News

by Jeff Kirshen

Offshore Corporations and the Voluntary Disclosures Program

With increasing globalization, it is common for many Canadian residents to be involved with business corporations and companies, both small and large, located outside Canada. If you are a Canadian taxpayer who is involved with a foreign corporation, the Canadian Income Tax Act may require you to file Form T1134 with the Canada Revenue Agency (CRA).

Given the complex reporting requirements of Form T1134, many Canadian taxpayers fail to file the form when required. This failure to meet reporting obligations under the Income Tax Act can result in significant penalties and interests for a taxpayer.

Taxpayers who are required to file a T1134 and have failed to do so, however, may be eligible for relief through the CRA Voluntary Disclosures Program. The disclosure allows taxpayers to avoid prosecution, penalties, and some interest associated with failing to meet their past reporting obligations.

 

Offshore Corporations and Form T1134

The Income Tax Act (s. 233.4(4)) requires resident taxpayers “of which a non-resident corporation is a foreign affiliate at any time in the year” to file a Form T1134. This means that taxpayers in Canada who are an “affiliate” to a foreign, offshore corporation at any time in the year, must file the required Form T1134 at tax year-end.

A corporation outside Canada meets the criteria of being a “foreign affiliate” of a taxpayer if:

1. The taxpayer’s equity percentage in the corporation is 1% or greater; and
2. The equity percentages of the taxpayer and each “person” related to the taxpayer total 10% or greater

These requirements ensure that taxpayers and related taxpayers who, together or separately, own 10% or more equity in a foreign corporation fall into the category of persons required to file a T1134.

The term “person” includes corporations, as well as individuals.  The definition of “related persons” likewise includes relations with or between corporations, and individuals who control corporations. People related via marriage, blood, common-law relations, and adoption are also included in the definition.

 

Offshore Corporations and Form T1134 – Exceptions

Certain situations may exempt a taxpayer from filing Form T1134. Notable exemptions include:

• The first year in which a person (who is not a corporation) becomes a resident for the first time;
• Where the aggregate cost to the taxpayer, in a year, of its interest in the foreign affiliate is
  • less than $100,000, and
  • the corporation is “dormant” during the reporting period.

The foreign corporation must meet certain definitions to be regarded as “dormant”, such as owning assets worth less than total fair market value of $1,000,000 at all times during the year and having gross receipts of less than $25,000.

 

Offshore Corporations and Form T1134 – Deadline

A Form T1134 – “Information Return Relating to Controlled and Not-Controlled Foreign Affiliates” asks the taxpayer to provide information and documentation about the affiliated foreign corporation, such as the value of all shares the taxpayer owns in the company, assets held by the foreign corporation and taxes paid or payable on the net income, among other requirements.

In the past, each taxpayer had to file Form T1134 within 15 months of the end of the reporting taxpayer’s tax year or in the case of a partnership their fiscal period.

However, the CRA has changed the rules for 2020 and subsequent years. For tax years that begin in 2020, Form T1134 will have to be filed within 12 months of the end of the reporting taxpayer’s tax year or, in the case of a partnership, fiscal period. 

For tax years that begin after 2020, Form T1134 will have to be filed within 10 months of the end of the reporting taxpayer’s tax year or, in the case of a partnership, fiscal period.

Note that you must include all additional information required by the Form on a separate page if there is insufficient space.

 

Offshore Corporations and Form T1134 – Penalties

Penalties for failure to file the required form can be severe. This includes a penalty of $2,500 for every year that a taxpayer failed to file the form, even if they did not intend to and were unaware of their obligation to do so. If a taxpayer knowingly fails to file a T1134, however, gross negligence penalties of up to $12,000 for each failure to file can also be levied after CRA conducts an audit.

 

Offshore Corporations and the Voluntary Disclosures Program

The Voluntary Disclosure Program can provide significant relief to taxpayers who fail to file by allowing penalties, some interest and potential prosecution to be waived upon disclosure. Persons who are associated with foreign affiliates may also need to file a T1135 if they own offshore bank accounts or have foreign income.

 

If you are interested in using the CRA’s Voluntary Disclosures Program to correct past errors or omissions regarding having a foreign affiliate corporation, Rosen Kirshen Tax Law can help you navigate this complex process and ensure that your privileged disclosure is dealt with correctly. We are here to help, call us for a free consultation today!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

Claiming CERB but not Eligible?

