Welcome to JMJ Accounting - Your Partner in Growth

Frequently Asked Questions

• What accounting services does JMJ Accounting offer to small and medium-sized businesses?

  JMJ Accounting provides comprehensive services including bookkeeping, financial reporting, payroll management, and cash flow analysis tailored to the unique needs of SMBs in London, ON. Our solutions are designed to streamline your financial processes, ensuring compliance and enhancing profitability.

• How can JMJ Accounting help with tax planning for SMBs?

  Our tax planning services are focused on minimizing liabilities and maximizing returns. We offer strategic advice, including entity selection, tax-efficient structuring, and proactive tax-loss harvesting, to ensure that your business leverages all available tax benefits.

• Does JMJ Accounting offer financial advice specific to different industries?

  Yes, we specialize in providing industry-specific financial advice. Whether you're in retail, manufacturing, transportation or technology, we have the expertise to offer customized financial strategies that address the particular challenges and opportunities of your sector.

• What makes JMJ Accounting different from other accounting firms in London, ON?

  What sets us apart is our personalized approach and our commitment to building long-term relationships. We not only manage your accounts but also provide insights and strategies to foster growth and improve efficiency in your business operations.

• Does JMJ Accounting provide regulatory compliance assistance for SMBs?

  Absolutely, our dedicated team excels in ensuring compliance with current financial regulations. We maintain your records with utmost accuracy and transparency, adhering to both local and national standards.

• What are the benefits of outsourcing accounting services to JMJ Accounting?

  Outsourcing your accounting to us can reduce operational costs, enhance financial accuracy, and free up your team to focus on core business activities. Our expert accountants act as an extension of your team, providing continuous financial oversight and advice.

• How does JMJ Accounting ensure the security of financial data?

  We use state-of-the-art security measures, including encrypted data transmission, secure cloud storage, and regular security audits, to protect your sensitive financial information against unauthorized access and data breaches.

• Can JMJ Accounting help with payroll processing?

  Yes, we offer full-service payroll solutions that include setup, maintenance, and processing. We ensure accurate and timely payroll management, along with compliance with employment and tax laws, relieving you of complex administrative burdens.

• Does JMJ Accounting provide support for financial crisis management?

  Yes, we specialize in financial crisis management, offering strategies such as cost management, restructuring, and emergency funding options to navigate through tough economic times and stabilize your financial health.

• How can I get started with JMJ Accounting?

  Getting started is simple. Contact us through our website or call us directly (519) 690-0802 to schedule a consultation. Our team will assess your needs and propose a customized accounting solution that aligns with your business objectives.

• What is the Canada Revenue Agency?

  The Canada Revenue Agency (CRA), formally known as Revenue Canada, is an agency of the federal government that has as its main function the administration of Canadian tax laws for most of the provinces and territories of Canada. In addition, the CRA manages several social and economic tax programs such as the Canada Child Tax Benefit program and the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit program.

• What is the official mission statement of the Canada Revenue Agency?

  The official mission statement of the CRA is “to administer tax, benefits, and related programs, and to ensure compliance on behalf of governments across Canada, thereby contributing to the ongoing economic and social well-being of all Canadians.” For the CRA, compliance means filing tax returns by the deadline, ensuring the declaration made is complete and true, and paying the Canadian government what the CRA has determined is due in a timely fashion.

• How can I make a formal complaint about the quality of service I have received from a CRA agent or representative?

  Formal complaints must be done in writing via Form RC193 available at www.cra.gc.ca/complaints or by calling toll-free (800) 959-2221. The form has to be filled out and mailed or faxed separately from all other forms you may have for the CRA:

  CRA – Service Complaints
  National Intake Centre
  P.O. Box 8000
  Shawinigan-Sud, Quebec
  G9N 0A6, Canada
  Fax: 866-388-7371

  If you are not satisfied with the resolution offered by the Service Complaints office of the CRA, then you may contact the Taxpayers’ Ombudsman office to have them reassess the complaint and resolution made at the Service Complaints office. A complaint form, found at www.taxpayersrights.gc.ca/frm-fll-eng.pdf , must be filled out and mailed or faxed, along with other supporting documents to the following mailing address or fax number

  Mailing Address:
  Taxpayers’ Ombudsman
  Suite 724, 50 O’Connor Street
  Ottawa, Ontario
  K1P 6L2, Canada
  Toll-Free Fax Number: (866) 586-3855

  You can also call toll-free (866) 586-3839 to have a form mailed to you or to speak with a representative of the Taxpayers’ Ombudsman office.

