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QUESTION: Is the 10 year time limit for using CRA's voluntary disclosures program hard and fast? If so, why? What happens when someone only discovers they made a mistake much later and they want to straighten it out? Can they still do so? (Since the CRA can go back as many years as they want, it only seems fair that someone who discovers a mistake more than 10yrs old should also have a chance to correct it.)
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david ingram replies;
The tax office is usually restricted to going back 3 years unless they
allege serious fraud. If there is fraud, they have a method of going
back eight years. In my 44 years in this business, I have only seen
the tax office go back under this legislation ONE time against an
ordinary individual and he was a logger. By the time they were
finished in a court room, the CRA had proven that he did not report
$5,000 of log sales in the right year. (He reported a $4,000 sale on
about Dec 21st of one year in the next year because that was when he
cashed the cheque). The judge found him guilty of tax evasion on a
technicality, chastised the CRA investigators AND the prosecutors, and
then gave him a mandatory $2,000 fine (the amount of tax delayed) with
no date set to pay it. The gentleman died in 2006, 20 years later,
without ever having paid the fine.. For the record, at one time I
administered over 700 tax preparation offices and have had lots of
chances to see more situations.
Canada also has an amazing piece pf legislation which allows YOU, the
TAXPAYER to go back 10 years.
No matter what you find, the US will only allow you to go back 3 years.
Now that I have said that he CRA (and the IRS as well) only go back 8
years when there is fraud involved, if you have not filed the returns,
the IRS can ask for back returns back to 1967 and Canada can go back
as far as they want if nothing was filed. Although not common, we
regularly see them go back fifteen or sixteen years when someone did
not file period. These are usually devastating because even a $5,000
bill in 1990 is now about $20,000 with penalties and interest.
I have seen many people's lives ruined when they were caught by the CRA
and ended up with the tax massive fines, penalties and interest and
sometimes a criminal conviction.. I have never really seen anyone hurt
(other than financially) when they do a voluntary disclosure. With a
voluntary disclosure, you get a big tax bill, no or little penalties,
and an interest bill. If the results are too devastating , the entire
bill can be eliminated in Canada with a bankruptcy. If you are going
to do this in Canada, I recommend that you consult a bankruptcy
attorney such as Murry Morrison at (604) 930-9013. You can find a link
to his website on my site at www.centa.com.
Personal taxes can also be eliminated in a US Chapter 7 bankruptcy.
The rules took effect in April 2005. In general, US personal
income taxes can be discharged if the taxes are at least
three years old, and were assessed at least 240 days prior to the
bankruptcy filing. The taxes also have to have been filed
voluntarily. If the IRS sent you a SFR (Substitute for Return) consult
a competent bankruptcy attorney
prior to filing your original returns! This is a must.
Income
taxes less than three years old can NOT be discharged in a US
bankruptcy. Tax returns filed less than two years ago
and taxes assessed less than 240 days ago can not be discharged in a
chapter 7 filing.
You
might also consider a Chapter 13 proposal in the US where you offer
payments on a dollar or a Compromise solution in the USA.
If
you do decide to do a compromise, be careful. Some of the mills being
run are just going to get you in more trouble. Watch out for heavy
pitches on television. The experience I hear from clients int eh US
and Canada is that they approached a high profile person, paid a chunk
of money and then were ignored. In one case in Canada for instance,
they did a compromise when none was needed, charged the client $10,000
up front and then prepared the returns incorrectly so that the CRA came
back with $20,000 more tax.
I
have personally left five messages for the high powered TV and radio
pitchman for the business and neither he nor his daughter have returned
a phone call or email.
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On Mar 14, 2008, David
Ingram wrote:
It is very unlikely that blind or unexpected email to me will be
answered. I receive anywhere from 100 to 700 unsolicited emails a day
and usually answer anywhere from 2 to 20 if they are not from existing
clients. Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject line
and get answered first. I also refuse to be a slave to email and do
not look at it every day and have never ever looked at it when I am out
of town. e bankruptcy expert US Canada Canadian American
Mexican Income Tax service and help
However, I regularly search for the words"PAYING
CUSTOMER" and always answer them first if they did not get spammed out.
For the last two weeks, I have just found out that my own email notes
to myself have been spammed out and as an example, as I wrote this on
Dec 25, 2007 since June 16th, my 'spammed out' box has
47,941 unread messages, my deleted box has 16645 I have actually looked
at and deleted and I have actually answered 1234 email questions for
clients and strangers without sending a bill. I have also put aside
847 messages that I am maybe going to try and answer because they look
interesting. -e bankruptcy expert US Canada Canadian American
Mexican Income Tax service and help
Therefore, if an email is not answered in 24 to
48 hours, it is likely lost in space.