The Canadian Emergency Response Benefit (CERB) has injected billions of dollars into the pockets of millions of Canadians, to help the country endure the COVID-19 pandemic. In a previous article, we discussed how to determine if you are actually eligible for CERB, and the consequences for those whom are found to be ineligible. More recently, however, news reports have surfaced regarding a proposed bill that is in its early stages in the House of Commons, that clarify how the government and the CRA could proceed following the pandemic.

 

Claiming CERB but not Eligible

The Canadian federal government is considering enacting a bill that would impose severe punishments, including fines and even jail time, for Canadians that have been defrauding the Canadian Emergency Response Benefit (CERB) program. The legislation is current at draft stage and is struggling to gain support from opposition parties, but is revealing of how the Canadian government would like to seek out those they deem to be undeserving of the benefit following the COVID-19 crisis.

The draft bill targets those whom:

1. Made a false or misleading benefit claim
2. Knowingly failed to declare income for the period which they applied for the benefit
3. Received a benefit cheque they were knowingly not eligible for, and
4. Aided someone in committing one of the aforementioned offences.

It appears that, much like the eligibility criteria for CERB, the fraud criteria are quite broad and are a catch-all. They almost seem like four different ways of saying the same thing: if you knew you were not eligible, but accepted CERB anyways, then you engaged in fraud. By framing each criterion in overlapping but technically distinct ways, they ensure that they are encompassing all potentially fraudulent behaviour.

It is important to emphasize that the bill is not a prescribing a punishment for those who accidentally took CERB. At its current stage, the bill seems to go after those that are maliciously accepting support from the government that they do not deserve. However, in practice the CRA will likely extend the boundaries of what would be considered fraudulent behaviour and force taxpayers to prove otherwise, just as they tend to do with gross negligence penalties.

 

Claiming CERB while knowing I am not Eligible

Under normal circumstances, if you are ineligible and received the CERB, the CRA will have grounds to investigate, audit, and assess you. Following an assessment the CRA will attempt to collect on the funds, plus interest and penalties. The interest and penalties accumulate quickly, and can transform into a minor debt into one that is much more substantial. The CRA could also pursue legal action in order to collect on the debt, such as garnishing wages or placing a lien on your property as security until the tax is paid.

If this bill becomes law, individuals accused of any of the above could be fined for up to $5000, plus double the amount of the benefit that was received. It also can incorporate amounts the accused would have received through CERB due to fraud. Most surprisingly, the bill also states that one could be punished with up to six months in jail for fraudulently accepting CERB.

 

May I Repay CERB?

Canada is allowing the repayment of CERB. More information may be found here.  You may repay it if you realized you are actually ineligible, or if you’ve returned to work. CERB is taxable so unless repaid in full in 2020, you will receive a tax slip for the income that must be reported on your 2020 income tax returns. There is no indication whether repaying the CERB will stop the CRA from coming after you if you knowingly received it while ineligible, but we are hopeful that will be the case.

 

If you are a CERB recipient but have doubts regarding your eligibility, please feel free to contact our firm for a consultation. We have extensive experience managing CRA collections, and ensuring that no legal action takes place against you. We can assist in creating a plan of action in order to avoid the worst consequences of owing a debt to the CRA. We are here to help! In the meantime, we will continue to keep you informed and hope you and your families remain safe and healthy in these uncertain times!

 

*Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

The Canada Emergency Response Benefit – What if CRA wants it back?

The Canada Emergency Response Benefit (CERB) has injected billions of dollars into the pockets of millions of Canadians, to help the country endure the COVID-19 pandemic. It is one of the most ambitious social welfare programs Canada has ever seen, and has certainly been a contributing factor in the country’s success in stopping the spread of the virus. Without the benefit, Canadians would be less likely to be able to pay their rent, stay in their homes and practice social distancing. Many would seek employment despite the virus to support their families. The CERB has provided some stability amidst great uncertainty.

 

Canada Emergency Response Benefit – Eligibility

It seems eligibility for the benefit has expanded every week. At first only those who lost their jobs due to COVID-19 were eligible after meeting other criteria. Then it was expanded to include those with reduced hours and pay. Students and seasonal workers struggling to find work were included after, followed by artists, farmers, and more. It is getting harder to know who is not eligible for the benefit anymore.

