taxdetective-Sandusky-Register

There's no statute of limitations if you haven't filed tax returns. Could be 15 years, or 50, if that's what CRA demands when you register a voluntary disclosure. There's a form for that now, that you submit and the program has been so successful, there's a substantial wait for approval and likely no one to talk to unless you get lucky when you call.

Step # 1 - Gather all the financial transactions and paperwork for everything for all the years, both business and personal. EVERYTHING. All accounts, all debts, all credit, all assets, investments, all deposits, purchases, payments, EVERYTHING. Contracts, correspondence, journals, logs of km's, (lucky break?)

Step #1a - Dump all the boxes out, or empty the binders and remove staples to establish a filing system in new bankers boxes with lids. You're going to be living with those boxes for months if not years.  Get rid of the bugs in the old boxes asap, yes old boxes have spiders and fleas.  Did you know there's paper fleas? You might want to spray everything with insecticide before you bring it in. Especially if those boxes were stored under the house or in the attic or out in the garage.

Step #2 - Contact CRA to establish a voluntary disclosure. Get approval or work thru anger as client realizes the penalties and interest will apply because they were already contacted and now it's too late.

Step #3 - Get a retainer for the work - if you go week by week, reporting on progress, and requiring more information before continuing, and the client stops delivering either more information, paperwork, or additional funds, dump them. Don't expect to do the work and get paid later. That won't be happening.

Step #4 - Sort it all out. This is where my training videos can help. I have a great system for working with clients like this, as QuickBooks allows you to enter all the years, there's no year end closes, you just enter everything until it reconciles. But that requires a system and being able to find everything again to reconcile. This is where a great Sort-All (they cost about $30 in Staples) comes in very handy.

Step #5 - Start recording the bank and credit card statements, recording everything that is business related (get the client to tell you this with a B beside everything business) and code everything, all purchases to Accounts Payable by Supplier name and all deposits to Accounts Receivable by Customer name.  Everything has to be NAMED.

Step #6 - Reconcile the bank and Visa accounts. This is where you have the conversation about missing months and require them to go back to all the financial institutions to get all those missing months / years... this costs them.

Step #7 - Start entering sales and clearing the deposits against the sales. This is where you discover nothing matches and your client isn't telling you the whole story.

Step #8 - Start entering purchases and clearing payments against purchases. This is where you discover that nothing matches and your client isn't telling you the whole story. Then you start the process of requiring them to contact suppliers to get copies of everything they paid for that's missing documentation.

Step #9  Demand to see their personal banking as well as the business accounts. This is where you find those missing deposits for sales, and deposits for which there's no explanation, and where you find payments for business purchases in the personal banking.

Step #10 - Decide client should have registered for GST/HST or PST way back when and start that process. This is where you have the discussion about how they have to register, but they aren't going to be able to claim their ITC's for more than 4 years back, but they'll have to calculate the GST/HST to be paid out of the invoicing to their customers, or charge the customers and collect... Oh joy.

Step #11 - Same for payroll and WCB - there's employees - but nothing withheld or remitted

Step #12 - Still with me? It's been months...If you get this far you're totally amazing and have the patience of a Saint. Your office will look like invasion of the bankers boxes (no not body snatchers), and there will likely be as many boxes as there are years outstanding if sales were anywhere from $30,000 to $100,000, more if sales were higher.  Usually sales aren't higher because people who aren't filing also aren't getting loans or credit and have to pay for everything up front.  This takes way more time and energy than having credit so there's no time left to make more sales than that. It takes a lot of energy to fly under the radar.

Probably not if the payer is not resident, and not a registrant, as in Amazon.com, Google.com

But... if you are advertising for a US corporation that is controlled in Canada, that might make a difference.

To be sure, you can ask them to provide you with confirmation of their status in writing.

Here's where you'd look for the rules!

