by Jeff KirshenEI 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 20th 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:
- Those who fall ill with COVID-19;
- Are forced to isolate as a result of the illness; or
- 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 15th 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 KirshenWhat 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 20th, 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.
As soon as the website is up and running, it will be added to this Blog. Check back regularly for updates.
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 KirshenThe 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:
- The filing due date for 2019 tax returns of individuals have been deferred until June 1st, 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.
- The filing date for Trusts with a taxation year ending of December 31 2019 will be postponed until May 1, 2020.
- 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.
- 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:
- 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.
- 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 KirshenThe 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.
by Jason RosenEdge Highshare Updates and Recent Correspondence
This blog will provide those who purchased a Franchise in any year with an update in respect of our ongoing Edge related dispute with the CRA. If you require an overview of the Edge program dispute in general please review our previous Edge Highshare Blog.
Below, please find a summary for the stage of the dispute resolution process that each franchise year is currently in, along with what will be happening in the near future.
2012 Franchisees
Some Franchisees, who invested in this year, are already in Tax Court. However, others are a few months into the appeals process but have elected to hold their position in order to join the 2013 Franchisees, which consists of a much larger group and allows us to split fees amongst more people.
If you are in the appeals process and looking to join our group for tax court, please contact Rosen Kirshen Tax Law.
2013 Franchisees
If you are a 2013 Franchisee, the CRA’s review of your previously submitted objection representations will take a significant amount of time.
It is our understanding that the completion of this dispute could take years to complete at the CRA appeals division (similar to the 4-5 years consumed by Audit). As well, the CRA has advised that they have not yet designated a team of appeal officers to focus on the Edge/Highshare matter.
As such it is our recommendation that franchisees in this predicament proceed straight to Tax Court.
2014 Franchisees
The CRA’s audit of the 2014 Franchisees has been completed for all of our clients. They have received final letters which outline the adjustments that the audit division made to their previous returns. After the CRA issues a final audit letter, a notice of reassessment for each taxation year will be issued creating the alleged tax liability, some of our clients have already received these reassessments.
Once these reassessments are issued, we can proceed to either:
(a) file a Notice of Objection and remain in the queue at CRA; or
(b) file a Notice Objection to start the 91-day clock allowing us to by-pass the anticipated delay inherent with the CRA appeals process and proceed to defend our position in the Tax Court.
As with the 2013 Franchisees, it is our recommendation that franchisees at this junction bypass CRA appeals and proceed to Tax Court. Furthermore, the CRA has not provided personalized audit responses but rather grouped their position into one final letter applicable to all of our clients. This blatant disregard for the taxpayer’s rights solidifies our recommendation of disputing these matters in Tax Court.
2015 Franchisees
The audit of 2015 Franchisees has begun. Many of our clients have received proposal letters already. This outlines the adjustments that the CRA is intending to make along with a brief explanation of their ill-founded reasons.
The deadline to respond to the proposal letters is usually 30 days from when they are issued. However, we have a working relationship with the designated team and they have afforded us the opportunity to negotiate extensions. If you have received an audit proposal letter from the CRA for your 2015 Franchise do not hesitate contact Rosen Kirshen Tax Law for assistance.
Moving forward, we anticipate the CRA will not issue a final audit position for several months. This is because, following the final audit letter being issued, it will likely take them several weeks to process the results and issue a Notice of Reassessment.
If you have bought into the Edge/Highshare franchise agreements, and are being audited by the CRA, contact our office today. Call us today for more information about this potential action and about how we can 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 the articles. If you have specific legal questions you should consult a lawyer.
by Jeff KirshenReal Estate Agents and Incorporating a Company
For years, professions have been lobbying the province of Ontario to be permitted to incorporate. After doctors were given the right to incorporate over a decade ago, legislation has been introduced and tabled that would grant the same rights to real estate agents. To date, nothing has passed. However, it appears that Bill 104, the Tax Fairness for Realtors Act, is picking up steam, and soon may finally grant real estate agents the right to incorporate their business.
Tax Benefits for Real Estate Agents who Incorporate
Passing Bill 104 would carry significant tax benefits for real estate agents who decide to incorporate. In the province of Ontario, the highest income tax bracket is 53.53%, for every dollar earned over $220,000. As real estate agents are sole proprietors, their businesses have been subject to the same marginal tax rates as Ontario incomes.