This is partly by design. In the current stage, the benefit’s eligibility has been set up as a catch-all system. Following the pandemic the government will take stock and determine who was not actually eligible. Therefore, determining eligibility today based on government statements and reports is difficult; they have not clarified the categories of persons who would be ineligible in recent weeks. Recently there are news reports of individuals that have been claiming the CERB when they are not eligible. While some are doing so intentionally, many are accidental, as the eligibility criteria for the CERB has become increasingly complicated over time.

We would like to help fill the gap. If you match any of the descriptions below, you are almost certainly not eligible for the CERB and may be penalized following the pandemic.

 

Fully Employed

If you are currently employed and are receiving the same salary as before the crisis, you are not eligible. The benefit is intended to help those that do not have a paycheque, or have seen their pay or hours sharply reduced. If you are employed and are making the same salary, then the CERB is not for you.

 

Voluntarily Unemployed

If you quit your job and are unemployed for reasons unrelated to COVID-19, you are not eligible for the CERB. One of the most important criteria for the CERB is that the need for assistance must be as a result of the pandemic. One cannot quit their job to take time off work, rest, take up a hobby, and then claim CERB. It is presumed that those individuals are not suffering from the lack of a paycheque because they already planned to live without earning a salary, and are therefore not in need of assistance.

 

Those who Receive Government Benefits and do not meet the Employment income threshold

Benefits received from the government prior to the pandemic do not count as part of your income calculation for determining if you earned enough to be eligible for the CERB ($5000 since Jan 1, 2019). The income calculation must incorporate employment or self-employment income. For example, someone living solely on disability would not be eligible, as they are already receiving support from the government. That individual’s source of income from the government has not been effected by COVID-19, so they are not eligible for CERB.

 

In essence, in determining your eligibility, the question that must be asked is whether your employment or income has genuinely been affected by the COVID-19 pandemic. If it has not, you are likely not eligible for the CERB.

 

What if I have received the Canada Emergency Response Benefit but I am not entitled to it?

If you are ineligible and received the CERB, the CRA will have grounds to investigate, audit, and assess you. Following an assessment the CRA will attempt to collect on the funds, plus interest and penalties. The interest and penalties accumulate quickly, and can transform into a minor debt into one that is much more substantial. The CRA could also pursue legal action in order to collect on the debt, such as garnishing wages or placing a lien on your property as security until the tax is paid.

 

If you are a CERB recipient but have doubts regarding your eligibility, please feel free to contact our firm for a free consultation. We have extensive experience managing CRA collections, and ensuring that no legal action takes place against you. We can assist in creating a plan of action in order to avoid the worst consequences of owing a debt to the CRA. We are here to help! In the meantime, we will continue to keep you informed and hope you and your families remain safe and healthy in these uncertain times!

 

*Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

When Should a Tax Lawyer be Used?

For most, filing taxes and dealing with the Canada Revenue Agency (CRA) can be scary and confusing. Even for those who file their taxes on time and have nothing to hide, the CRA can often make mistakes that lead to unfair enforcement and tax litigation. As such, there may be various times when you may seek legal assistance to navigate your way through a variety of tax issues. We will outline below a non-exhaustive list of when it would be helpful to enlist the expertise of a qualified tax lawyer.

 

Tax Lawyers, Audits, Objections and the Tax Court of Canada

If you are being audited, this is your first chance to prove your filings are correct. Having a tax lawyer right at the start of your tax dispute will ensure your first opportunity to defend the way you’ve filed your tax returns is not wasted.

If you disagree with a CRA assessment or reassessment, you may dispute this through a Notice of Objection. You can do so by writing a letter to the Chief of Appeals at your tax services office, or by filing a T400A Objection form. The success of an Objection often depends on the level of detail and supporting documentation provided. A tax lawyer will be able to assess the validity of your Objection and ensure you follow through with it correctly. If the CRA does not accept the Objection, you may have the option to bring your case to the Tax Court of Canada.

If you are going to tax court, it is a good idea to have a tax lawyer to represent you and may even be necessary. Tax lawyers have been trained in the law and can navigate through the court system to best represent your interests. Similarly, a CRA tax evasion prosecution or prosecution for failure to file tax returns should only be defended by a tax lawyer. It is a tax battle that may end up in the criminal courts, and you want to ensure that you have the right representation. The lawyers at Rosen Kirshen Tax Law understand the ins and outs of the court system as they have litigated a number of cases with both the Tax Court of Canada and criminal court.

