+ What common mistakes do taxpayers make during a CRA tax audit?

An audit by the Canada Revenue Agency (CRA) is a review of a taxpayer’s books and records to ensure that tax returns accurately reflect the taxes owed and all filing and payment obligations are being met. The following is a list of common mistakes made by taxpayers when dealing with a CRA audit.

1. Ignoring the CRA: taxpayers sometimes believe that ignoring the CRA will make an audit disappear. This is an ill-advised tactic that only serves to harm the taxpayer. Ignoring the CRA does not make them go away. Instead, by ignoring their problems, taxpayers end up missing important deadlines, and forcing the CRA to audit based on assumptions. These assumptions often lead to grossly inaccurate reassessments that are never in the taxpayer’s favor.

2. Providing unnecessary information: taxpayers often provide too much or unnecessary information during a CRA audit in an attempt to be cooperative and forthcoming. Unfortunately, they end up making admissions or disclosures that can complicate matters unnecessarily. It is important to be aware that CRA auditors are hunting for inconsistencies. Providing unnecessary information creates additional opportunities for the CRA to find errors and discrepancies. Taxpayers should strongly consider professional representation before corresponding with the CRA.

3. Giving up: a CRA audit is a stressful and time consuming process that can quickly become overwhelming. In order to end their frustration, taxpayers concede to the CRA and accept their reassessments at face value, even when they know the CRA is wrong. Giving up out of frustration should never be an option. Our tax system has an independent objections and appeals process that taxpayers should take advantage of with a professional representative. Having an independent review of the audit can often lead to reductions in the amount of taxes owed. In addition, the CRA frequently makes errors in audits that taxpayers never even realize. By giving up, taxpayers accept the CRA’s work – errors included. Hiring a professional to review the CRA’s work is a smart move that can save taxpayers thousands of dollars.

Taxpayers should seek professional representation immediately upon receiving any correspondence from the CRA. The professionals at Tax Solutions Canada can help provide guidance throughout the audit process and yield significant tax savings. Our team includes former CRA agents, accountants, financial and legal professionals, who work with you at every stage of the audit to resolve your tax problem quickly and efficiently.

Criminal Tax Evasion

+ Is owing money to CRA tax evasion?

Tax evasion is the willful attempt to suppress or not disclose income that is required to be reported. Owing money to the CRA is not tax evasion. Some Canadians fall behind on their tax obligations and as a result cannot pay back tax arrears immediately. In such situations, the CRA can negotiate a payment arrangement, although it may do so reluctantly.

+ Is filing a late tax return tax evasion

Tax evasion is the willful attempt to suppress or not disclose income that is required to be reported. Late filing a tax return could be characterized by the CRA as an attempt to avoid disclosing income and an attempt at evading taxes.

+ Is making a mistake on a tax return tax evasion?

Tax evasion is the willful attempt to suppress or not disclose income that is required to be reported. A mistake on a tax return is not necessarily tax evasion, although the CRA may attempt to characterize the mistake as willful and an attempt at evading taxes.

+ What is tax evasion?

Tax evasion is the willful attempt to suppress or not disclose income that is required to be reported. Ordinarily, tax evasion involves one or more of the following:

o Not filing a tax return;
o Filing a tax return but willfully excluding income;
o Filing a tax return but willfully misrepresenting the nature or amount of income;
o Arranging for the receipt of income in a way that hides it from the CRA and willfully excluding that income in a tax return (i.e. earning income in cash which the taxpayer believes is untraceable); and/or
o Characterizing a transaction in a manner so as to disguise the real object or benefit of the transaction (i.e. recording an expense which has not been incurred).

+ Does tax evasion really lead to criminal prosecution?

All too often individuals and businesses, in attempting to avoid a tax debt, will turn a financial problem into a legal one. Tax evasion is a crime. While all evidence of tax evasion is pursued, the CRA's Criminal Investigations Program (CIP) is specifically dedicated to ensuring that significant cases of tax evasion are investigated and, where appropriate, referred to the Public Prosecution Service of Canada for criminal prosecution.

The CIP focuses on the most egregious cases that meet one or more of the following priorities:

• Significant and/or material cases of tax evasion with an international element;

• Promoters of sophisticated tax schemes aimed at defrauding the government;

• Financial crime cases investigated jointly with the Royal Canadian Mounted Police and other domestic or international law enforcement partners; and

• Significant and/or material cases involving income tax and/or GST/HST tax evasion, including the underground economy.

Under the Income Tax Act and the Excise Tax Act, persons convicted of tax evasion can face fines ranging from 50% to 200% of the taxes evaded and up to two years imprisonment. Further, upon conviction on an indictment, a fine ranging from 100% to 200% of evaded taxes and up to five years in imprisonment can be imposed.

If convicted of fraud under Section 380 of the Criminal Code of Canada, an individual can face up to 14 years in jail.

Court convictions are publicized in local, regional and national media to communicate the consequences of fraud committed against the Canadian public and to maximize the deterrent effect of these convictions.

If you are at risk of or currently in the midst of a criminal investigation, contact Tax Solutions Canada immediately. Our experienced ex-CRA and legal professionals will help guide you through the process of a criminal investigation, advising you each step of the way.

What Others Are Saying

Thank you for all your help and guidance dealing with this horrible issue! I will recommend you to anyone I know that needs a tax solution! I look forward to putting this behind me and moving forward. Thanks again for all your guidance!! D.C. Mississauga, ON