• What is the Taxpayer Bill of Rights?

  The Canada Revenue Agency has developed a list of rights they claim Canadians are entitled to when dealing with the CRA. However, this Taxpayer Bill of Rights in and of itself is not actually a Bill or law at all. As such, the Taxpayer Bill of Rights can be changed at any time since it does not have to go through the normal legislative process laws normally have to undergo when being modified. It does not have the force of law behind it and therefore does not offer any kind of guarantee that the Canada Revenue Agency will themselves apply and follow this so-called Taxpayer Bill of Rights. However, it is important to note that seven out of the fifteen items listed in this so-called Bill of Rights are legislated rights implemented by the Canadian government and can therefore be legally upheld using the process outlined in the appropriate legislation, and those are items #1, #2, #3, #4, #7, #8, and #12 listed below in bold text.
  The “Taxpayer Bill of Rights” reads as follows:

  • You have the right to receive entitlements and to pay no more and no less than what is required by law.
  • You have the right to service in both official languages.
  • You have the right to privacy and confidentiality.
  • You have the right to a formal review and a subsequent appeal.
  • You have the right to be treated professionally, courteously, and fairly.
  • You have the right to complete, accurate, clear, and timely information.
  • You have the right, as an individual, not to pay income tax amounts in dispute before you have had an impartial review.
  • You have the right to have the law applied consistently.
  • You have the right to lodge a service complaint and to be provided with an explanation of our findings.
  • You have the right to have the costs of compliance taken into account when administering tax legislation.
  • You have the right to expect us to be accountable.
  • You have the right to relief from penalties and interest under tax legislation because of extraordinary circumstances.
  • You have the right to expect us to publish our service standards and report annually.
  • You have the right to expect us to warn you about questionable tax schemes in a timely manner.
  • You have the right to be represented by a person of your choice.

  The “Taxpayer Bill of Rights” then continues to state their alleged “Commitment to Small Business,” which states in verbatim:

  • The Canada Revenue Agency (CRA) is committed to administering the tax system in a way that minimizes the costs of compliance for small businesses.
  • The CRA is committed to working with all governments to streamline service, minimize cost, and reduce the compliance burden.
  • The CRA is committed to providing service offerings that meet the needs of small businesses.
  • The CRA is committed to conducting outreach activities that help small businesses comply with the legislation we administer.
  • The CRA is committed to explaining how we conduct our business with small businesses.
• What is a tax audit?

  According to the Income Tax Act of Canada, a tax audit is the “examination of a taxpayer’s books and records to determine accurately the taxes, interest and penalties owing under the law.” In other words, a tax audit is the government’s way of double checking the tax filings made by Canadians to make sure the taxes were reported accurately, honestly and completely. The CRA can audit GST/HST tax returns, income tax returns, excise taxes, and payroll documentation.

• Why is a tax audit performed?

  The Canada Revenue Agency performs tax audits to help ensure taxpayers are accurately and honestly declaring their taxes under the risk of being audited by the CRA and having various penalties, including criminal prosecution, applied for inaccurate tax filings. The Canada Revenue Agency maintains that an effective self-assessment tax system where Canadians voluntarily follow the tax laws can only be achieved via a “vigilant and continuous inspection of returns.” In other words, the CRA asserts that without the threat of the Canadian government auditing the tax filings made by taxpayers, the tax system would be rendered ineffective. The CRA also states that the one-on-one contact with an agent of the Canada Revenue Agency affords the opportunity for Canadians to get a more personalized view of the tax system and helps to create an environment where taxpayers conclude that it is the responsibility of every Canadian to contribute their share to the Canadian tax system.

