When Canada Revenue Agency (CRA) has a question, it can come at the taxpayer in many different ways. For example:
- CRA can telephone and ask you questions (these calls may be recorded).
- CRA can write to you and request additional information, demand returns be filed, etc.
- CRA can arrive, with no warning, to do an audit.
- CRA can launch an investigation, with no warning (investigations can lead to criminal prosecution).
- Most commonly they will issue a notice of (re)assessment – which starts the clock ticking.
- CRA starts collection and enforcement action.
When this happens most people reach out to whoever prepared their tax return. Unfortunately this is not always the best answer.
The “World of Taxes” has four continents:
- Tax planning (how to legally minimize your taxes)
- Tax compliance (bookkeeping, financial statements and filling in tax forms)
- Handling disagreements with CRA
- Tax law – going to tax court against the CRA
In your parents’ day, things were more straightforward and one person could provide all of these services. Over the past generation however, dealing with taxes and CRA has gotten increasingly more complex. Thanks to this, there are now specialists who focus exceptionally well on just one of these areas.
The ophthalmologist does not do back surgery and the orthopedic surgeon does not operate on your eyes. They are both doctors, but their areas of expertise differ greatly. The same rules apply to those of us who specialize in taxes. A good tax professional knows what they do not know and will always refer their client on to someone who deals with the client’s particular issue.
We all understand what the other professional does but we really do specialize in one area.
|Area of Tax||Who Does it Best|
|Tax Planning||Tax and Estate Lawyers or Certified Public Accountants (Chartered Accountants). This involves a detailed understanding of income taxes, often across different provinces and countries, as well as a creative mind. Do not choose someone who does not specialize in planning (i.e. this is all they do).|
|Tax Compliance and Accounting||Generally you are safest with a licensed and regulated accountant who has earned the Certified Public Accountant designation. However, if your affairs are straightforward, a well-known bookkeeper may be the better answer.|
|CRA Disputes||This is both a science and an art. It is essential that your professional knows the ways that CRA works and how decisions and approvals are made inside CRA. No amount of hanging around the outside will teach you this. Only experience gained by previously working, over several years, at the appropriate levels of management at CRA, means that you know the CRA playbook – how far they can actually go to treat the taxpayer client fairly. Such specialty firms are still few and far between. Look at the details – experience as an Ontario Auditor or work at the Department of Justice as a CRA lawyer does not give you the necessary insight.|
|Tax Law||At tax court, any dispute involving tax and/or penalties beyond $25,000 requires a lawyer to represent you. It is interesting to note that the Law Society of Upper Canada lists 15 different fields in which they recognize specialties, but tax law is not among them. Nearly every case that requires the significant investment in a tax fight against CRA has probably been through the CRA dispute zone above. You can save a significant portion of your legal fees if your CRA disputes professional is highly competent in laying the groundwork for this next tax law level.|
As we all know, not all lawyers and accountants are competent – some are far more adept than others. To find the best one, start by asking wise people you know for a referral. Check the internet by just typing in the professional’s name – you will be surprised by what you can learn about them. For example, just recently a professional who built a strong profile in the world of tax law turned out to be in a whole world of hurt himself. I am certainly not in the judgement business, so read the Toronto Star article here http://www.thestar.com/news/gta/2015/02/04/tax-fighter-philippe-dioguardi-has-serious-battles-of-his-own.html and decide for yourself if this is someone you should trust.
If your accountant let you get into trouble, is he the one that you should trust to get you out of trouble? If the financial planner, accountant or lawyer wrote the tax plan or sold you the product they said would save you tax (read our earlier blog on GLGI as an example), they are going to have at least one conflict of interest in being the professional to pull you out of the fire.
Do your research. A CRA question can turn into a big problem.
Don’t turn to just anyone to solve your tax problem. Call Tax Solutions Canada today for expert advice from tax specialists: 1-888-868-1400.