You can try and resend it but if important AND YOU TRULY WANT OR NEED
AN ANSWER from 'me', you will have to phone to make an appointment.
Gillian Bryan generally accepts appointment requests for me between
10:30 AM and 4:00 PM Monday to Friday VANCOUVER (Seattle, Portland, Los
Angeles) time at (604) 980-0321. david ingram expert
US Canada Canadian American Mexican Income Tax service and help.
david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604)
980-0325
Calls welcomed from 10 AM to 9 PM 7 days a week
Vancouver (LA) time - (please do not fax or
phone outside of those hours as this is a home office) expert US Canada Canadian American
Mexican Income Tax service help.
Disclaimer:
This question has been answered without detailed information or
consultation and is to be regarded only as general comment. Nothing
in this message is or should be construed as advice in any particular
circumstances. No contract exists between the reader and the author and
any and all non-contractual duties are expressly denied. All readers
should obtain formal advice from a competent and
appropriately qualified legal practitioner or tax specialist for expert
help, assistance, preparation, or consultation in connection with
personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be
included." e bankruptcy expert US Canada Canadian American
Mexican Income Tax service and help.
David Ingram
gives expert income tax service & immigration help to non-resident
Americans & Canadians from New York to California to Mexico
family, estate, income trust trusts Cross border, dual citizen - out of
country investments are all handled with competence & authority.
Phone consultations
are $450 for 15 minutes to 50 minutes (professional hour). Please note
that GST is added if product remains in Canada or is to be returned to
Canada or a phone consultation is in Canada. ($472.50 with GST if in
Canada) expert US Canada Canadian American
Mexican
Income Tax service and help.
This is not intended to be definitive
but in general I am quoting $900 to $3,000 for a dual country tax
return.
$900 would be one T4 slip one W2 slip
one or two interest slips and you lived in one country only (but were
filing both countries) - no self employment or rentals or capital gains
- you did not move into or out of the country in this year.
$1,200 would be the same with one
rental
$1,300 would be the same with one
business no rental
$1,300 would be the minimum with a
move in or out of the country. These are complicated because of the
back and forth foreign tax credits. - The IRS says a foreign tax credit
takes 1 hour and 53 minutes.
$1,600 would be the minimum with a
rental or two in the country you do not live in or a rental and a
business and foreign tax credits no move in or out
$1,700 would be for two people with income from two countries
$3,000 would be all of the above and
you moved in and out of the country.
This is just a guideline for US /
Canadian returns
We will still prepare Canadian only
(lives in Canada, no US connection period) with two or three slips and
no capital gains, etc. for $200.00 up.
With a Rental for $400, two or three
rentals for $550 to $700 (i.e. $150 per rental) First year Rental -
plus $250.
A Business for $400 - Rental and
business likely $550 to $700
And an American only (lives in the US
with no Canadian income or filing period) with about the same things in
the same range with a little bit more if there is a state return.
Moving in or out of the country or
part year earnings in the US will ALWAYS be $900 and up.
TDF 90-22.1 forms are $50 for the
first and $25.00 each after that when part of a tax return.
8891 forms are generally $50.00 to
$100.00 each.
18 RRSPs would be $900.00 - (maybe
amalgamate a couple)
Capital gains *sales) are likely
$50.00 for the first and $20.00 each after that.
Catch - up returns for the US where we use the
Canadian return as a guide for seven years at a time will be from $150
to
$600.00 per year depending upon numbers of bank accounts, RRSP's,
existence of rental houses, self employment, etc. Note that these
returns tend to be informational rather than taxable. In fact, if
there are children involved, we usually get refunds of $1,000 per child
per year for 3 years. We have done several catch-ups where the client
has received as much as $6,000 back for an $1,800 bill and one recently
with 6 children is resulting in over $12,000 refund.
This is a
guideline not etched in stone. If you do
your own TDF-90 forms, it is to your advantage. However, if we put them
in the first year, the computer carries them forward beautifully.
This from "ask an income trusts tax service and
immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily basis with expatriate tax
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ingram
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& immigration consultant, income trusts experts on rentals mutual
funds RRSP RESP IRA 401(K) & divorce preparer preparers
consultants Income Tax Convention Treaty. advice
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Be ALERT, the world needs more "lerts". bankruptcy expert US Canada
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