• What are financial records?

  According to the Income Tax Act, financial records are “accounting and other financial documents that should be kept in an organized way.” Financial records include bank statements, sales invoices, ledgers, journals, expense account statements and income tax records, among others. All financial records must be complete and be accompanied by supporting documents that would allow the auditor to verify that your financial records are reliable and true, like bank deposit slips, sales receipts and even emails that would support a particular financial record.

  Taxpayers who have more than one business are legally required to keep separate financial records for each business.

  Corporations are required to keep additional financial records, specifically: 1) Minutes of shareholder meetings 2) Minutes of meetings of the directors 3) Any financial information pertaining to the ownership or transfer of shares of the corporation 4) The general ledger or other books of final entry that includes summations of the corporation’s yearly transactions 5) Specific agreements or contracts that give any additional insight to the general ledger or books of final entry 6) Supporting documents to any transactions made by the corporation.

• Who is legally required to keep their financial records?

  Basically, any individual who is involved in any commercial activity is required by law to keep adequate financial records. The CRA defines “adequate” as those records that would be sufficient to determine the amount of taxes owed to the government of Canada. In addition, partnerships, corporations and trusts are also obligated to keep adequate financial records, including those who have to pay or collect taxes on behalf of the Canadian government, such as payroll deductions and GST/HST. And, of course, those individuals who have to file income tax returns and/or GST/HST returns, those who request GST/HST rebates or refunds

• Where must I keep my financial records?

  Financial records must be kept in the place of business in Canada or residence of the taxpayer in Canada, unless specific permission has been granted by the Canada Revenue Agency. Electronic records kept on servers outside of Canada but accessed from Canada are NOT in compliance with this requirement. Permission may be requested to have financial records be kept elsewhere, including outside of Canada, at the taxpayer’s respective tax services office. Registered charities and registered Canadian amateur athletic associations, however, are obligated to keep their financial records in Canada

• How long must I keep my financial records?

  The Income Tax Act states that taxpayers must keep their financial records and supporting documentation for six years. If the taxpayer filed their taxes late that six year period begins as of the date in which the taxes were filed. Financial records having to do with long-term acquisitions and disposal of property, the share registry, and other information relating to the sale or liquidation of a business, however, must be kept indefinitely. The CRA may also explicitly require in writing via registered mail or delivered in person by a CRA representative for certain financial records to be kept for a longer period of time.

• In what format are financial records recognized by the Canada Revenue Agency?

  Financial records along with any supporting documents may be kept in paper format. Also, it is acceptable to take financial records originally generated in paper format and change and keep it in an electronic, readable and accessible format. For example, scanning receipts and invoices and storing it in your computer is allowed by the CRA. Moreover, electronic and readable financial records originally produced electronically are acceptable. It is important to note that you are obligated to keep any electronic records in its electronic format regardless of whether you have print-outs of these records. Individuals who have more than one business are legally required to keep separate financial records for each business.

• I’ve hired a bookkeeper or accountant or other third party to keep my financial records, am I still legally responsible for my financial records?

  According to the Income Tax Act, taxpayers are legally responsible for their own financial records, regardless of whether they have hired a third party to maintain their financial records. If, for example, the bookkeeper loses or misplaces your financial records, the CRA will still hold the taxpayer responsible. As such, it is always a good idea to personally have a copy of all of your financial records.

• Are there additional financial record keeping requirements for an e-commerce business?

  The CRA requires that e-commerce businesses with internet-based or telephone-based sales transactions keep whatever information would be necessary to help substantiate claims made by the taxpayer regarding their sales activities, for instance, emails and web logs confirming sales transactions. If a third party is responsible for the e-commerce transactions of a business, like a separate online billing software, then it is still the responsibility of the taxpayer to retain this information. Plus, third parties may keep such financial records for a limited amount of time and likely less than the time required by the Canada Revenue Agency. It is important to note that financial records stored in a computer or server outside of Canada is NOT in compliance with the CRA’s requirement to have such information stored in Canada, regardless of whether you can access such information from within Canada. Permission may be requested to have financial records kept outside of Canada at the taxpayer’s local tax services office.

