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CRA Tax FAQs

1. Why would I need a tax accountant?
You have to handle problems with the CRA carefully. Tax mistakes can be very costly, making it crucial to not make any missteps. Mistakes can cost you very dearly. Not only can you lose time and money, but you may also end up with a criminal record and in prison. Tax accountants help individuals and organizations, big and small, solve tax-related issues. They assist clients with tax planning and tax filing, and help defend them in tax disputes.
Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.
2. What is the CRA?
The Canada Revenue Agency (aka the CRA) is the administrative agency tasked with administering tax laws including the Income Tax Act, Excise Tax Act, Canada Pension Plan, and others. They do so for the Canadian Government and for most of the provinces and the territories. They also deal with the many social programs that are delivered through the tax system. The Canadian tax system is a self-reporting and self-assessing system that relies on the honesty of taxpayers. This is why the CRA has very broad powers to investigate, request information, and seize money and property.
Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.
3. What is the VDP?
The Voluntary Disclosure Program (VDP) also known as the Canadian Tax Amnesty program, is a program administered by the Canada Revenue Agency. It gives taxpayers who have unreported income and unfiled tax returns the opportunity to rectify shortcomings. Through this program, taxpayers can make amendments to previous filings, correcting errors or omissions. The VDP allows taxpayers to avoid penalties and criminal prosecution. For more information see VOLUNTARY DISCLOSURE.

Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.

4. Will I be penalized for not filing taxes?
The CRA constantly monitors your financial behavior. The longer you continue as a non-filer, the more money they charge as penalties and interest on the tax you should have paid. Also, if you are convicted of criminal tax evasion, fines can be as much as 250% of the tax owing plus daily interest, and imprisonment can beup to two years. If you owe taxes and do not file your return on time, you can face up to 17% of the tax owing may be charged for the first year. If the late filing is a repeated occurrence, your liability can nearly triple to a maximum 50% of the tax owing.
Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.
5. What is a tax shelter?
A tax shelter is a legal method of reducing or minimizing an investor’s taxable income and thereby decreasing tax liability. A tax shelter can include a gifting arrangement or the acquisition of property, where the tax benefits and deductions arising from the gift or acquisition will equal or exceed the actual cost of entering into the arrangement or of the property.
Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.
6. What is a Tax Audit?
A Tax Audit is an examination of an organization’s or individual’s tax returns. Canada’s tax system is a self-assessment system. This means that individuals must voluntarily complete an income tax return,accurately reporting their annual income and claim eligible deductions or credits. It is the taxpayer, not the CRA, that calculates the amount owing or the refund receivable.
Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.
7. Where do I get the CRA’s taxpayer relief form?
The Request for Taxpayer relief, Form RC4288 is available at http://www.cra-arc.gc.ca/E/pbg/tf/rc4288/README.html.

Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.

8. What is Bankruptcy and how will it affect my business?
Bankruptcy is a legal procedure under the Bankruptcy and Insolvent Act. Through thisa person can be discharged from most debts. Bankruptcies allowan honest but unlucky debtor to get a fresh start. When filing income tax and benefit returns, it is highly recommended that you or the appointed trustee clearly indicates that the particular return is a pre-bankruptcy, in-bankruptcy, or post-bankruptcy return. This is done above the “Identification” section on page 1of the T1 return.
Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.
9. What is the deadline for filing one’s tax?
The Income Tax Act imposes a deadline to file tax returns on April 30th. If you file your return after the April 30th, all your provincial and territorial payments (GST/HST, Child benefit payments) may be delayed. Where the due date falls on a Saturday, a Sunday, or a holiday recognized by the CRA, your return is considered to have been filed on time if you file or post mark it for the next business day.
Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.
10. What is a tax lien?
A tax lien is a notation on property to secure the payment of taxes. When the CRA registers a lien against your home, they are securing their interest by tying the repayment of the debt to your property. If the debt is c significant and you fail to replay it or negotiate a payment plan, the CRA has the right to place a lien on your home or other valuable asset. This can interfere with your ability to sell your home or property, or cause you to go into default with lenders.
Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.
11. Do Fist-Nations People have to pay Tax in Canada?
Most people falsely believe that First-Nations people of Canada are free of the obligation to pay federal or provincial taxes. First-Nations are generally liable to the same taxes as all Canadian residents. There is a limited exception in Section 87 of the Indian Act, that is rooted in the colonization by Europeans and is meant to prevent the state from interfering with natural property rights of first-nations. Inuits and Metis people are not eligible for this exemption. .
Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.
12. I am confused between Tax Avoidance and Tax Evasion. What is the difference?
Tax avoidance is legal, tax evasion is illegal. Although both results in less tax being paid, tax evasion will result in fines, penalties, interest, and perhaps jail time. Tax avoidance is the minimization of tax liability through the legal arrangement of affairs that do not abuse or misuse the spirit and intent of the law. Tax evasion is reducing tax liability by opting for illegal ways. May con-artists have and continue to sucker taxpayers into schemes that appear to be legal, but end up getting the taxpayer in trouble while making the con artist rich. .
Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.

Testimonial

Sam Faris reduced the significant unreported income based on net worth audit to be nil. Sam’s approach in fighting these types of complex audits is unique and sophisticated. He found countless mistakes made by the auditor which were rectified when Sam appealed the audit decision. Instead of owing significant amount of taxes, Sam reduced it to zero. I highly recommend to hire Sam for this type of audits and any CRA problem.”

E.M., Ottawa