Success Stories & Case Studies
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Recent Success Stories And Case Studies
Unfreezing of Bank Accounts And Apology From CRA
Situation / Background:
Ms. M. is the director of a company located in North Bay, Ontario. She reached out to Farber Tax Solutions after the CRA had taken legal action against her company, by sending a Requirement to Pay to freeze the corporate bank account. The company had fallen behind with remittances for GST and Source Deductions due to a prolonged period of slow business, and the CRA collector assigned to the accounts was taking a very aggressive stance. The legal action was seriously impairing the company’s ability to maintain normal operations, pay their staff and their expenses, and make any payments at all to the CRA.
The company was not in a position to resolve the arrears through an immediate payment in full, but was anxious to negotiate a long-term payment arrangement that would allow them to resolve the corporate debts to the best of their ability to pay. In order to demonstrate the company’s actual financial position, I worked with Ms. M. to prepare full financial disclosure in accordance with the CRA’s collections policies. A complete disclosure and the company’s proposal for a payment arrangement was submitted to the collector. After multiple attempts to reach the collector, the proposal was rejected outright by this collections officer. I then asked to speak with the collector’s Team Leader, in order to discuss the proposal with someone more experienced and with more authority. I subsequently received a call from another agent who was equally aggressive, and who was pressuring the company to commit to payments beyond their ability to pay. Before we were able to complete this negotiation, I was referred back to the original collector, who then informed me that the proposal demanded by the second agent I was led to believe was a manager had been rejected. I subsequently discovered that these 2 agents were both in fact Collections Contact Officers – the most junior level agent in Collections – and were misrepresenting themselves and playing games in a very unprofessional manner. A letter of complaint was immediately prepared, advocating on behalf of our client, outlining all the multiple abuses of CRA policies that we fully understood these Collections staffers had committed, and restating our request to negotiate an equitable arrangement for the client. This letter was sent to the Director of Collections at the Sudbury Tax Service Office.
Within a day, I was contacted by the actual Team Leader. She offered an apology for the unprofessional behavior on the part of these two junior officers. This Team Leader accepted the original proposal made by the company. This Team Leader also authorized the immediate release of the frozen bank accounts.
While I had secured the desired payment arrangement for our client, there were some residual issues that still needed resolution. Payments and remittances had been missed during the period of time the bank account had been frozen, and so I continued to communicate and negotiate with Collections to ensure that the company was given the time and opportunity to catch up to the best of their ability, while keeping their payment arrangement in good standing.
Secured Payment Plan To Payoff Tax Debt
Situation / background:
Ms. L is a semi-retired teacher in the greater Toronto area. She had an amount owing to the Canada Revenue Agency in the amount of roughly $35,000 as a result of non-filing for a number of years. She had been in discussions with the CRA regarding her outstanding balance but was having no success in negotiating a payment arrangement. She contacted Farber Tax Solutions after the CRA registered a lien on her home and had placed a garnishment of 25% on her Public Service Pension.
A payment arrangement was required. After an extensive review of her Income and Expenses, Assets and liabilities we approached the collection officer on the file by way of submitting financial disclosure and proposing a reasonable payment arrangement. The collection officer was not accepting of the arrangement and refused to remove the garnishment from the client’s pension. This, of course, put the client in a precarious financial position and resulted in her falling behind in various obligatory payments such as condo fees and mortgage payments which put her in the possible position of losing her home.
Having had no success with the collection officer, Farber Tax Solutions escalated the situation to her immediate supervisor. This too proved fruitless. At this point, Farber Tax Solutions composed a definitive letter to the Assistant Director of the Tax Services Office in question outlining the specifics of the situation, our dissatisfaction with the treatment of the taxpayer by the CRA and the ways in which the CRA had fallen short of their obligations according to the Tax Payer Bill of Rights, their own Collections Policies and Procedures and Supreme Court Case law.
