Taxpayer Relief Measures Available to Canadians Affected

Ottawa, Ontario, September 1, 2011... The Honourable Gail Shea, Minister of National Revenue, would like all Canadians who were affected by the recent tornado in Goderich or were impacted by Hurricane Irene to know that the Canada Revenue Agency (CRA) has taxpayer relief provisions available to them if they are unable to meet their tax obligations because of these natural disasters.

“My sincere sympathy goes out to the people of Goderich who were harmed by the devastating tornado that swept through the city on August 21^st. I also deeply sympathize with all of those Canadians whose lives have been disturbed by Hurricane Irene. I know that your first concern is to begin to re‑build your lives, and in some cases, your homes and your businesses too.”

“I would like you to know that you have one less thing to worry about right now,” added Minister Shea. “If you cannot meet your tax obligations due to a natural disaster, you can be given special consideration by the Canada Revenue Agency.”

The CRA has taxpayer relief provisions in place that use a balanced approach to help taxpayers to resolve tax issues that arise through no fault of their own. Under these provisions, any taxpayer can apply to the CRA to have interest and/or penalties waived or cancelled in situations where they are unable to file a tax return and/or make a payment on time due to a natural disaster or other extraordinary circumstances beyond their control. Taxpayers should submit their request in writing using form RC4288, Request for Taxpayer Relief. The CRA will consider these requests on a case-by-case basis.

Affected taxpayers who have questions or concerns about the CRA’s taxpayer relief provisions can access additional information on the CRA website athttp://www.cra-arc.gc.ca/gncy/cmplntsdspts/txpyrrlf-eng.html. or they can call the CRA at 1-800-959-8281. Business owners and self‑employed individuals can call the CRA at 1-800-959-5525.

Source: Canada Revenue Agency

Watch Out for Phishing Schemes

The Canada Revenue Agency (CRA) warns all Canadians to beware of telephone calls, mail, or email that claim to be from the CRA but are not. These are phishing scams that could result in identity thefts.

Canadians should especially beware of phishing scams asking for their personal information, such as a social insurance, credit card, bank account, and passport numbers. Some of these scams ask for this personal information directly, and others refer the taxpayer to a Web site resembling the CRA's where the person is asked to verify their identity by entering personal information.

An email scam that has been recently circulating notifies taxpayers that a complaint containing evidence of involvement in tax evasion has been filed against them and the company with which they are affiliated by using the Informant Leads Program. This email is not from the CRA. The CRA's Informant Leads Program Web page warns taxpayers about this scam.

The CRA has well-established practices to protect the confidentiality of taxpayer information. For more information about security of taxpayer information and examples of fraudulent communications, go to the Security section at the CRA website.

Anyone who receives a suspicious communication should immediately report it to info@antifraudcentre.ca or to the institution that it appears to be from.

For information on scams, to report deceptive telemarketing, and if personal or financial information has been unwittingly provided, go to the Royal Canadian Mounted Police Web page at: www.rcmp-grc.gc.ca/scams-fraudes/phishing-eng.htm.

Reviewing Returns at the Canada Revenue Agency

The Canada Revenue Agency (CRA) wants to make sure you are paying the correct amount of taxes—not too much and not too little.

Each year, more taxpayers file their income tax and benefit returns online using NETFILE or EFILE. Although electronic filers do not have to send their receipts to the CRA, they should make sure to keep the receipts and relevant documents that support their claims. When the CRA reviews returns, it will ask taxpayers for receipts or specific supporting documentation.

Completing your individual return can sometimes be complex. The CRA does several reviews to make sure that income, deductions, and credits are accurately reported and filed. These reviews promote taxpayer education by identifying areas of misunderstanding.

Four review programs

There are four main review programs:

• Pre-assessment Review Program
• Processing Review Program
• Matching Program
• RRSP Excess Contribution Review Program

Canadians file about 27 million individual income tax and benefit returns each year, and all are electronically analyzed. Based on this analysis, certain returns are selected for review because they are high-risk. Other returns are selected as part of a random sample used to measure non-compliance for all taxpayers.

Under the Pre-assessment Review Program, the CRA electronically analyzes returns to identify situations that represent a higher risk of tax loss. Various deductions and credits are reviewed, and contact with the taxpayer may be made by mail before a notice of assessment is issued.

After a notice of assessment is issued, returns go through the Processing Review Program where they are reviewed to make sure that certain claimed deductions and credits are accurate and are supported by appropriate documentation. The CRA may also ask a taxpayer for proof of payment. In specific instances, a taxpayer may be asked to send more information to support his or her claim, such as cancelled cheques or bank statements. If a review identifies an error, the taxpayer will receive a new notice of assessment.

The Matching Program makes sure that information slips filed by a third party, such as an employer or a bank, correspond to the information the taxpayer reported. Payers and financial institutions submit to the CRA a copy of all slips they issue to taxpayers, which the CRA cross-references with returns after notices of assessment are issued.

All returns are matched to third-party information slips. If there is a discrepancy between the income reported by a taxpayer and the income reported by a third party, the CRA may contact the taxpayer or a representative by mail or telephone for clarification. If the CRA determines that an adjustment is required after completing the review, it will send a new notice of assessment to the taxpayer.

