# Negotiating Settlement With CRA



## dogleg (Feb 5, 2010)

Has anyone had experience negotiating a settlement with CRA ? A nephew had a business that failed along with his marriage. It turned into a nightmare and he got way behind with his tax filings . CRA seized his bank account and now of course he can't even cash a check etc. His tax accountant has a boxload of his business receipts and that is also in limbo due to delinquent payments. Any idea how he should start to finally clear up this mess ? He could go to a tax lawyer if he had any money. Can he deal directly with CRA or does your name have to be Mulroney to get a deal done ? Thanks . I will pass any advice on to him.


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

dogleg said:


> CRA seized his bank account and now of course he can't even cash a check etc.


Stuff like that strikes fear in me when I read it.

One point for keeping money in your mattress and in cash form. Keep control of your money, so nobody else can seize it. (other than break-enter robbers of course)

Yikes.

As for the nephew, was there anything he could have done to prevent it from ever reaching this level? Often (but not always) these things are caused by some form of negligence).


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## marina628 (Dec 14, 2010)

My friend dealt directly with them ,they can only go back 7 years.My friend was into drinking worked largely for cash jobs had little in terms of record keeping .I think they agreed he made $13,000 a year for 7 years and he owed them only $3300 plus he was paying taxes at his current job so they kept about $300 tax refund as well.CRA could not prove his income ,he had no clue what he made either.He was paid a bit of GST that was really all they could track.i can tell you this ,he is happy he is finally on the books and got control of his life.


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## MoneyGal (Apr 24, 2009)

Ugh. I don't have any personal experience, but I have some professional experience. He should approach them directly - avoiding them only makes it worse. Ideally he would go through a tax preparer or other representative, but I doubt anyone would take him on at this point (plus his records are with the first rep).

The first thing they are going to want is his word that he has started work on this, and that he will respond to their requests by such-and-such a date. Then he has to do that. Only then will they unfreeze his assets. 

If he does not respond, and/or does not meet the goals he sets and they agree to (or they may not let him set his own timeframe and may require him to meet theirs), it can get worse - they can start to garnish his assets (paycheques), and they can also go after the assets of other family members (parents, siblings). 

There's no particular benefit to him in working with a lawyer at this point. The real benefit of using a tax lawyer is if CRA has not yet approached you...you can then use the voluntary disclosure provisions of the Income Tax Act to have the lawyer negotiate a settlement on your behalf. But if CRA has already asked you to file, the room to negotiate is much, much smaller.


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## kcowan (Jul 1, 2010)

I had an audit in Alberta and, when I moved to Ontario, the guy on Adelaide Street said: "Look we can agree on this payment or we can go back for 7 years! What do you want to do?" I thought about it for a minute and said: "OK here is the cheque!"


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## Karen (Jul 24, 2010)

MoneyGal said:


> ...If he does not respond, and/or does not meet the goals he sets and they agree to (or they may not let him set his own timeframe and may require him to meet theirs), it can get worse - they can start to garnish his assets (paycheques), and *they can also go after the assets of other family members (parents, siblings)*...


This information shocked me - especially since it comes from MoneyGal, who is so knowledgable about such things. Would the CRA have to have reason to suspect that the taxpayer had transferred assets to the other family members in order to go after them? Surely parents or siblings can't be held responsible for taxes owed by their relative - or can they?


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## Eclectic12 (Oct 20, 2010)

Karen said:


> This information shocked me - especially since it comes from MoneyGal, who is so knowledgable about such things. Would the CRA have to have reason to suspect that the taxpayer had transferred assets to the other family members in order to go after them? Surely parents or siblings can't be held responsible for taxes owed by their relative - or can they?


I'm interested to find out as well.

I can see it as a possibility as several of my fellow students in university, way back when, said the only way they could qualify for a gov't loan was to transfer their assets to relatives. I suspect CRA knows that the unscrupulous type can attempt this sort of a dodge.

I hope there is some sort of a reasonable criteria though.


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## dogleg (Feb 5, 2010)

Wow. Some of this info is pretty frightening if it is all valid ; i'm not sure I want to pass it all along to him.


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## fraser (May 15, 2010)

I agree with Moneygal...he should approach CRA directly and deal with this.

There could be two issues. One is straight tax on earnings, corporate, personal etc. The other is remittances, ie employee tax withholding and CPP payments. If it is the latter CRA will be very aggressive and will most definately attach/empty bank accounts AND attach any other assets that can be identified.. Keep in mind, employee remittances are held in trust by the employer. If ee remittances are the issue, I suspect that CRA will take a very hard line with good cause.


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## MoneyGal (Apr 24, 2009)

I am going to take some kind of a break from posting but I didn't want to leave this hanging there. 

I should have specified that CRA will only go after (i.e., seize) property owned by a third party if (1) you co-own that property or (2) you transferred property to that third party and you have unpaid tax. 

Property is commonly transferred in families and third parties who owe NO tax but who are the recipients of gifts of any kind from a person who owes tax can have that property seized. 

I linked to this article last year in a similar discussion, but here it is again: a Tim Cestnik column on this very issue: http://www.theglobeandmail.com/glob...-makes-for-awkward-gift-giving/article764828/

CRA will subpoena the bank records of third parties (your family members, your business partners) in order to check for transfers of property.