• Does the legal representative of a person who has died have to keep the financial records of the deceased?

  In order to legally throw out or otherwise destroy the financial records of a deceased taxpayer, you must obtain a clearance certificate from the CRA. To receive a clearance certificate, you must fill out Form TX19, Asking for a Clearance Certificate, located at http://www.cra-arc.gc.ca/E/pbg/tf/tx19/README.html and then send the form to the tax services office in your area.

• Is there a time limit for the Canada Revenue Agency to perform a tax audit for any given tax year?

  There is a time limit of up to four years from the date the original tax return was filed. However, the exception to this time limit exists in matters where it has been established that a fraud may have occurred, or a waiver was filed by the CRA agent prior to the deadline detailing the circumstances in which a tax audit may be performed. Here, the advice of a tax expert is crucial to determine whether the Canada Revenue Agency acted lawfully in even performing a tax audit in the first place.

• Is there a way that I can legally destroy financial records earlier than the time allowed by the CRA?

  The only way you can legally destroy financial records prior to the time prescribed by the Income Tax Act is to receive written permission from the CRA. To request such permission, Form T137, Request for Destruction of Books and Records, must be filled out and sent to the tax services office. The form can be found at www.cra-arc.gc.ca/E/pbg/tf/t137/README.html . Those individuals who destroy financial records prior to the time allowed by the ITA run the risk of being criminally prosecuted.

• What do I do if the financial records that were being kept in an electronic format were accidently damaged, destroyed or lost?

  If the financial records being kept electronically were damaged, destroyed or lost, then the CRA requires that they be contacted at 1(800) 959-5525 to report the incident. It is also the responsibility of the taxpayer to recreate the financial files within a reasonable amount of time.

• What is an audit trail?

  According to the Income Tax Act, an audit trail is “the information that is required to recreate a sequence of events related to a business transaction.” You are legally required to keep any financial information that would be needed to create an audit trail, such as paper receipts and stock inventories. For e-commerce businesses, this includes emails or web logs that are used to confirm the sales transaction and even recorded voice confirmation, if that is what is used to confirm a sales transaction.

• Do you have any tips or preventative strategies I can use to help avoid a tax audit by the Canada Revenue Agency?

  J.M.J. Accounting & Tax Services Inc. is pleased to offer the following tips to help reduce the risk of an audit. These tips are not a guarantee that a tax audit will not occur, but are meant to be helpful preventative strategies to help reduce the possibility of an audit:

  • File on time! Tax returns filed after the due date run the risk of being red flagged and selected for a tax audit.
  • Do not file your tax return before obtaining all necessary financial documents needed to make an accurate tax filing. Filing too early will increase the likelihood of an inaccurate return and thus the chances of having to make a tax adjustment, which alerts the CRA and increases the chances for a tax audit.
  • Double-check, triple-check, quadruple-check your tax return. Any mathematical error may increase the risk of a tax audit. Use a tax software program or the expertise of a tax professional minimizes mistakes.
  • Be honest. Exaggerating expenses or deductions and/or underreporting your income will increase your chances. CRA has industry-specific information and will match the information you provide with the information they have. If there is a major discrepancy, this increases the risk for a tax audit.
  • Choose your partners wisely. Before investing, partnering, merging or associating yourself with an individual or business, investigate whether they have ever had problems with the CRA or are engaged in shady business practices. The CRA will choose to audit you if they choose to audit this business or individual, simply because of your association.
  • Try to avoid major changes in income levels, expenses and/or tax deductions from one year to the next. Anything out of the norm will be a red flag to CRA and will increase the risk of a tax audit.
  • Avoid continuously declaring business losses. There is a reasonable amount of time the CRA will accept business losses.
• What is a notice of assessment (NOA) or notice of reassessment?