 

Tax Lawyers and Tax Residency

Canada taxes based on residency, which is different from the United States where they tax based on citizenship. What this means is that it is possible to pay no Canadian tax. That being said, Canadian taxpayers should ensure that they do this properly to avoid problems with the CRA in future. Tax lawyers are well versed in tax residency, and can best advise you on the proper steps to take to ensure that you are not required to pay Canadian taxes on your worldwide income.

 

Tax Lawyers and the Voluntary Disclosure Program

The Voluntary Disclosures Program (VDP) allows those who have either not filed their taxes, or made mistakes on previous filings, to come forward and correct these errors.

A voluntary disclosure starts with an application to the CRA requesting that you be allowed into the program. If your disclosure is not accepted, your tax returns will still be sent for processing, but you will be hit with major penalties, and interest charges, not to mention possible criminal charges.

Our tax law firm understands the principles of a voluntary disclosure and can assist you with this application, ensuring you meet all of the requirements so that your disclosure is accepted.

 

Tax Lawyers, Tax Debts and Taxpayer Relief Applications

Taxpayers may struggle to meet their tax obligations for a number of reasons beyond their control. Unfortunately, once you have been assessed or reassessed by the CRA, your tax debt may be due immediately and CRA collections may be breathing down your neck. Tax lawyers know the ins and outs of CRA collections, and are in the best position to assist taxpayers who are trying to get themselves on payment plans. Tax debts can also often lead to significant penalties and interest for those who are unable to make timely payments, thereby increasing an already hefty tax debt. Many people find that themselves in this situation and they may apply to the Taxpayer Relief Program to request relief in the form of waiving interest and penalties. An application for relief may be made by completing an RC4288 – Request for Taxpayer Relief.

While the CRA does provide this avenue for relief, relief is often denied to uniformed applicants who fail to meet the confusing CRA policies for relief. This is because each taxpayer relief application is considered on a case by case basis, by different individuals working out of different offices, and as such, there is often a lack of transparency and consistency by the CRA. Therefore, it may be useful to contact a professional who is familiar with the CRA’s administrative policies and procedures to give you the best chance for relief.

 

If you feel overwhelmed with your tax situation, you are not alone. The Toronto tax lawyers at Rosen Kirshen Tax Law have the expertise and experience to assist you in all tax related matters. Call us now for a free consultation!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

Canada and COVID-19: Rent Relief and Loans for Businesses

Last week the Canadian government took an additional step towards helping small business owners overcome the impact that COVID 19 is having on their enterprises. The latest assistance program announced by the federal government is being billed as a, “Rent Assistance Program for Businesses”. To ensure that the program will have a positive impact on as many Canadian business owners as possible, the announcement of the new scheme was accompanied by attestations from the Prime Minister that the federal government would be easing restrictions that may presently hinder small and medium sized businesses from accessing loans. Please see our tax blog for additional information on last week’s other Emergency Response updates.

 

Rent Relief – The Canada Emergency Commercial Rent Assistance Program

The Canada Emergency Commercial Rent Assistance Program will assist eligible small businesses with their rent payments for April, May, and June. The program will be administered in conjunction with the provinces and territories, who are typically responsible for overseeing the administration of commercial property in their respective locales. The crux of the program involves providing loans to commercial property loans, some of these will be forgivable in the future, to enable them to reduce or forgo the rent they charge to small businesses.

Tenants who have their rent deferred by their landlord may still input a tax credit even if they have not paid their rent. This makes it important for landlords to record deferrals properly, so as to make them legally binding, and thus the owner of the property will not be burdened by a GST/HST liability before they have received the rent for the property.

However, it is also worth noting that short-term accommodations to tenants will likely not impact a landlord’s GST/HST liability as the federal government has deferred the due date for any GST/HST owing until the 30^th of June 2020.

 

Forgivable Loans – The Canada Emergency Business Account

In addition, there will be expanded access to the Canada Emergency Business Account. This program is aimed to provide small and medium sized companies with loans of up to $40,000 in order to assist with keeping their businesses viable during the COVID 19 crises. As an additional method of assistance, if a company can pay the remaining balance of the loan by the end of 2022, up to $10,000 of the loan may be forgiven.