For reasons unknown, the Assistant Director failed to respond to this letter. With the CRA collector and her supervisor adopting an intractable posture, and having no response from the Assistant Director, Farber Tax Solutions made overtures to the Director of the Tax Services office, again stating the case and making a reasonable payment proposal.
As a result of our understanding of the structure and mechanisms of the CRA and in bringing upward pressure to bear on the situation, we were ultimately successful in having the CRA agree to two lump sum payments facilitated by the client’s refinancing of her home and a payment arrangement over the course of approximately 32 months which the client could afford.
Secured Corporate Taxes Payment Plan To Continue Running Business
Situation / background:
Farber Tax Solutions was asked to meet with the directors of “ABC Company”, who had originally reached out to Farber Financial in late 2017. ABC had been audited by the CRA for HST and Payroll source deductions, resulting in a total debt to the CRA exceeding three-quarters of a million dollars. The directors had grave concerns regarding solvency, but after consultation with Director James Bell, it was established that Farber Tax Solutions could be engaged to represent ABC in negotiations with CRA to secure a payment arrangement. The mission would be to resolve the arrears at a pace acceptable to the CRA, while allowing the company to continue operating successfully, and keeping ABC’s directors from potential personal insolvency.
Our first mission was to take over communication with the CRA and negotiate the removal of the Requirements to Pay that had been sent to the company’s bank. Through intense conversations with the collector, I was able to convince this collector to give us the opportunity to provide full financial disclosure in order to establish ability to pay, and I successfully negotiated the cancellation of the legal action. The bank account was unlocked within the first week of our engagement.
During the following month, I generated an elevated level of credibility with the collector through timely updates and a steady flow of the information requested. The final disclosure and proposal from ABC was submitted to the collector. Within a very few days, the collector responded with acceptance of the 6-month payment arrangement to address the GST debt. The CRA also agreed to our proposal to suspend collection action on the Payroll debt, and was prepared to wait for the GST debt to be resolved in full, before demanding an arrangement be negotiated to pay the Payroll debt.
The 3-month initial engagement between ABC and Farber Tax Solutions had long concluded, and so ABC reengaged our services to assist them again with the required second round of negotiations. Our positive relationship with the collector through the first negotiation fostered a high level of credibility in the CRA’s view. And so our continued representation on behalf of ABC was a key element in a positive outcome for this negotiation, as the quantum of Payroll debt had increased significantly due to the recent filing of the company’s T4 return. Once again, we were successful in getting the CRA to accept the desired payment arrangement proposed by ABC.
Unfortunately, a month and a half later, ABC breached the arrangement and failed to remain current. The CRA launched swift legal action against the corporate bank account, which all clients are made to understand will occur if a negotiated arrangement is not honoured. Intense communication between ABC and our office and CRA collections ensued, and Farber Tax Solutions once again succeeded in getting the CRA to accept an amended payment arrangement that would remedy the missed payments.
While ABC’s challenges to resolve all tax debts were daunting, Farber Tax Solutions involvement and credibility with the CRA was the key element in CRA’s willingness to work with ABC despite the length of the payment arrangement, and the unforeseen lapses in compliance. The company continues to operate successfully and works towards full payment of all taxes owing.
Stopped CRA Legal Action And Secured Tax Payment Plan To Avoid Penalties
Situation / background:
Mr. M. is a motor-cycle mechanic based just north of Toronto. His business is seasonal and fluctuates. Mr. M approached Farber Tax Solutions as a sole proprietor owing both a personal and HST/GST balance. Mr. M. also had the problem of not having filed his personal or business return for some years.
A two-part solution was required. Initially, we informed the CRA that the figures currently owing on these accounts were arbitrary in nature and worked with them to set a schedule for filing. Secondly, we had to go about negotiating a payment arrangement, understanding that there would be amounts owing subsequent to the filing of proper returns. We had Mr. M. complete an Income and Expense statement that was the start of conversations with the Canada Revenue Agency in terms of establishing a payment arrangement. Through this information, it was further determined that Mr. M. had little in the way of assets that could be sold or used as collateral in obtaining a loan of any kind.
