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4.
5. Extensive audit powers
Increased access to global information
Not restricted to businesses
Focus on Canadian residents and non-resident activity in
Canada
6. Thousands of auditors & support staff
Increased funding
Auditor hiring campaigns
Increased training
Commitment to risk analysis – targeted audits
8. Limited/Restricted
General/Unrestricted
General audits of small and medium private corporations
Books & Records and other documentation
Other information – questions, personal and family
Initial meetings/Interview
The audit
Audit results
9. Experienced tax team including ex-CRA resources
History of successful dealings with the CRA
Assistance in navigating through all aspects of CRA audits
including resolutions
10.
11. The Case: A
Canadian
subsidiary of a
Foreign Parent –
Restaurant
Expenses disallowed
– professional fees
Interest and
Financing expenses
disallowed on
Parent loans
Part XIII issues
Foreign Tax Credit
issues
Unreported income
– projection method
The Result: A
Canadian
subsidiary of a
Foreign Parent –
Restaurant
Financing
expenses
reversed
Objection filed
on other issues
Service
complaint filed
12. The Case: A
Management
Consulting
business
Expenses
disallowed
including home
office, auto, cell
phone, etc.
Shareholder
benefit issues
Shareholder loan
issues
Gross negligence
penalties applied
Statute-barred
year reassessed
The Result: A
Management
Consulting
business
90% of
reassessments
reversed
Penalties
reversed
Statute-barred
year reversed
Service and
Ombudsman
complaints
filed
13. The Case: A Restaurant
business began as a
restricted audit to
determine the accuracy
of tax treatment on the
sale of the restaurant.
Expanded to a full scale
audit.
Expenses disallowed
Shareholder benefit
issues
Shareholder loan issues
Allocating sale proceeds
Net worth adjustments
and unreported income
Gross negligence
penalties applied
Statute-barred year
reassessed
The Result: A Restaurant
business began as a
restricted audit to
determine the accuracy
of tax treatment on the
sale of the restaurant.
Expanded to a full scale
audit.
90% of reassessments
reversed
Penalties reversed
Statute-barred year
reversed
14. Coverage For Professional Fees In Dealing with CRA
Corporate Tax / Personal Tax / HST / Payroll / SR&ED / Other
Current and All Prior Year Filings
Annual Fee
Based on Size of Client
Tax Deductible for Businesses
Opt In or Opt Out – Up to the Client
CRA Info Requests / Audits / Objections / Appeals
15.
16. Step 1
o Review; or
o Audit
Step 2
o Objection
Step 3
o Judicial
review
17.
18. What is a reassessment?
What is an objection?
Disputing penalties and interest
19. Income Tax Act and Excise Tax Act:
Don’t sign a waiver without counsel
The Taxpayer Bill of Rights:
1. You have the right to receive entitlements and pay no more and no
less than is required by law.
2. You have the right to a formal review and a subsequent appeal.
20. Allowed in full
Allowed in part
Reassessment confirmed
21. 2015/16 – 70,352 objections were filed
In the 5 years between 2011 and 2016 – CRA resolved
223,739 objections
65% were decided in favour of the taxpayer (partially or fully)
$6.1 billion in taxes were favourably allowed to the taxpayer
(Auditor General Report Fall 2016 – Income Tax Objections – CRA)
22. Deadline for filing an objection
Extension of time
Timeline for conclusion of the objection
23. Who bears the burden of proof?
What is the standard of proof?
25. Brown envelope phobia
CRA collections powers
Objections:
Income tax
“Trust funds”
Interest
26. 3 years after date of original assessment
Unless “neglect, carelessness or willful default”
Burden on CRA
27.
28. When do I appeal for judicial review?
Who handles an appeal?
The informal procedure vs. the general procedure
Procedural steps in a general procedure appeal for
judicial review
29.
30. Hire great help from the outset
Multiple levels of oversight
Keep meticulous books and records
Ex. Cash deposits, loans, etc.
Be conservative
Respect the CRA’s capacities and willingness
Sales analysis, deposit analysis, net worth assessment
Be alert to high risk areas
31. Cash sale businesses - residential construction,
barbershops, restaurants, convenient stores, etc.
Intermingling of funds
Intercompany management fees
Shareholder benefits
Real estate
Assets held overseas
Tax shelter and donation schemes
32.
33. Purpose is to reduce penalties and interest and avoid
prosecution
Criteria:
Voluntary
Complete
Relates to a penalty
Involves info >1 year old
Includes payment of the estimated tax owing
34. 19,500 voluntary disclosures were filed in 2015-2016
$1.7 billion in total recovery
This is a 30% increase over the amount recovered in the
previous year
35. Less generous relief in certain circumstances —target the
“sophisticated taxpayer”, active efforts to avoid detection and multiple
years of non-compliance
Two types of relief: General (criminal prosecution, penalties, 50% of
interest) and Limited (no interest relief)
Emphasize that VDP is not available for Repeated Uses
Require VDP payments to be made within 90 days of disclosure
Mandatory Disclosure of Advisors
VDP not used to handle improperly filled or incomplete T1135 forms