To qualify for a loan under this program, the company must demonstrate that they paid between $50,000 and 1,000,000 in payroll during their 2019 fiscal year. However, as part of the expanded access programs the eligibility is being extended to companies with a 2019 payroll between $20,000 and 1,500,000.

 

If you have any questions about how these programs above may affect you as a business owner, or questions about applying, contact our firm for a free consultation. We are here to help! In the meantime, we will continue to keep you informed and hope you and your families remain safe and healthy in these uncertain times!

 

*Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

Canada Emergency Response Benefit Updates

On Wednesday, April 15, 2020, the Government of Canada announced that a greater number of Canadians will be eligible for the Canadian Emergency Response Benefit (CERB). The CERB provides $500 per week to Canadians for 16 weeks. In most cases, individuals can only apply for the benefit 14 days after their last paycheque. Applicants must re-apply every four weeks.

The government is actively seeking to fill the gaps created by the original eligibility criteria. The original requirements for qualifying for the CERB were the following:

• The applicant must be at least 15 years old;
• The applicant must have stopped working for reasons due to COVID-19;
• The applicant must have earned employment or self-employment income of at least $5,000 in 2019, or in the 12 months prior to the date of their application; and
• The applicant must not have quit their job voluntarily.

The most important expansion of CERB eligibility criteria is to permit those who make under $1000 per month to apply. This is to help those that are still working and making a paycheque, but at reduced hours. This adds some flexibility to the rule that applicants must wait 14 days since their last paycheque to apply. Now, even though an individual is still earning a salary, if it is under $1000 they can be eligible.

The criteria have also been expanded to include Employment Insurance (EI) exhaustees. If you have completed a claim of EI since January 1st, 2020, you will qualify for CERB. This is intended to help individuals who have not necessarily stopped working because of COVID-19, but are now finishing their EI and are unable to find employment because of COVID-19.

The expansion also benefits seasonal workers, who might use their EI in the off-season, and work in the warmer months. Now, as we approach summer, seasonal workers who cannot find employment due to COVID-19 are also eligible for the CERB.

Additionally, essential workers who are working full time but earn less than the CERB provides are going to get a wage boost. The federal and provincial governments are working together across the country to provide a top-up or wage boost for essential workers that are paid less than $500 per week. The details on this are not finalized yet, but it appears that the government is going to reconsider who are truly “essential workers”, and give them a wage supplement as compensation for working during this pandemic. We will provide further details on this as they become available.

The government has stated that if you select to receive the benefit as direct deposit, you should receive it within one business day. If you choose to receive the benefit by cheque, it can take up to five business days.

If a recipient receives a double-payment, there is no reason to worry. The government has stated they are tracking those cases and those individuals will just have to ration the larger benefit amount over a larger period of time. The government will not retrieve the additional funds. They will just stop providing additional payments once that recipient reaches the maximum benefit amount of $8000.

 

If you have any questions about how the taxable benefit above may affect you as a taxpayer, or questions about applying, contact our firm for a free consultation. We are here to help! In the meantime, we will continue to keep you informed and hope you and your families remain safe and healthy in these uncertain times!

 

*Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

EI Sickness Benefits and COVID-19

Given the financial uncertainty facing Canadians as a result of the COVID-19 Pandemic, on March 18, 2020, the government of Canada announced additional measures to help stabilize the economy as the fiscal impact of the Pandemic intensifies. For information on the new flexibility afforded to Canadian taxpayers please see our blog post form March 20^th 2020. For more information on the Canada Emergency Response Benefit, please see our previous blog post found here.

The government of Canada has revised their EI Sickness Benefit rules and a detailed discussion is found below.

 

EI Sickness Benefits and COVID-19

One of the most significant components of the March 18 announcement was the waiving of the one week waiting period for EI Sickness Benefits. These benefits are being changed to provide enhanced eligibility for:

1. Those who fall ill with COVID-19;
2. Are forced to isolate as a result of the illness; or
3. Those who must care for a loved one or dependant who becomes ill.

The removal of the waiting period is designed to provide immediate aid to those who would otherwise have to wait too long for these benefits to kick in. Without the ability to earn income, these people would be waiting for their EI benefits for too long during the current crisis. The measure has been deemed in effect from the 15^th of March 2020, onwards.