The RRSP Excess Contribution Review Program makes sure that taxpayer records are correct and that any required T1-OVP,  Individual Tax Return for RRSP Excess Contributions forms are filed by the taxpayer. Through this program, the CRA identifies taxpayers with potential registered retirement savings plan (RRSP) excess contributions and communicates with them to review their situation.

More information

For more information on the Pre-assessment Review Program, the Processing Review Program, and the Matching Program, go to the Reviews section at the CRA website.

Claiming Flase Losses

The Canada Revenue Agency (CRA) has recently uncovered a fraudulent scheme in which taxpayers claim large losses or expenses equal to their personal expenses such as payments for mortgages, personal loans, vehicle loans and common everyday expenses.

In this scheme, taxpayers use a CRA business number to submit information slips for amounts related to their personal debts and expenses. These slips include the T5008 Statement of Securities Transactions, the T5 Statement of Investment Income and the T4A Statement of Pension, Retirement, Annuity and Other Income. The amounts from the slips are reported on T1 tax returns as business losses, professional income losses, capital losses or as expenses. Under the Income Tax Act, deductions for personal expenses are not permitted.

Serious Consequences

The CRA has identified taxpayers who are participating in this scheme, and is taking action. Under the Income Tax Act and the Excise Tax Act, the CRA has the authority to reassess tax returns, charge interest and levy penalties.  Where intentional non-compliance with tax laws, tax evasion or fraud is suspected, the CRA will undertake criminal investigations and will recommend prosecution against the taxpayers promoting, organizing or participating in such tax schemes.

If you are convicted of tax evasion or tax fraud, the courts may fine you up to 200% of the federal tax evaded or false refunds claimed, and sentence you to a jail term of up to five years. The CRA will also publicize your court conviction in the media to deter non-compliance with tax laws, and to maintain confidence in the integrity of the self-assessment tax system. More information on these convictions is available on the CRA Web site.

Even if you receive a refund, you can still be reassessed

You may have participated in this scheme and received a tax refund; however, this does not mean that the CRA agrees with your claims. Therefore, keep your books and records, since the CRA generally has three years from the date of assessment to audit and reassess taxpayers.

In cases of alleged fraud or misrepresentation, such as neglect, carelessness or willful default, the CRA can audit and reassess outside the three-year period. These audits can take over a year to complete. The fact that participants in this type of scheme have not yet been reassessed should not be interpreted as the CRA’s acceptance of their claims.

Get professional, independent advice

If you are thinking about participating in an arrangement to minimize your tax, it's very important that you get independent legal and tax advice. Independent advice means advice from a tax professional who is not connected to the particular arrangement.

Go to them before they go to you

If you are involved in a tax scheme such as this one, and you would like to correct your tax return, you can do so by sending the CRA an adjustment request. For more information, go to www.cra.gc.ca/changereturn or call 1-800-959-8281.

In some cases you may be able to come forward and correct your tax information through the CRA’s Voluntary Disclosures Program (VDP). Taxpayers may avoid penalties and prosecution if they make a valid disclosure before the CRA begins to take any compliance action against them. Taxpayers availing themselves of the VDP may only have to pay the taxes owing, plus interest. For more information on the VDP, go to www.cra.gc.ca/voluntarydisclosures .

For more information about abusive arrangements and how to protect yourself, go to www.cra.gc.ca/alert.

Keep Your Accounting Records

Client often ask us which accounting documents they should keep. The general rule is that Canadians who file their income tax and benefit returns electronically, or who do not file information slips and receipts with their paper-filed returns, should keep their tax records on hand in case they are contacted by the Canada Revenue Agency (CRA) for 7 years.

After returns are filed, the CRA verifies the income reported, as well as the credits and deductions claimed. Reviewing filed returns is essential to protecting the integrity of Canada's self-assessment tax system and to ensuring that Canadians pay their taxes. For the 2008 tax year, about 2.4 million individual returns were reviewed.

Some of the first reviews of deductions and credits are done when the returns are filed, and before taxpayers receive their notices of assessment. However, most reviews take place later in the year, as the CRA works to verify the information on an individual's return and compares it with the information provided by other parties, such as employers, spouses, or common-law partners.

During this review process, the CRA may contact taxpayers to ask for more information on income sources or dependants. We may also request copies of receipts or information slips to support claims related to: 

• medical expenses;
• charitable donations;
• child care expenses;
• spousal or child support payments;
• moving expenses;
• the home renovation tax credit; or
• registered retirement savings plan contributions

In addition, the CRA may ask you to support your claim by providing proof of payment in the form of cancelled cheques, bank statements, or other documentation.

Keeping your records on hand makes it easier to respond to these requests. It will also help you explain your tax and benefit situation to the CRA if you do not agree with your assessment or reassessment.

Receiving a request for receipts or documentation does not mean you are being audited by the CRA. When an individual is selected for an audit, the CRA tells them that their tax and benefit situation is being reviewed and calls to arrange a meeting to begin the audit.