The Canada Revenue Agency always requests payment in full immediately and through regular payments in the shortest time frame possible. This generally equates to no longer than twelve months. In Mr. M.’s case, based on the combination of debt, his demonstrated ability to pay and the fluctuations in his business, Mr. M. would require better than thirty-three months to pay the total amount outstanding based on staggered payments.
Conversations with the Canada Revenue Agency were lengthy due to Mr. M.’s filing situation, his ability to pay and the nature of the CRA’s policies and procedures. Discussions with the collector on the account and the nature of the proposed payment arrangement the matter was escalated beyond the collector to her supervisor. Escalation resulted in successfully making two separate arrangements that accommodated Mr. M.’s financial limitations. The first arrangement was of nineteen months and addressed the HST/GST balance. This was to be followed by a fifteen-month arrangement which would take in Mr. M.’s T1 tax debt. Of particular importance was the fact that one arrangement would follow the other, essentially equating to a thirty-three-month arrangement and that the CRA effectively put a stay of legal action on the personal account while the HST/GST payments ran their course to make the situation work even though it was well outside the ordinary payment arrangement and the CRA’s normally undertaken policies and procedures.
Reduced Business Tax Debt Through Getting Expenses Confirmed
Jane Doe runs a successful restaurant in Nova Scotia, which she founded almost 20 years ago.
Last year, the CRA conducted a personal and corporate net worth audit of both Jane and her restaurant in relation to the 2009 through to 2011 taxation years. The auditor’s findings resulted in a significant and improper increase to Jane and the restaurant’s business income.
Following the results of the audit, Jane was devastated. She could not afford to pay the amounts reassessed by the CRA, nor did they accurately reflect her business income for the years in question. At this point, Jane engaged Farber Tax Solutions to help her mitigate her tax debt for the years in question.
Immediately after undertaking carriage of her file, Farber Tax Solutions submitted Notices of Objection to the Canada Revenue Agency against the Notices of Reassessment. Following the filing of the Notices, the objection was assigned to an Appeals Officer. Members from our team of lawyers corresponded with the Canada Revenue Agency over the course of four months to dispute the matter. The work we completed included:
- submitting an Access to Information Request to the Canada Revenue Agency to obtain documentary disclosure of the audit documents;
- reviewing and analyzing approximately 1,000 pages of audit documents provided by the Canada Revenue Agency;
- meeting with Jane to clarify each expense incurred and obtaining explanations of their business purpose; and
- drafting and providing submissions to the Canada Revenue Agency.
Jane’s case was exceptionally challenging as many of the expenses had been incurred nearly a decade prior to the audit and Jane had not retained the supporting documentation. Though the CRA did confirm some disallowances due to a lack of supporting documentation, we were able to prove Jane and the restaurant’s entitlement to numerous business expenses by drawing on national statistics and providing arguments based on reasonableness. With our representation, the Taxpayers debts were reduced, and Jane was able to continue running her restaurant in Nova Scotia.
Investigated And Stopped Accrual of Interest
John Doe is a retired American resident. Since 2008, John has been receiving rent payments from his tenant for the use of a property he owns in Canada. He declared the rental income in his section 216 tax returns.
In 2018, the Canada Revenue Agency issued Notices of Reassessment in relation to John’s non-resident income tax account, which indicated that he had significant interest amounts owing for the 2008 through to 2017 taxation years. John, unaware of any tax debt and confused by the reassessments, engaged Farber Tax Solutions to investigate the matter.
Over a two-week period, Farber Tax Solutions conducted a full investigation of John’s situation, including:
- corresponding with the Canada Revenue Agency to obtain an explanation regarding the basis of the reassessments;
- researching relevant case law and legislation;
- drafting and providing John with a memorandum explaining our findings;
- outlining all possible next steps and recommending a specific course of action; and
- filing Notices of Objection against the Notices of Reassessment to prevent the CRA from taking any collections actions against John.