In addition to waiving the delay period to access the EI Sickness benefits, for those impacted by the COVID 19 crisis, the federal government is also waiving the need for a medical certificate to demonstrate eligibility for EI Sickness benefits. Normally one would need the medical certificate, but because of COVID-19, it is nearly impossible to retrieve one.

 

How to Access the EI Sickness Benefits

The EI Sickness benefits will become available to Canadians in April of 2020. We will post the link as soon as it becomes available.

Canadians will need to demonstrate their eligibility for relief and successful applicants will be required to re-demonstrate their continuing need for relief every two weeks. Once the application process is opened, Canadians will have access to the system through a toll-free phone call, their CRA MyAccount, or their My Service Canada Account. Those who presently lack access to these online accounts, who feel they may qualify for EI Sickness benefits or the Emergency Canada Benefit, should proactively sign up for these services. This will reduce any unexpected delay.

 

If you have any questions about how these taxable benefits above may affect you as a taxpayer, or questions about applying contact our firm for a free consultation. We are here to help during these trying times! In the meantime, we will continue to keep you informed and hope you and your families remain safe and healthy!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

What is the Canada Emergency Response Benefit?

On Wednesday March 25, 2020, the Government of Canada announced further measures to help protect Canadians and the economy from the continuing impact of the Covid-19 pandemic. Please see our previous blog post from March 20^th, for general information on the Government of Canada’s action plan.

The announcement included the creation of the Canada Emergency Response Benefit (“CERB”). This taxable benefit will provide $2,000 per month, for up to four months, to workers who have lost their income as a result of Covid-19. Once the application is approved, the CERB will be paid every four weeks and be available from March 15, 2020 to October 3, 2020.

 

How do I Access the Canada Emergency Response Benefit?

The Canada Emergency Response Benefit will be accessible through a secure web portal starting in early April. The website itself has not yet been unveiled. Once it is up and running, it is meant to provide easy access for all taxpayers. Money will be paid out with in 10 days of applying. The CERB is meant to streamline two previously announced benefits, The Emergency Care Benefit and the Emergency Support Benefit, into one plan.

To apply for the benefit, please click here.

 

Will I be Eligible for the Canada Emergency Response Benefit?

The Canada Emergency Response Benefit covers all Canadians who have lost their job, are sick, quarantined, or are taking care of someone who is sick or at home because of school/daycare closures. The CERB covers not only wage earners or employees, but also contract and self-employed individuals who would not otherwise be eligible for Employment Insurance. The CERB would also extend to workers who are still employed but not receiving income due to work disruption caused by Covid-19.

For a detailed listing of who is covered, please see the CRA website found here.

Canadians already receiving employment insurance ought to continue and not apply for this new benefit. Once the employment insurance benefits cease, as long as it is before October 3, 2020 those individuals will be able to apply for the CERB.

 

If you have any questions about how the taxable benefit above may affect you as a taxpayer, or questions about applying contact our firm for a free consultation. We are here to help! In the meantime, we will continue to keep you informed and hope you and your families remain safe and healthy in these uncertain times!



 

**Disclaimer

 This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

The Canada Revenue Agency Response to COVID-19

In order to alleviate the burden of the ongoing COVID-19 crisis on Canadians, the Federal Government of Canada has introduced changes to the Canada Revenue Agency (CRA) processes and extended the tax calendar for this upcoming tax season. The changes affect all taxpayers, and hopefully will have the effect of relieving some of the stress of the current circumstances.

 

CRA and COVID-19 Personal Tax Changes

The following changes are relevant for individual taxpayers:

1. The filing due date for 2019 tax returns of individuals have been deferred until June 1^st, 2020. However, the CRA encourages individuals who receive benefits under the GSTC or the Canada Child Benefit not to delay the filing of their return if possible. This is to ensure that their entitlements for the 2020-2021 benefit year are properly calculated.
2. The filing date for Trusts with a taxation year ending of December 31 2019 will be postponed until May 1, 2020.
3. Taxpayers are allowed to defer the payment of any income tax amounts that become payable between March 18 and September 2020 until after August 31, 2020. This applies to all balances due, including any instalments. No interest and penalties will apply.
4. The CRA will recognize electronic signatures as having met the signature requirements of the Income Tax Act, effective immediately. Usually, taxpayers are required to sign their tax returns by hand. In an effort to reduce the amount of person-to-person contact between taxpayers and their tax-preparers or accountants, they are now allowing electronic signatures instead.