  A notice of assessment is a statement sent by the CRA to the taxpayer indicating the amount of taxes that is owed to the Government of Canada or the tax refund that the taxpayer will receive. The NOA will state the contribution that a taxpayer can make to his or her RRSP (Registered Retirement Savings Plan).

  On the other hand, a notice of reassessment, is a notice issued by the CRA to the taxpayer indicating a modification to the taxpayer’s original NOA, due to either a the taxpayer’s specific request, T1 adjustment or CRA’s audit/review.

• Can a CRA tax audit lead to criminal prosecution for tax fraud, tax evasion or other tax-related criminal charge?

  YES! Although it is not the norm, CRA does refer cases to the courts for criminal prosecution under the ITA for tax evasion and/or tax fraud.

• Who does the Canada Revenue Agency target when selecting who to audit?

  The CRA tax audit program focuses mainly on small business owners, self-employed individuals, corporations and trusts.

• Who decides which tax returns will be audited?

  A computer program generates a list of potential tax returns that may be audited. Then the supervisor from each district office then decides which of those tax filings will undergo a tax audit. This selection is based on his or her own judgment and criteria.

• How long does a tax audit take?

  According to CRA, the field audit itself can take anywhere from several hours to several weeks to complete, depending on the case. The time it takes to complete the entire tax audit is relative to the complexities of the individual case.

• Am I legally required to give my personal financial records to a CRA agent?

  Yes, under the Income Tax Act, taxpayers are legally required to make available their financial records to authorized agents of CRA. But only those record that specifically pertaining to the establishment of the amount of taxes that would be owed to the government. CRA may also request to inspect the records of others, like your clients, to verify that your records are accurate & complete. This information, however, does not have to come directly from you. You can be represented and have an experienced tax expert to help determine which financial records are absolutely necessary to comply with the tax law while at the same time ensuring your rights and interests are protected.

• Do you have any tax audit tips for taxpayers, corporations or organizations currently undergoing a CRA tax audit?
  • Consult a tax expert. It goes without saying that due to the complicated nature of a tax audit, it is highly recommended to seek a tax expert to represent you during a tax audit. Tax auditors are trained to look through your financial records to find errors and omissions that could lead to a reassessment where you could end up owing more in tax, interest, & possibly penalties, and not to mention possible criminal charges. Given all that is at risk (your financial welfare, your business’ reputation, your mental wellbeing) it simply makes sense to get a trained tax professional on your side.
  • Do not volunteer any information to the tax auditor. The auditor will have a lot of questions for you and many specific requests. It is best to stay quiet and only answer the specific questions asked of you and only hand over financial records specifically requested for since you never know how that information can be used against you. Do not get drawn into what may only seem as harmless chit chat with the auditor since you never know how that information can be used against you.
  • When in doubt, remain silent. If you’re in doubt about answering a specific question or handing over some information because you fear that it could be incriminating, take note of the question or request and let the auditor know that you will be getting back to them with the reply shortly after consulting with your tax expert. If they insist on getting an answer right away, simply restate what you have said. You are entitled to get clarification.
  • Don’t let your guard down. Always remember that they are there for one thing and one thing only, to find mistakes in your tax return. They may try to make small talk, but do not for a moment let your guard down.
  • You have rights, learn them. The CRA has published the Taxpayer’s Bill of Rights. Although some of these rights are not legal rights that have the force of law behind them, it is still a good idea to know the principals behind them. See the section on Taxpayer’s Bill of Rights found here.
  • Do not be afraid to appeal the results of the audit. If you believe that the audit was done unfairly, or the CRA agent has made a mistake, then speak with the auditor to try to reach a compromise. Speak with the auditor’s manager, if speaking with the auditor doesn’t help. If the result is still not to your liking, then go through the appeals process outlined here.
  • Be organized. Maintaining the financial records that would serve to prove the amount of taxes you should owe is your legal duty. Keeping your records in an organized format lends credibility to you as a responsible citizen and taxpayer. If you make it harder for the auditor to go through your financial information by keeping it in a disorganized fashion will only lead the auditor to assume that a mistake was committed by you or that you are trying to hide something from the auditor and are thus attempting to make it hard for the auditor to find that mistake. If anything, this will only encourage the auditor to work even harder to find an error or omission in your tax return.
  • Make copies of all of the financial records being asked of you and keep all of the originals. Do not assume that the CRA agent will care for your financial records in the same way you would. These records could still get lost or misplaced and you will nevertheless be held responsible for those missing financial records.
  • Be polite. You will likely be feeling very stresses out about the whole ordeal. However, taking it out on the auditor will get you absolutely nowhere. Tax auditors get yelled at all of the time and it would likely be very refreshing to encounter a taxpayer who is polite and refrains from rude or confrontational behavior. Behaving civilly will definitely not work against you, but rude or outright abusive behavior is very likely going to play against you. This in no way means that you need to be friends with the auditor and take him out for a cup of coffee afterwards, but you could consider offering him a cup of coffee and a muffin when he arrives in the morning. It couldn’t hurt
• What is the auditing process? (i.e. how is a tax audit performed?

