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Frequently Asked Questions

Frequently Asked Questions

Frequently Asked Questions

Do we need an accountant, or a lawyer?

Accountants and lawyers are both highly trained professionals, but they ultimately have different (and complementary) skill sets. Accountants understand tax from a planning perspective – they can help with tax planning, preparation, and filing, and may be able to answer additional questions as well.

However, if you have a tax dispute with CRA, you need to speak with a tax lawyer. We understand CRA disputes from all angles, and know how to structure arguments that will have the best chance of success with CRA.

What should I do with my audit questionnaire from the CRA?

Your audit questionnaire may seem straightforward, but this document helps CRA craft its position to support a reassessment of tax against you. You want your story told in the best light. Our job is to help you craft that story so that it’s looked upon favourably by CRA

Do we need to get our reassessments dealt with on time?

Yes, it is important to deal with your reassessments on time! The Income Tax Act has a deadline of 90 days to respond to a reassessment. If you miss the 90 day deadline, you may apply for an extension within 1 year, but the added stress and headaches can take their toll. Meeting that deadline is always the faster, cheaper option.

How far back can CRA ask for information?

Do not underestimate CRA’s audit powers. CRA has significant authority under the Income Tax Act and the Excise Tax Act. They can ask for information that’s over 10 years old, and you will need to comply with that request.

Can I just cut a deal with the CRA?

CRA will only agree to a principle-basis settlement. In other words, you need to show a legal reason (grounded in the Income Tax Act or the Excise Tax Act) as to why there should be a reduction of tax. The CRA does not have jurisdiction to settle based on monetary considerations only.

There are generally two types of negotiations with CRA.

In a light switch negotiation, such as with gross negligence penalties, you are either grossly negligent or you’re not. If you owe $10 in a gross negligence penalty, you either owe the money or you don’t – there is no middle ground.

In a dimmer switch negotiation, such as unreported income, you may have more leverage. If you owe $10 as part of a reassessment, it may be possible to negotiate that down to $4, however this needs to happen on principle.

Will CRA send me to jail?

The CRA can refer a taxpayer to the Criminal Investigations Division in egregious cases. A tax lawyer can help you understand where you stand and what your options are.

However, rest assured that this happens infrequently and the vast majority of cases will not rise to the level that warrants a criminal investigation.

Will hiring a lawyer make me look guilty to CRA?

Absolutely not. If you were going through any sort of legal battle, you would want to hire a lawyer because they understand the legal system well and can help assert your rights and put you in the best possible position. Working with CRA is no different. They will not think less of you, and in fact your dispute may resolve quicker because they’re working with someone who speaks their language.

Can I deduct my legal fees on my tax return?

Often yes, you can deduct your legal fees if you are disputing an income tax reassessment, but speak with your lawyer to make sure that you qualify.

How long do I have to repay a tax debt?

Generally, CRA’s policy is six months. However you may be able to negotiate a longer repayment period by providing full and complete financial disclosure.

Does owning a corporation protect me from its tax liability?

It can in some circumstances. However, directors of a Corporation may be liable for the unpaid payroll taxes and HST owed by the Corporation. Shareholders may also be liable if they’ve received dividends payments from the Corporation while it owes a tax debt.

If I have a tax debt, can I transfer my assets to a family member instead?

CRA will catch you doing this if it is to avoid taxes, and they can still take action. The CRA tracks non-arm’s length transactions that are below fair market value, and those transfers will be assessed with the tax debts of the person who made the transfer. The CRA has this power under both the Income Tax Act and the Excise Tax Act, so it’s not an effective strategy to get out of paying your debts.

How long will it take to resolve my tax dispute?

Simple disputes may take between 3 and 6 months to resolve, but more complicated disputes can take many years.

Can CRA collect even if I’m disputing a reassessment?

That depends on what you’re disputing. If you’re disputing an income tax reassessment, that will usually force CRA to stop collection. If you are disputing an HST or payroll reassessment though, CRA will not be prevented from taking collection action and will do so aggressively.

Does CRA need to prove what I owe?

The short answer is ‘no.’ CRA can make assumptions about your income, and as a taxpayer it becomes your responsibility to disprove those assumptions. The basis of our tax system is that taxpayers self-report, and so taxpayers are deemed to be in the best position to know how much they owe.

There are, of course, exceptions. If CRA believes that you made a misrepresentation attributable to carelessness or neglect during a tax year that would otherwise be statute-barred (off limits), then CRA needs to prove their case. Or, if CRA is alleging that you were grossly negligent in your reporting, then the onus is on them to prove it.

Do I need to hire a tax lawyer from my own province?

No, the tax laws are federal, so you can hire a tax lawyer from anywhere in the country . Our firm is based in Ontario, but we regularly represent clients from coast-to-coast-to-coast.

CRA audited and reassessed me – am I in trouble?

No, that’s not necessarily true at all. CRA can be aggressive in their auditing and they don’t always take reasonable positions. The good news for taxpayers though is that those reassessments are often reduced or overturned on appeal, so don’t panic before phoning a tax lawyer!

Is CRA recording my conversations?

Auditors and collection agents take detailed notes of every conversation that they have with a taxpayer. You can get a copy of these notes by making an Access to Information and Privacy (‘ATIP’) request.

Can I get a copy of my file from the CRA?

Yes, you can get a copy of your file upon request, and it will have important information about your case. We regularly request a copy of the CRA’s file for our clients.

Should I phone CRA myself and explain what went wrong?

This can be a dangerous game. Tax legislation is very technical, and if you say the wrong thing you have the potential to make things even worse. If you’re looking to appeal then you want to make sure that you’re putting your case forward in the best light.

Can I skip the CRA appeals stage and go directly to tax court?

The Income Tax Act allows taxpayers to ‘skip’ the CRA appeals stage if they haven’t received a decision with respect to their Notice of Objection within 90 days.

The Excise Tax Act allows taxpayers to ‘skip’ the CRA appeals stage if they haven’t received a decision with respect to their Notice of Objection within 180 days.

The decision to skip or not comes down to legal strategy, speak with a tax lawyer to determine what steps are most advantageous to your case.

How long do I have to wait after I file a notice of objection?

CRA will assign an appeals officer in as early as 6 months, or it could take 2 years or more. You don’t have to wait though – if you haven’t received a decision within 90 days (Income Tax) or 180 days (GST/HST), then you can move your case forward to the Tax Court of Canada

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