 

CRA and COVID-19 Corporate Tax Changes

The following changes are relevant for businesses:

5. Similar to individuals, the CRA is allowing businesses to defer the payment of any income amounts that become payable between March 18 and September 2020 until after August 31, 2020. This applies to all balances due, including any instalments. No interest or penalties will accumulate on these amounts owing during this period.
6. The CRA will not contact any small or medium business to initiate any income tax or GST/HST audit for the next four weeks, starting March 18, 2020. Additionally, for the vast majority of businesses, the CRA will suspend audit interaction between CRA agents and taxpayers.

 

CRA and COVID-19 – Collections

Rosen Kirshen Tax Law has successfully negotiated the removal of the vast majority of the legal action taken against our clients. CRA understands that now is not the time to garnish wages, freeze bank accounts or take additional action against taxpayers. If CRA has taken legal action against you, call us to see if we can help get it removed ASAP.

 

CRA and COVID-19 – Situation Moving Forward

If the situation continues to worsen, we expect the CRA to continue loosening its rules and regulations. More importantly, the CRA will likely begin offering credits and benefits that were not necessarily available before the crisis in order to alleviate the financial burden of the COVID-19 pandemic. We will be sure to keep you updated on any changes that could ultimately lower your amount owing.

If you have any questions about how the changes above may affect you as a taxpayer or small-to-medium size business owner, contact our firm for a free consultation. We are here to help! In the meantime, we want to wish everyone a safe and healthy quarantine / self-isolation period. We are truly fortunate to be in Canada during this crisis, where from our government, to our neighbours, we all take it upon ourselves to ensure the well-being of those around us. Let’s get through this together.

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.

by Jeff Kirshen

The CRA and Employment Agency Audits

Recently, the Canada Revenue Agency has created a group project auditing employment agencies located in Ontario, Canada. These audits typically encompass every year of operation for the employment agency. The CRA believes that these agencies have been apart of a group that has been claiming Input Tax Credits fraudulently. The CRA refers to this as a sham issue, which will be discussed below.

 

The CRA and the So Called Sham

A transaction is considered a “sham” for tax purposes where a transaction is conducted with an element of deceit as to create an illusion that leads the tax authorities away from the true nature of the transaction. A very common example of a sham is when there is collusion between parties that are intentionally creating the appearance that they are working at arms-length. Parties might do so to confer benefits upon themselves or related parties that avoid the imposition of additional tax. The CRA and the courts consider the participation in a sham to be tax abuse, and the CRA pursues suspected cases of tax abuse very diligently.

 

Employment Agencies and the Sham

In recent audits, the CRA has alleged that a group of labour-supply companies (employment agencies) are involved in a sham and have denied all their Input Tax Credits (ITCs). Customers would hire these labour companies (employment agencies) to provide cheap workers to fit their needs. If the task required lower skilled labour, the labour companies (employment agencies) would hire a subcontractor to provide the workers, and act as a middle-party. On their tax returns, the labour companies (employment agencies) would expense the cost of hiring the subcontractors and claim ITCs on their GST/HST returns.

The CRA alleges that this business structure is a sham. The CRA alleges the existence of a sham by claiming that the labour-supply companies (employment agencies) created the subcontractors themselves. The CRA believes that the subcontractors do not exist; that the labour supply companies (employment agencies) are providing their own workers to their customers, are cutting cheques to themselves but claiming they were to subcontractors, and are claiming to have hired subcontractors in order to write off ITCs.

 

Why Does the CRA think this is a Sham?

The CRA started investigating the existence of a sham when they were unable to contact any representatives of the subcontractors using the phone numbers and addresses on the invoices issued to the labour supply companies under audit. While the subcontractors have business numbers, GST numbers, and articles of incorporation, their tax-filing history was non-existent.

Basically, because the CRA was not getting the GST/HST collected by these subcontractors, they decided to audit the companies paying the subcontractors.

 

The CRA has now proceeded to deny hundreds of thousands of dollars, even millions, in ITCs of the numerous labour-supply companies (employment agencies) that they allege are involved in a sham. If you are a business owner and are accused of being involved in a sham by the CRA, contact our firm for a free consultation. We are here to help!

 

**Disclaimer

This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.