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Quick action key when dealing with tax debt, appeal

For taxpayers who feel they may have received an incorrect or unfair tax assessment, it is vital to contact the Canada Revenue Agency (CRA) about your concerns without delay — as the clock is ticking on the appeal period, Toronto tax litigation lawyer David J. Rotfleisch tells The Globe and Mail’s Rob Carrick.

Appearing on Carrick Talks Money, Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation, explains that taxpayers have 90 days to file a Notice of Objection — a formal objection with the CRA that will typically set out the facts and why you disagree with the taxman.

“Filing the Notice of Objection is the start of a process — it’s called an appeal, a tax appeal at the objection stage, and it’s dealt with by an internal CRA officer called an appeals officer, whose mandate is to take an independent look at the file,” he adds.

Those who miss the 90-day window have one year to file an extension application, says Rotfleisch.

“Now, it's discretionary on the part of CRA to grant you that extension, they are often prepared to do it, you have to have a valid reason. However, if you miss the 15-month window, we’ve got a real problem,” he adds.

While taxpayers may be able to handle simple objections on their own — related to a question about income listed on their T4 for example — Rotfleisch says anything more complex would require the assistance of an accountant, or a lawyer if you are getting into technical legal issues.

In another episode of Carrick Talks Money, Rotfleisch explains that the CRA also has a program designed specifically for those who haven’t filed a tax return for years and wish to come back into the system.

It’s called the Voluntary Disclosure Program, and what they say is, if you file all of your tax returns — back tax returns, can’t be the current year — they will not charge you penalties, they will not prosecute you for failure to file tax returns and you can get an interest break on these.”

However, Rotfleisch cautions taxpayers not to begin the process by simply asking a tax return preparer to prepare and submit the returns — as this will result in full penalties and interest.

“What you have to do is first file the voluntary disclosure, then submit the tax returns,” he explains.

In these cases, Rotfleisch explains, it is also not unusual for an individual who hasn’t filed tax returns for five, 10 or even 20 years to be missing documentation from past tax years.

“What we do is we file a voluntary disclosure and say ‘I’ve got a taxpayer’ — I either give the name or don’t give the name, I can do it on a no-names basis — and say ‘these are the facts — 10 years unfiled returns,’ and then I have a minimum of 90 days to file the tax returns.”

And, in another instalment of the video series, Rotfleisch discusses the drastic collection powers at the CRA’s disposal — and why you should never ignore your tax debt.

For those with taxes owing, Rotfleisch explains: “You will receive a notice — computer generated — saying ‘you owe money, pay us.’ Don’t ignore it, call CRA. In fact, if you can afford to, send them some post-dated cheques, even without calling them. If the amount is fairly minor and you send them post-dated cheques, they will probably be accepted.”

However, he says, if the amount is larger — upwards of $10,000 for example — you will have to deal with it in a more proactive way.

“CRA charges interest at the prescribed rate all the time, compounded daily, believe it or not. What will happen is, the collections officer will contact you, you will then enter into negotiations to try to make a collection arrangement. What will happen is, they will ask for a complete income and expense statement, and all of your assets and liabilities, and based on that, they will try to negotiate with you as to what you can pay.”

Indeed, he tells viewers, the CRA plays tough. “Remember — they can seize your bank account, they can lien your property, they can seize your receivables, all without a court order. So you can’t really play games with them.

“If you owe money, don’t ignore it — get on it right away, send some post-dateds, make lump-sum payments, deal with it.”

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