As a result of our investigation, John was able to stop the accrual of additional interest and chose an appropriate course of action to mitigate his tax debt.
New Housing Rebate Settled With Department of Justice
The Taxpayer is an individual who owned a number of properties. In particular, the Taxpayer purchased a new condominium and had moved into the property once it became available for occupancy. During this time, the builder of the condominium had applied for a GST/HST new housing rebate on behalf of the Taxpayer.
In the following year, the Taxpayer was audited by the Canada Revenue Agency (the “CRA“) to determine whether she qualified for the new housing rebate with respect to the condominium that she owned. At audit, the Taxpayer had been unsuccessful in convincing the CRA that she qualified for the rebate. While she filed for a Notice of Objection to dispute her claim, she was equally unsuccessful at the appeals stage. As a result, she sought a professional representative, Farber Tax, to dispute her claim at the Tax Court of Canada.
Farber Tax submitted a Notice of Appeal to the Tax Court of Canada on her behalf. Once counsel from the Department of Justice was assigned, we reached out to discuss our position and negotiate a settlement to limit the amount of legal fees associated with taking the matter to court.
With our representation, the matter was settled with the Department of Justice who allowed the Taxpayer’s claim for the new housing rebate.
Removed Gross Negligence Penalties By Getting Deductions And Expenses Approved
The Taxpayer is a long-haul truck driver. The Canada Revenue Agency (the “CRA“) audited him for the 2012 to 2014 taxation years, and the Taxpayer was reassessed as a result.
The Taxpayer had originally engaged Farber Tax for assistance with obtaining a payment arrangement plan for his tax debt, but we quickly realized that we could minimize his tax debt further by disputing his tax debt through the appeals process. The Taxpayer agreed with this approach, and Farber Tax submitted a Notice of Objection to the CRA against the reassessments.
With our representation, we noticed that the auditor had failed to consider the Taxpayer’s job as a long-haul truck driver, which would entitle him to an 80% deduction for meals and entertainment. Additionally, we were able to remove the gross negligence penalties that the CRA had placed on his account.
He was pleased with the reductions to his tax debt and decided not to pursue the matter further in the Tax Court of Canada. He was also able to better manage a payment arrangement with the CRA with the reduced tax debt.
Audit Support Allowed Expenses To Be Approved By CRA Leading To Lower Amount Of Taxes Owed
The Taxpayer was a sole proprietor in the construction business. The Taxpayer was audited by the CRA for the 2013 and 2014 taxation years. As a result of the audit, all of the Taxpayer’s expenses were denied on reassessment, including his costs of goods sold, telephone, motor vehicle and other expenses. The primary reason given for the denial was that the Taxpayer had not providing adequate supporting documentation to prove that expenses had been incurred.
The Taxpayer’s accountant engaged Farber Tax on his behalf for tax dispute resolution, and provided us with all supporting documentation, including invoices and receipts, to be submitted to the CRA.
Farber Tax submitted a Notice of Objection to the CRA against the reassessments. Once the objection was assigned to a CRA Appeals Officer, our representatives corresponded with the Appeals Officer over the course of three months to dispute the matter. This included preparing and sending submissions to the CRA:
- clarifying the types of expenses that the Taxpayer’s business incurred;
- explaining how the expenses were business related and not merely personal expenditures; and
- providing supporting documentation to prove the number of expenses claimed.
With our representation, the CRA accepted the Taxpayer’s entitlement to over $130,000 of valid business expenses, primarily with costs of goods sold. The CRA confirmed some disallowances as the Taxpayer was unable to provide important supporting documents, such as a call log or vehicle mileage log to determine the split between personal and business use for telephone and motor vehicle expenses, respectively.
As the Taxpayer had greatly reduced their personal income tax debt based on the reduction in income after accounting for expenses, he was very pleased with the result and decided not to pursue the matter further via Tax Court.