  The most common type of tax audit is a field audit. Here one or more CRA agents inspect and scrutinize the financial records of the taxpayer, typically at the taxpayer’s place of business or residence. The auditor will contact the individual being audited to set-up a date and time for the audit. Prior to the meeting, the auditor will examine the taxpayer’s file to familiarize them self with the case. The file will include the current return under scrutiny, and may include such information as past tax audits and financial statements. Based on this preparation, the auditor will go into the meeting with a list of questions for the taxpayer. The expert representation of a tax expert at this initial meeting is particularly advisable so you know how to answer the questions so not to provide damaging or self-incriminating statements. Upon commencement of the meeting, the CRA auditor should identify them self with their official CRA identification card. The auditor may attempt to speak with the taxpayer rather informally to get more information about the taxpayer and/or the business he or she is in. A tour of the place of business may be requested by the auditor. Again, the assistance of a tax expert is crucial to help assess whether these requests are legally required or in the best interest of the taxpayer. The auditor will then begin with the analysis of the taxpayer’s records. How deep the auditor will dig into the taxpayer’s records is essentially up to the auditor and their supervisor. The auditor may ask to speak with employees. It is important to reiterate the benefits of representation at all stages of the audit, since a tax expert will defend your rights and represent your interests, unlike the auditor who is there solely to represent the interests of the Canadian government. If CRA that the information provided does not sufficiently explain the standard of living of the taxpayer, they may then have net worth statements drawn-up to establish or confirm the taxpayer’s income.

  The auditor will normally keep their queries for the end of the examination and will not question each individual item. At the conclusion, the auditor will then decide whether a readjustment of your return is necessary. If a readjustment is so determined, the taxpayer may request the proposed adjustments be put in writing for the taxpayer’s or tax expert’s evaluation of the proposed changes, unless the taxpayer agrees with the auditor. In this case no proposal is drawn up and the auditor continues with the reassessment. If the auditor determines that the tax filing was accurate and there is no need for a readjustment, then the taxpayer or their representative is so informed.

  Another way the CRA may perform an audit is by way of an office audit. An office audit is a tax audit that takes at the local CRA tax services office. Here, CRA will contact the taxpayer being audited to request that they send in the requested information.

• What are the circumstances in which the CRA may waive or reduce penalties and interest charges on a tax debt?

  Under the Taxpayer Relief Provisions of the ITA, CRA may waive or reduce penalties and interest charges on a tax debt at the discretion of the Minister of National Revenue. These tax waivers come as a result of an unforeseen situation that affects a taxpayer; which can include a natural disaster, personal hardship, service disruptions or an error by the Canada Revenue Agency. A request to waive or reduce the interest and or penalty amounts must happen within ten calendar years after the end of the tax year in question. Additionally, CRA may waive or reduce interest and/or penalties when a taxpayer faces financial hardship; i.e. loss of employment or loss of income or when the interest represents a significant portion of payments due. As long as payments are made on time by the taxpayer the interest may be waived.

