# CTV W5 documentary on tax nightmares



## the-royal-mail (Dec 11, 2009)

I saw this documentary last week and thought it would be a good basis for discussion.

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20100401/w5_taxman_100403/20100403?s_name=W5

I personally found it disturbing. As always, I would like to hear both sides of the story. But on the surface it seems like CRA was not acting in good faith. Should we be worried? Take a look at the site and videos - let's discuss.


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## OhGreatGuru (May 24, 2009)

Sure doesn't seem to pass the smell test (and I usually defend the poor overworked public servants). If he was in the US he could probably find a lawyer who would be happy to file charges of malicious prosecution, working on contingency.


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## MoneyGal (Apr 24, 2009)

I have been through two field audits of my own personal tax returns, and I have seen field audits of other people (in my capacity as a tax preparer; I used to be a partner in a small tax-prep firm).

The woman who did my field audits was a first-timer. It was REALLY weird. I was self-employed, so she came to my house every day at 9 a.m. and sat at my dining room table, not eating or drinking (I would offer her water but she would always decline), leaving at 4 p.m. I don't honestly understand how/why she did it (unless it was...Ramadan? I have no idea). 

This went on for a few weeks. Then, when she contacted me with the findings, I had her meet me at my accountant's office. He was flabbergasted at what she had to say and present - she had re-created my books for two years, down to the penny. "Normally," he said to me, "they do what's called a 'spot audit' - where they randomly check a few receipts a month. I have *never seen* anything like this," he said. 

Anyways. After all that, they found that I had not evaded any taxes. I know why I was flagged - I had dramatic shifts in my income, and they wanted to know why, as a self-employed person, my income was moving around so much (obviously, from higher to lower - they don't get concerned so much the other way 'round. The concern was that after reporting income for many years, I had just decided to not report any longer). I got CRA to write a letter saying they'd found nothing! I still have it, filed with my will. 

My former biz partner did have a client who went through a lifestyle audit, which is what that program describes. He was a hairdresser, living with his parents. His claim was that he just didn't make that much money, and his parents supported him. He was caught after the new, post 9/11 reporting requirements on large transactions. His initial claim was that he had made a series of lucky bets at the local casino, but the casino's records (subpoenaed by CRA) didn't bear that out. He ended up taking his whole family down - CRA went after his parents and sister for this guy's outstanding tax owing. And the worst part was that they estimated his income based on his spending...he had to pay taxes (plus penalties and interest) on what THEY thought he owed based on what THEY thought he had not reported.


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## ghostryder (Apr 5, 2009)

the-royal-mail said:


> I personally found it disturbing. As always, I would like to hear both sides of the story. But on the surface it seems like CRA was not acting in good faith. Should we be worried? Take a look at the site and videos - let's discuss.



Unfortunately getting both sides of the story often doesn't happen. 

There was a case years ago local to me that always makes me question the integrity of the press. A local restaurateur was being "persecuted" by the evil CRA (according to the press anyway). When the case finally made it to Tax Court and everything became public it was discovered that in the documentation the guy provided to support his appeal was proof that he was not reporting most of the income from his restaraunts (family restaraunts with no revenue after 5pm??). Suddenly the editorials that droned on an on about how the "upstanding businessman" was being "railroaded" dried up.

Had the press even bothered to investigate (like talk to his employees for example) they would have found out that his tax cheating was an open secret. As was his habit of keeping 70% of tips on credit cards, being unable to get insurance because the safe's in his restaraunts would get stolen once or twice a year etc etc.


Doing stories on the "evil" or "incompetent" CRA makes good TV. Do you think you will ever see W-5 do a story on the CRA doing a good job? Who would watch that?

If it bleeds, it leads.
If it doesn't bleed, it's ignored.


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## andrewf (Mar 1, 2010)

MoneyGal said:


> I have been through two field audits of my own personal tax returns, and I have seen field audits of other people (in my capacity as a tax preparer; I used to be a partner in a small tax-prep firm).
> 
> The woman who did my field audits was a first-timer. It was REALLY weird. I was self-employed, so she came to my house every day at 9 a.m. and sat at my dining room table, not eating or drinking (I would offer her water but she would always decline), leaving at 4 p.m. I don't honestly understand how/why she did it (unless it was...Ramadan? I have no idea).
> 
> ...


How the heck are his parents and sister liable for his tax evasion?


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## MoneyGal (Apr 24, 2009)

Because he gave them money. 

When you have unpaid taxes, and you transfer property to a non-arm's-length third party, that third party can be held responsible for paying YOUR unpaid taxes. 

See s.160 of the Income Tax Act. Here's a recent(ish) column from Tim Cestnik on this issue.


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## andrewf (Mar 1, 2010)

That seems only fair for gifts, etc. If it was rent payments, then I it is perhaps less so.


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## bean438 (Jul 18, 2009)

I watched the show and I would like to think CRA doesnt just randomly pick someone and fabricate things to make an example, with the believe that the average joe will just roll over and pay.

Bottom line is pay your taxes, and keep your records.


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