GST/HST Memoranda Series 4.5.3 para 16-17 has zero rating provisions. 
If you meet those, you should obtain Appendix A letter proof of non residence in Canada in GST/HST Memoranda Series 4.5.1.

http://www.cra-arc.gc.ca/E/pub/gm/4-5-3/README.html

If you don’t meet criteria for zero rating then you look to P 18-24 and advertising specifically para 25-27 

If you don’t meet the zero rating provisions in para 16/17, it’s necessary to get Appendix B letter proof of non residence and non registrant status from the provider of the commission.

Appendix A & B letter are found in GST/HST Memoranda Series 4.5.1.

http://www.cra-arc.gc.ca/E/pub/gm/4-5-1/README.html

I found out that less is more in the CRA search engine. If you type in GST/HST Memoranda Series and the number, you don't get anything, but if you just type in 4.5.3 you get what you want. Less is more; at least today...

Tonight's workshop


https://skydrive.live.com/redir?page=view&resid=F244372B5D1DAC5!2290&authkey=!AJEYUADpsO0RuDk

https://skydrive.live.com/redir?page=view&resid=F244372B5D1DAC5!2312&authkey=!AEjn9PFzm53xYPI

https://skydrive.live.com/redir?page=view&resid=F244372B5D1DAC5!2326&authkey=!AFz-zji08bV-nAw

Who else can see what you're doing? Where exactly is your data stored? Which country? Or is it on the moon? Who really knows? Maybe Chris Hadfield can fill us in...

Last night I did a presentation on QuickBooks Online for accountants at the Fraser Valley CGA Computer User Group. Accountants may be invited to participate in QBOnline by their clients for free. Exactly what does that mean to accountants? How can they participate securely? Do they want to participate?

No one in the group is willing to download their own online banking into a program on the cloud stored in another country just yet.  I'm not surprised by that. But how many of their clients already do? There's all these free accounting programs out there willing to ask you to sign in to your bank and download your transactions for free. Where exactly is that stored? One does wonder... And who are these people that own these companies? Intuit has been around for years, and we think we know them, but do we really?  And what about the others hoping to break into the market? Wave, FreshBooks, etc.

See my Productivity Tools page under "Free Stuff" on my website for links to many of these tools, many are APPs you can load to your mobile devices.

There was an article I found on another blog that someone asked me to post so here's the link!

CFO.COM article on why CFO's should oversee company cloud initiatives

Terms of services, unauthorized use of cloud-based tools and programs and acceptable policies and procedures for cloud products and services need to be stick handled by someone who knows how to set controls in place and manage corporate activity on the cloud.

The Bottom Line April 2013 had an article about Hackers looking to 'spear' small businesses. Richard Morochove, FCA of Morochove & Associates Inc. wrote about how the bank will be attempting to call you to confirm if there is suspicious transactions, and the fraudsters will use TD0s attacks, automated dialing programs to override your ability to call or receive calls on your phone. Nasty.

Richard recommended you don't use your PC to perform online banking, keep your software up to date for Malware and Virus catching, and change your passwords frequently. That, and perform full scans frequently and know what to do, or who to call should you be infected or attacked.'

When was the last time you changed your banking passwords?  Where are your passwords stored?

MP Cheryl Gallant has support across party lines for this Bill to restrict the fees charged or accepted by persons who request a determination of the disability tax credit eligibility under the Income Tax Act.

The problem is that the determination isn't what costs. It's the adjustments after it's accepted. That's where it gets tricky.

You see, tax credits and expenses can be 'apportioned' and transferred to supportive family. IT 513 Personal Tax Credits has an appendix that describes what support means.

When support can be proven, there's all sorts of changes to other people's tax returns, those relatives who support someone with a disability can step up to have their crack at a piece of the tax credit pie.

I don't think that the MP's quite get it. They think that it's the determination that's costly. That part of the process, it's nothing in the grand scheme of things.

