Dispute Resolution with the Canada Revenue Agency
Aside from ordinary audit and assessment issues, there are several key issues in dealing with the Canada Revenue Agency (CRA).
Net Worth Assessments
There are times when the CRA goes behind the returns that have been filed, or when a taxpayer has failed to file returns, and a net worth assessment is often the result. This might be due to a number of factors such as:
Books and records are inadequate, inaccurate or unreliable
The Taxpayer is involved in a Cash-based business
Third-party information indicates unreported revenue. This might be a result of an audit of someone you do business with that discloses payments that you didn’t report, or an anonymous call from a disgruntled neighbour, partner or former spouse
Like any notice of assessment, a taxpayer has a right to appeal the assessment or reassessment by filing a notice of objection. Often there are errors in the manner in which the calculations in a net worth assessment are done – sometimes obvious errors, but more often errors that are only obvious to those who know what to look for. Sometimes there are increases in net worth that are not the result of unreported income.
Along with experienced accounting professionals, we can review the net worth assessment, put together proper computations of income and help you explain the increases in net worth to help you avoid taxes, interest and penalties.
The purpose of the Canada Revenue Agency's (CRA) Voluntary Disclosures Program (VDP) is to promote voluntary compliance with the various tax rules. The VDP encourages clients to come forward and correct deficiencies to comply with their legal obligations. It is a fairness program that is aimed at providing taxpayers with an opportunity to correct past omissions, thus rendering themselves compliant.
We have decades of experience in assisting clients to make a valid voluntary disclosure in order to avoid penalties and prosecution and to allow clients to sleep at night without worrying about the tax department. AND, we can start the process with a no-names disclosure which allows the process to proceed without, initially, disclosing your identity to the CRA.
As most business people recognize, a director of a company has certain potential personal liability for such things as GST/HST, WSIB and employee withholding taxes. There are requirements that must be met by the CRA, or the appropriate provincial ministry, before an assessment can be made against a director personally. There are also defences available to defeat a directors’ liability assessment.
We can ensure that the proper requirements have been met before a director can be assessed personally for any corporate liabilities, and assist in building a case to defeat any such assessment.
Section 160 Assessments
If a taxpayer transfers property to his or her spouse, or anyone with whom he or she does not deal at arm’s length at a time when he or she has a tax liability and the transferee does not pay fair market value consideration for the property; the transferee can be liable for some or all of that outstanding tax liability, under Section 160 of the Income Tax Act.
We often see taxpayers hurriedly transferring property, frequently the family home, to their spouse in order to avoid a big tax liability. Not only is this ineffective to protect assets, but it will also spread the tax liability to the spouse.
Clearly, in any contemplated transfer of property, both the transferor and the transferee must have good advice and information. We can help you ensure that any transfer of property will not also transfer a tax liability, and assist in minimizing any liability that may arise as a result of such transfer.