General Tax Questions
Answers to the most asked questions regarding the CRA and Canadian tax law. With ex-CRAs, tax lawyers and tax accountants on staff, Farber Tax Solutions can help you handle the CRA.
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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 Farber Tax Solutions 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. Farber Tax Solutions 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.
Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:
- 1| Offer a comprehensive solution that is focused on achieving the most favourable possible outcome for your tax issue;
- 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
- 3| Offer a complete solution to your tax problems, including ex-CRA professionals and tax lawyers from Farber Tax Law.