It's all those adjustments after the fact that take all the time and effort to sort out. It's the extra child care for an adult child, it's the disability supports claim, it's the other credits that all of a sudden become something worthy of consideration. It's the dependent care, nursing care, and other medical expenses not previously claimed, and trust me, those are time consuming to sort out for ten years prior. It's like doing someone's taxes all over again, because essentially you are, and for the entire family group. That can take multiple hours x 10 years. By the time you do the math, you can see why, if the promoters are really doing those adjustments, they're probably really earning a fair wage, that is if they were hiring professionals. Maybe they are, I don't know. If they are, because they aren't professionals up front, that's how they are skirting the ethics of charging a flat fee.

And after all that, CRA can counter with multi page questionnaires requiring details of exactly how many times food, clothing and shelter were purchased during the year, and how much, when, from whom, and was it paid directly to third parties. If you haven't kept your paperwork, look out, not only will you not get the credits you thought you'd get, but you'll have paid out fees you can't get back when you're re-assessed. Those promoters, they aren't going to be willing to refund their 30%. And neither will a professional who put in the hours.

The moral of the story, better have your bank and credit card statements and receipts to prove support.

I suspect it's going to get ugly.

Just received a letter from CRA with tips to assist with accurate adjustments for clients in the future

Tip # 1) If two T1 Adjustment Request forms are submitted for separate taxpayers, and the adjustments relate to each other, please provide an explanation and identify the related taxpayer and tax year in the other details and explanations area of the form. The usefulness of one cover letter for both taxpayers is limited in that the cover letter will remain with only one of the requests. An alternative is to attach a cover letter to each T1 ADJ though this is not necessary.

My Comment: It was indicated in the body of the letter that cover letters are NOT read and in fact, are completely ignored in the mail room. I was informed that the cover letter goes with what ever the first item under it is. The rest of the items are sorted and sent to a variety of departments. See previous post for what to say on EACH T1ADJ if the requests are related.

Tip # 2) A Tax Summary of a return will generally be referred to the T1 Processing area to determine if it was intended as an original return. If it's determined it has already been filed, then it's forwarded to the Individual and Benefit Returns division. This could result in request for related taxpayers being referred through different areas. You may want to not include tax summaries when requesting adjustments. The T1 ADJ forms are sufficient on their own provided the necessary adjustments are identified, explanations are provided and the appropriate supporting documentation is provided.

My Comment: The reason I put a "Before" and "After" snapshot/summary with the adjustment (and it's stapled to the back of the adjustment, and referenced in the Explanation, is to attempt to engage the adjuster in checking their work. Obviously that backfired.

Tip # 3) Where one taxpayer is dealing with multiple areas of CRA and the issues are not related, it is sometimes more effective to respond directly to each area for each issue that you are addressing. Providing all information to only one of the areas may cause delays in getting information to the areas that need information.

My Comment. This was specific to one client where T1 Processing Review had requested additional information. Because the client came in with more information than what was originally requested, and it became a Voluntary Disclosure at that point, I made arrangements with VD to send the information to them. Now I'm being accused of being the problem. Apparently I should have sent the information to two place.

It's my observation from this experience that CRA management can choose to make a case as to why it's our fault, not theirs and maybe even sell themselves on the idea that they are right.

Even when it definitely was CRA's fault, they still won't believe it's their system that's at fault. Instead, and this is very sad, they chose to blame an employee for an error, instead of the system for not allowing for packages to be dealt with as a package. In that case, which involved a couple and spousal transfers, it was very obvious to me that even though the employee processed both returns on the same day, the spouses may have been processed by the same person on the same day, but I doubt they were processed together, or the employee would have caught their error.  This was in spite of a line by line breakdown of which lines on each return should change. It's obvious they aren't instructed to cross check the results anticipated by the client, as is evidenced by me being instructed not to send in summaries of before and after as that just confuses them.