However, as a Personal Real Estate Corporation, real estate agents will be able to enjoy the Ontario small business tax rate, which is 13.5% on the first $500,000 of income earned. Furthermore, as long as the corporation is owned, controlled, and operated in Canada, it can enjoy the Canadian Controlled Private Corporations tax rate of 26.5% on income that exceeds $500,000. The incorporation route promises huge tax savings for real estate agents.
There are also valuable income splitting opportunities with corporations’ income, which would be accessible to real estate agents. Income splitting allows corporations to separate its income among family members, which can be done strategically to stay in lower tax brackets. Corporations can do this by either paying them a “fair salary”, or issuing dividends.
There are also large tax deferral opportunities. Individuals are required to report income to the CRA that they earned during the year. Corporations only have to pay tax on income that is withdrawn. Therefore, they can delay the payment on a share of income by just leaving it in the corporation. This gives corporations significant tax planning advantages, as they can control the amount of income leaving their corporation in a specific tax year to lower their tax obligations.
Reporting Requirements for Real Estate Corporations
Of course, with incorporation comes new challenges. Requirements for filing and record keeping for corporations are far more onerous than for individuals. There are also indirect taxes like employer health tax, WSIB, taxes for payroll and GST/HST on commissions that can add expenses. In essence, while the power to incorporate would give real estate agents far more power to file their income strategically and enjoy small business tax rates, it also requires a far more complicated tax filing process with more costly obligations.
If you are a real estate agent and would like to discuss the implications of incorporating your business in the near future, 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.
by Jeff KirshenHome Depot and the CRA
In July of 2019, the Canada Revenue Agency used the “unnamed person requirement” to obtain a Federal Court order compelling Home Depot to disclose customer information to the CRA.
The CRA started its application for the information in 2016, but the application was put on hold while Rona disputed a similar application. Rona fought the CRA all the way to the Federal Court of Appeal, where it lost. It attempted to appeal the case to the Supreme Court of Canada, but leave to appeal was denied.
At that point, Home Depot informed the CRA that they would not challenge the application.
In September of 2019, Home Depot sent out letters to the customers affected, notifying them that their information would be provided to the CRA.
Who is Involved in this Request?
This involves customers who used Home Depot’s commercial credit card program between January 1, 2013 and December 31, 2016.
What Information and Documentation is being sent to the CRA?
Home Depot was compelled to disclose the identity, address, and the total annual amount spent by each customer.
What is the “Unnamed Person Requirement”?
The “unnamed person requirement” (UPR) found in the Income Tax Act is often utilized by the CRA to obtain information related to taxpayers from third parties.
As long as there is reasonable evidence that tax evasion is occurring, the CRA will likely succeed in obtaining the information requested.
UPR is often used by the audit division within the CRA in order to obtain information on taxpayers. The CRA has multiple options on how to obtain information during audit.
Why is the CRA doing this?
This is an example of the CRA’s latest attack on the underground economy. The CRA is targeting cash industries to discover businesses engaged in tax evasion. A Statistics Canada report released in 2018 found the underground economy accounted for $51.6 billion in 2016, or 2.5% of gross domestic product. Residential construction accounted for 26.6% of that.
The CRA has previously obtained a list of municipal building permits in order to discover unregistered building subcontractors. Their review of 8,396 building permits yielded 2,751 unregistered building contracts.
What Happens Now?
The CRA will use this information to attempt to find Home Depot commercial customers who have avoided filing accurate returns due to the fact that they work in a cash industry.
The CRA will look at the amounts that businesses spent at Home Depot and assess whether the revenue reported to the CRA on tax returns was reasonable in comparison. For example, if a business purchased $100,000 worth of items from Home Depot, but only declared $20,000 in revenue, this would likely be flagged to further review by the CRA audit division.
This will likely result in many businesses involved in construction being audited.
What if I am Affected?
If you are audited by the CRA, you should follow our guide on how to survive an audit.
Businesses or individuals who believe themselves to be at risk from the disclosure of third-party information to the CRA should consider applying to the CRA’s voluntary disclosure program in order to avoid prosecution and gross negligence penalties.
If you are worried about being audited or are considering applying for the voluntary disclosure program, 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.