  Request to have interest and/or penalties waived or cancelled must be submit in writing to the tax services office where the tax return was filed or by filling out Form RC4288, Request for Taxpayer Relief, which can be found at www.cra-arc.gc.ca/formspubs/menu-eng.html or requested at toll-free 800-959-2221. Any written request must explain the situation and circumstances surrounding the taxpayer’s inability to pay and must be backed up with supporting documents.

• How much interest am I paying on my overdue CRA tax debt?

  The Canada Revenue Agency charges daily compound interest on any overdue debts starting May 1st for the preceding tax year. Interest is charged on tax penalties from the day after your tax return is due. Every quarter the rate of interest charged can change. An updated list can be found at the following Canada Revenue Agency web page: http://www.cra-arc.gc.ca/tx/fq/ntrst_rts/menu-eng.html. The CRA continues to charge daily compound interest on any owed balances until repaid in full. Remember CRA does have the ability to waive or reduce interest and penalties that you owe. For more information, see “What are the circumstances in which the CRA may waive or reduce penalties and interest charges on a tax debt?”

• What are some of the more common CRA collections methods to collect unpaid tax debt?

  The most common collection methods utilized include: wage garnishment, imposing property liens, freezing and/or seizing bank, intercepting monies payable to you and seizing and selling your assets.

• Will the CRA accept a payment plan for an overdue tax debt?

  CRA may accept a payment plan for an overdue tax debt under certain circumstances. The taxpayer must prove that they are not in a financial position to pay in full the amount owing but could do so over the course of two years or less. In order to prove this, the taxpayer will need to provide complete financial disclosure to CRA, including details about your place of employment, assets, investments and bank accounts, etc.

• What can I do if I simply can’t pay my tax bill due to financial hardship?

  The CRA has the power to accept a payment plan that will allow you to pay off your tax debt over a set period of time. However, they will only accept a plan once you have sufficiently tried to borrow money or rearrange your financial affairs in order to pay the tax debt in full.

• Is there a penalty for a late tax filing – i.e. filing after the tax deadline?

  CRA does apply a penalty for late filing your tax return if you owe taxes. The penalty is 5% of the total balance owing + 1% of the total balance owing for each month the tax return is late, up to a limit of 12 months. If in the past three tax years, the CRA imposed a late penalty and you once again file your tax return after the deadline, the penalty can rise to 10% of the total balance plus 2% of the total balance per full month that the tax return is late up to a maximum of 20 months.

  The penalties for late filing can be waive or reduce if the circumstances that lead to filing after the deadline are beyond the taxpayer’s control . In order to request a tax waiver or a tax reduction, you must complete form RC4288, Request for Taxpayer Relief, and send it to your local tax services office.

• Are tax debts treated differently from other debts one may owe to a creditor?

  Tax debts owed to CRA are treated slightly different from other debts owed to a creditor. The CRA has a special set of laws and rules that only apply to tax debt, and they have more options and power when it comes to collecting tax debts; for example, wage garnishing, bank account freezes and tax liens. The key difference is that the CRA does not need a court order to garnish wages but a regular creditor does. For more information on wage garnishments and tax liens, see “What is salary garnishment or wage garnishment?” and “What is a tax lien?”. Tax debt is otherwise seen as equal to other debts one owes to a creditor. This means that consumer proposals and personal bankruptcy erases debt owed to CRA similarly to personal credit card debts, loans and other unsecured debts.

• Could I avoid a large tax bill at the end of the tax year by paying in installments over the course of the year?

  Yes. The Income Tax Act does allow for income taxes to be paid throughout the year in installments when it would otherwise be due as a lump sum on April 30th. These installments are not paid in advance of income you receive but rather while you are receiving the taxable income. These installments usually are set up when not enough tax is being withheld at the source of the income; for example, rental properties, investments, self-employment or having more than one job.

• What is tax evasion?