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

MoneyGal said:


> I am going to take some kind of a break from posting but I didn't want to leave this hanging there.
> 
> I should have specified that CRA will only go after (i.e., seize) property owned by a third party if (1) you co-own that property or (2) you transferred property to that third party and you have unpaid tax.
> 
> ...


I sure hope you won't be taking any breaks, MG. Posts like this are a very necessary eye-opener for a lot of people. Please stick around if you have the chance.


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## bean438 (Jul 18, 2009)

marina628 said:


> My friend dealt directly with them ,they can only go back 7 years.My friend was into drinking worked largely for cash jobs had little in terms of record keeping .I think they agreed he made $13,000 a year for 7 years and he owed them only $3300 plus he was paying taxes at his current job so they kept about $300 tax refund as well.CRA could not prove his income ,he had no clue what he made either.He was paid a bit of GST that was really all they could track.i can tell you this ,he is happy he is finally on the books and got control of his life.



Actually CRA can go back as far as they want.

The mafia guy in Montreal was in tax court recently for tax charges going back into the mid 80's


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## bean438 (Jul 18, 2009)

MoneyGal said:


> Ugh. I don't have any personal experience, but I have some professional experience. He should approach them directly - avoiding them only makes it worse. Ideally he would go through a tax preparer or other representative, but I doubt anyone would take him on at this point (plus his records are with the first rep).
> 
> The first thing they are going to want is his word that he has started work on this, and that he will respond to their requests by such-and-such a date. Then he has to do that. Only then will they unfreeze his assets.
> 
> ...



Moneygal are you absolutely certain that CRA can go after other familly members?
I really hope you are wrong. That does not seem right. If I was involved with familly in the business then fine, or if title was transfered to avoid seizure fine too.

But seriously if my parents or siblings screw up, and break the law why would CRA come after my assets? That does not seem right. Canada is not a dictatorship.

If my dad murders someone should I go to jail?

Please tell elaborate more on this.


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## Cal (Jun 17, 2009)

It sounds like the OP's nephew needs to start co-operative with CRA. It doesn't get this far from being compliant with their communications.


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## Robillard (Apr 11, 2009)

I haven't been directly involved in negotiations with the CRA (only tangentially), but I am familiar with how tax disputes get resolved in Canada. 

The dispute process basically goes like this: 

1. You file your original tax return.
2. The CRA processes your return and mails you a *Notice of Assessment*. At this point, if you disagree with the original Notice of Assessment, jump to stage 8.
3. Within the next three years the CRA audits you.
4. The CRA proposes a reassessment based on the results of the audit.
5. You negotiate with the CRA. I'm not sure how disputable things are with personal taxes, but there is some room for negotiation on corporate taxes. 
6. Either you settle with the CRA and agree to pay the tax you negotiated; or, you disagree with the proposed reassessment.
7. Regardless of the outcome of 6, the CRA mails you a *Notice of Reassessment*.
8. If you settled with the CRA, you pay the outstanding tax. If you disagreed with the CRA, you have something like 90 days to file a *Notice of Objection*. You do this to reserve your right to fight the CRA in tax court. You should do this even if you intend to go through stages 9 or 10. 
9. You can choose to go the CRA's *Appeals Branch*. Appeals is a relatively fresh set of eyes on your case, but it's my understanding that they tend to rule in favour of the auditor if there is sufficient merit in the CRA's case.
10. If this is an international tax dispute involving double taxation, you can try requesting relief under the *Mutual Agreement Procedure *article of the relevant tax treaty. (I can explain more if you are interested.)
11. Fight the government in Tax Court. Good luck!

There is a bit more to this, but it would take a while to explain.

I think it has already been stated that it is a bad idea to anger tax auditor. If you comply with the CRA's requests and maintain an adequately non-adversarial relationship, the auditor may be more disposed to negotiate. Sometimes though auditors can just be unreasonable. In that case, it is best to start preparing your appeal and your Notice of Objection for the court.


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## kcowan (Jul 1, 2010)

bean438 said:


> But seriously if my parents or siblings screw up, and break the law why would CRA come after my assets? That does not seem right. Canada is not a dictatorship.


The liability for tthers taxes owing only applies if the family member is complicit, i.e. receiving gifts that were financed by the tax money. So no need to worry during normal course of events.

I have used the Notice of Objection and it works well. They really pay attention to your issues and then request your approval for issue resolution. many times it is just an overworked clerk who made an inadvertant error. No fines or penalties apply if you are correct.


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## dogleg (Feb 5, 2010)

These replies have been very helpful. I have convinced my nephew to try to deal with CRA directly . I will let you know how he makes out. I had one conflict with CRA several years ago and got a decision in my favour by appealing to what is called the "Fairness Committee" . I had never heard of it but a friend told me about it and apparently it is made up of both CRA employees and independent outsiders - accountants etc. Worked for me.


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## Addy (Mar 12, 2010)

bean438 said:


> Actually CRA can go back as far as they want.
> 
> The mafia guy in Montreal was in tax court recently for tax charges going back into the mid 80's


My case was not anywhere near as serious as the guy in Montreal, but I can vouch CRA can, and does, go back further than 7 years. In other words, if you are throwing your tax records out after 7 years, you *can* (hopefully not likely, but could) get screwed if they come knocking.


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