I'm sure glad I don't work at CRA. Reminder to self, could have had a nice pension if you'd worked there, but the office politics evidenced by this letter which blames everyone but themselves, no thanks. They can keep their big fat salaries and their pensions. I'd rather make less, work from home, and choose my clients carefully, and cross check my work. Of course, none of us can choose not to work with CRA to help those clients.  So we'll keep re-submitting those T1ADJ's until they finally get it right or drop dead trying.

In March, at a CRA/CGA liaison meeting at the Surrey TO, I commented that CRA was not respecting our cover letters for multi-family, multi-year adjustments.

One very wise CGA pointed out after the meeting, that CRA processes individuals, not families. We, as tax preparers process families. That's OK as long as it's the initial filing in April, as there's no cross checking done at that point, any cross checking takes place later during the post audit assessments, and by then everything should  line up in the credit apportionment game.

The problem is when you attempt to adjust tax returns for families for prior years, it's often 3 or 4 taxpayers, parents, grandparents, children with disabilities for ten years that need adjusting. So you send in adjustments where the credits or expenses are apportioned differently than when they were first filed. That's the problem, if everything isn't adjusted together, it will raise red flags. If I change one taxpayer, it trips a wire that says the other taxpayer claimed that, if the other taxpayer's adjustment hasn't been processed yet. CRA's method of handling that tripped wire wasn't to investigate. It turns out that was because they couldn't, because they couldn't find the other adjustment as they had no tracking system for T1ADJ's in process. Shades of the DTC application process back in 2005, when DTC's would vanish into CRA desks for years at a time.

Usually this problem is the result of a newly approved, backdated Disability Tax Credit, and soon, the Infirm Amount that isn't claimed yet (new for 2012). As a result, there are a whole bunch of other credits, expenses, etc. that can be apportioned differently, or amounts can be increased for new limits because of the DTC, for example, the child care amount increases to $10,000 from $7,000 or continues to be claimable for an adult child... or you can claim medical expenses you couldn't before, as there are four medical expenses you must have the DTC to claim the medical expense...you get my drift.

Anyway, CRA mail room had instructions to keep the cover letter with whichever T1ADJ was on top, and the other T1ADJ's were torn off and sent on their merry way. As a result, taxpayers would receive partial adjustments. It might take several more tries with new T1ADJ's to eventually get the whole adjustment processed correctly for the entire family.

It was pretty obvious, after the meeting, the management at CRA really didn't like being told they didn't respect our submissions. They did some investigating; and have determined, bless their hearts, have come up with a solution.

The solution? If they implemented an electronic tracking system for receipt of T1ADJ's, just maybe, if we were to cross reference our T1ADJ's they might be able to find the other adjustment to cross check and process the entire T1ADJ for everyone on the first go.

So we have to do our part to make this work. Instead of a cover letter, your first line on each T1ADJ in the explanation/information box should cross reference to the other connected or related or affiliated T1ADJ's for that year, with a statement that says:

THIS ADJUSTMENT DIRECTLY RELATES TO THE T1ADJ FOR "suzie Q" SIN #777777777
and list the multi-family members whose adjustments should all be considered together. Then, explain what you would have put on the cover letter right on the T1ADJ, and do that on each one.

Now that they have an electronic tracking system, at least in the Surrey Tax Office so far, and soon to be rolled out to other TO's across this fair land for the rest of you, just maybe we'll be able to stop this round robin and get on with doing what we should be doing, instead of re-doing T1ADJ's at least twice, if not three times. It's been known to take an entire year to adjust everything correctly.

I'm impressed. Someone has obviously taken this seriously and it just could work. 

And me, here's hoping they discover how to use electronic tracking devices with little GPS's in them next. That way, they could see inside the desks of those CRA staffers on 4 week holidays who have squirrelled away work for when they get back. What's with that? Take away those desks, make them work at tables and for heaven's sake, put the unfinished work back in the queue. Come back to a fresh start. That would be my answer.