Filed Notice Of Objection To Prevent CRA Collection Actions
The Taxpayers were a husband and wife that had not filed their personal tax returns for some time, and were owing a significant debt to the CRA. They initially engaged Farber Tax for an investigation to determine the nature and source of their tax debt.
Upon investigation, we found that both Taxpayers owed significant amounts in personal income tax debt. After examining their online CRA accounts and through separate calls to the CRA General Inquiries line, Farber Tax was able to determine that the Taxpayers had not filed tax returns since 2007. As a result, they had been arbitrarily assessed for all years since 2008, which included substantial penalties and interest.
Our memorandums to the Taxpayers recommended that they:
- file income tax returns to allow the CRA to reassess the Taxpayers based on their reported amounts of income and expenses; and
- for the most recent arbitrary assessments which were within the 90-day objection period, file protective Notices of Objection to prevent the CRA from taking any collections action while they filed their income tax returns.
As a result of our investigation, the Taxpayers re-engaged the services of Farber Tax to file the Notices of Objection as recommended. As the Taxpayers were arranging to prepare and file their tax returns, Farber Tax was able to promptly file the Notices on their behalf to prevent the CRA from taking collections action against them.
Conducted Investigation Analyzing taxpayer's filings And Account Disclosures
The taxpayer was an employee in the mining industry, working on-site for much of the 2014 and 2015 taxation years. The taxpayer was a Status Indian and was told he was working on reserve. Normally, any income earned under those conditions would be tax exempt. In 2016, the taxpayer was suddenly reassessed, and had a significant tax bill, and was unsure how this had occurred.
The taxpayer engaged Farber Tax to determine what the cause of his tax issue was, and to advise him on what remedies may be available to him.
Farber Tax spent significant time deciphering and analyzing the taxpayer’s filings and the notes on his account following disclosure from the CRA, and determined the following:
- that the taxpayer’s employer had initially filed their T4 returns exempting the income earned on site;
- that the taxpayer’s employer had, sometime late in 2015 or early in 2016, discovered that the job site was not on reserve; and
- had filed amended T4 returns without consulting the taxpayer.
This caused a cascade of new assessments against the taxpayer, ultimately resulting in significant tax debt, including interest.
Our memorandum laid out these facts to the taxpayer, and further broke down the exact timeline of events that cause this situation. Our memorandum further recommended that the taxpayer seek out taxpayer relief, and to arrange a payment plan on the outstanding tax debt with the CRA.
Because of our investigation, the taxpayer could fully understand the state of his affairs and was able to properly orient himself in his negotiations with the CRA.
Represented Client Against CRA and Overturned Reassessment Denying Business Expenses
The taxpayer was a musician who performed with a band that he formed sometime in early 2010. He incurred significant expenses as a result, including for rehearsal space, advertising, and musical supplies. He claimed these expenses as business expenses. He was audited by the CRA, and was found to not be carrying on business during those years. As a result, they reassessed him and disallowed all the expenses he had claimed.
The taxpayer engaged Farber Tax to contest these reassessments and to have the taxpayer’s endeavors classified as a business.
Farber Tax submitted a Notice of Objection to the CRA against the reassessments. Once the objection was assigned to a CRA Appeals Officer, our representatives prepared submissions contesting the finding that the taxpayer was not a business, including an analysis of the taxpayer’s expenses.
As the taxpayer was a musician, it was important to clarify the steps taken by the taxpayer to turn his endeavors into a successful business. Each of these steps was raised and explained to the Appeals Officer, as well as linking the expenses incurred to the business.
Based upon our representations, the CRA overturned the reassessments on the basis that the taxpayer was, in fact, operating a business during the audit period, and they were therefore entitled to significant business expenses that had been rightfully claimed.
Years of Ex-CRA Experience
*Past results are not necessarily indicative of future results and the amount recovered will vary according to the facts in individual cases.
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