Twelve Ways the Canada Revenue Agency May Have an Advantage Over You
HERE ARE 12 WAYS CRA MAY HAVE AN ADVANTAGE OVER YOU:
1. You believe what CRA tells you without having them prove it, just like we have to prove everything to them. Therefore, you follow CRA guidelines and compliance requirements (many of which are administrative wishes, not the law) without knowing specific details such as reasons for assessment positions and the general assumptions made by CRA about your situation that are often biased and not in your favour.
2. You do not know how your business may or may not fit special tax laws or what options are available that provides more favorable tax treatment. You do not follow current changes in legislation, policy, outcomes of disputes with CRA of similar types of organizations as yours. Then you may expect CRA to apply favorable treatments to you because someone else in a similar situation got it.
3. Not having the ideal organizational structure, or procedures in place to split income, postpone tax liability, claim losses, and maintain required compliance standards while minimizing flag waving. For example, all those holding companies that actually name themselves as ‘holding companies’ and wonder why they get audited.
4. You take no steps to legitimately reduce or postpone net income as you try to comply with covenants with your bank without getting the bank to realize it’s costing you a fortune in tax (money that could be used to pay debt). You have two choices – convince the bank to recalculate their compliance ratios to take into account your tax cost (use 120% of before tax incomes in ratios, for example) or ensure your bank understands your income is less because of meek tax positions – not a welcome choice but don’t assume this can’t be accomplished.
5. You get into a skirmish with CRA because of your own prejudices or underestimate the determination of CRA’s requests, personnel and authority.
6. You are not performing year-end tax planning (for savings or deferrals).
7. You are not mandating your accountant or controller go line by line through your budget and discuss with you the tax implications and opportunities of each category (e.g. capitalization policies, employee benefits, vehicle financing).
8. You complain to your ‘friend’ in high places in CRA about alleged abusive treatment. You are now on senior personnel’s radar and to ensure they are doing you a ‘favour’ they send in the CRA brigade for a full audit to clear up the matter (because they must follow up all leads and protect each other).
9. You are not taking advantage of industry association insights or networking with tax professionals familiar with your industry.
10. You have no creditor proofing or due diligence of your personal contingent liability for corporate withholding tax and GST/HST transactions with CRA.
11. Your transactions are not structured to deal with tax consequences or opportunities from the very beginning.
12. You don’t know the difference between a request and a requirement for information.
Of course we are just getting started on the first dozen insights. Stay tuned.