  Tax evasion is the act by a taxpayer to illegally evade paying taxes. Tax evasion is accomplished through such tactics as misrepresenting income and/or profits by reporting less than actually earned and taking additional deductions that are not allowed by law. Not filing a return is tax evasion.

• What is the difference between tax avoidance and tax evasion?

  The major difference between tax avoidance and tax evasion is that tax avoidance is legal while tax evasion is not. The definition of tax avoidance is using tax law or code legally to minimize taxes you otherwise would owe. This can include, for example, moving to a different country, state or region solely because income taxes are lower.

• Are there additional penalties charged by the CRA for continuously underreporting income?

  Yes CRA does impose penalties for repeated misrepresentation on tax returns. If it occurs twice within a four year period, the federal and provincial fines are both equal to 10% of the unreported income for the current year. However, CRA does encourage taxpayers to voluntarily disclose the amount of misrepresentations by waiving the penalty if an individual voluntarily provides this information.

• What is the CRA tax deadline to file one’s tax return?

  The deadline to file your taxes and pay any outstanding tax debt owed to the Canadian government under the Income Tax Act, is April 30th. Self-employed individuals have until June 15th to file their taxes. But any outstanding tax debt owed must still be paid by the April 30th deadline. Interest will be charged on a compound daily basis for unpaid tax debts not paid to by the prescribed deadline.

• What is salary garnishment or wage garnishment?

  Wage garnishment or salary garnishment is the act of a creditor obtaining a court order to have the debtor’s employer turn over a portion of the debtor’s wages to said creditor. Except for two specific cases, this can only happen by a court order in favor of the creditor. The judge will determine what percentage of your wages should be handed over to the creditor by your employer. Salary garnishment occurs if an individual has extensive debt and is thought to be unwilling or unable to pay the creditor.

  The two cases in which a court order is not required for a creditor to garnish wages is: 1) when an individual turns in an assignment of wages to a credit union, or 2) when an individual owes unpaid taxes to CRA.

• What percentage of my wages can the CRA garnish?

  Title III of the Consumer Credit Protection Act specifies that no more than 25% of an individual’s income, in any one pay period, can be garnished.

• Will my employer know that my wages are being garnished by the CRA?

  Yes, your employer will know that your wages are being garnished. They will receive notice directly from CRA before they become legally obligated to garnish your wages.

• Could my employer legally terminate my employment for having my wages garnished?

  If an employee’s wages are being garnished for the first time, then by law the employer may not fire that individual, Title III of the Consumer Credit Protection Act. If said employee has had their wages garnished more than once, an employer can then legally terminate the contract of employment.

• What is a tax lien?

  A tax lien can be described as a claim imposed by law against the private property of an individual owing tax to CRA. It is important to note that a tax lien can be implemented if a person owes taxes on personal property, real property, income or any type of taxes.

• How can I stop CRA from garnishing my wages, or seizing my bank account, or placing a lien on my personal property?

  Paying your taxes in full and on time is the most obvious answer. However, if you find yourself experiencing financial hardship where you cannot pay the taxes owed, then you do have options:

  • Contact a tax expert who will negotiate with CRA on your behalf for a payment plan that is fair and within your capabilities.
  • If you decide to do this yourself, then you should contact CRA immediately to show your intent to pay the outstanding debt and attempt to make a payment arrangement with CRA. For further advice see “Will the CRA accept a payment plan for an overdue tax debt?” in this FAQ section.
• With regards to the CRA, is there anything I need to do in order to close or shut-down my business?

  Yes, first you need to file any GST/HST tax returns that have not been filed. This also means paying any outstanding balance up to the same day your business closes. Second step is closing your GST/HST account. In order to close it, you must fill out Form RC145, Request to close business number accounts (BN) and mail it to the tax services office that serves you. Alternatively you may call the Canada Revenue Agency Business Window at 800-959-5525.

  In the case that you have property owned by the business, the CRA will assume at the time of closure that the property was sold and priced according to its basic tax content and that GST/HST was obtained. Please note that the final GST/HST return must include this amount.