http://www.finlay-associates.com/index.cfm?i=13291&mid=25&blogid=6100 AdvancedMinistry On Feb. 28, Winnipeg chiropractor Rosalie Chobotar was sentenced in the Provincial Court of Manitoba to six months in jail and fined $162,513. Chobotar's offense: tax evasion. She is what Canada Revenue Agency (CRA) refers to as a "tax protester,” someone who believes income taxes are unconstitutional, optional or easily averted using certain interpretive techniques. The justification tax protesters most commonly use for not paying taxes is the "natural person” vs "legal person” dichotomy. As the CRA explains, a tax protester treats him- or herself as two people for income tax purposes. The natural person is the individual who performs the labour required to earn income while the legal person is the entity the federal government creates by issuing a social insurance number. Tax protesters acknowledge that the legal person has to file an income tax return — which Chobotar did — but contend that income received as a natural person is not subject to Canadian income taxes. For example, Chobotar reported "nil” income on the tax returns she filed for the years 2002 to 2007; when she signed the returns, she included the phrase "to the best of my knowledge without understanding". But, as Chobotar discovered, the courts do not accept this argument. (Go to http://www.cra-arc.gc.ca/nwsrm/cnvctns/mb/mb120228-eng.html.) And Chobotar isn't alone in paying the price. An Ontario tax protester was recently fined $522,000, representing 150% of the federal taxes evaded. The taxpayer was also given a one-year conditional sentence, ordered to remain in Ontario and surrender his passport, and perform 180 hours of community service. A little history. Canada's income taxes were instituted to pay for the First World War. Prime Minister Sir Robert Borden introduced federal income taxes on business profits in 1916 and on personal income in 1917. At the time of introduction, the minister of finance stated: "I have placed no time limit upon this measure; a year or two after the war is over, the measure should certainly be reviewed.” Thirty-two years later, on January 1, 1949, income taxes were declared permanent. The authority to tax. From where does the authority to impose taxes derive? Income taxes must have a constitutional basis that defines and legitimizes their implementation and administration. Canada's legal system is based largely on the common law of the United Kingdom and the rule of no taxation without representation extends back to the Magna Carta of 1215. Although Canada's constitution now comprises many documents, section 52 of the Constitution Act 1982 provides that the Constitution of Canada is the "supreme law of Canada” and any law inconsistent with it has no force or effect. Included in section 52's non-exhaustive list of documents comprising the supreme law of Canada is the original British North America Act of 1867, written in London for the new dominion. This Act divides the authority to impose taxes between the federal and provincial governments. Under subsection 91(3) of the Act, Parliament has the power to raise money by any mode or system of taxation. Subsection 92(2) permits the provinces to impose income taxes but only through direct taxation within the province and only for raising revenue for provincial purposes. By organizing the power to tax in such a way, the federal government has considerable power over the national economy and the distribution of wealth amongst the provinces. Courts confirm constitutional validity. Courts analyze the "pith and substance” of laws to determine their constitutional validity. The division of powers between Parliament and the provincial legislatures offers a hurdle for laws seeking validation. If, for example, a provincial legislature enacts a law that the courts construe as pertaining to another province, the court will strike the law down as ultra vires or outside the jurisdiction of the legislature. Other than this jurisdictional safeguard, Parliament and the provincial legislatures are almost unconstrained in their ability to impose and reform income taxes. Conclusion. Tax protesters have no legal basis for their claims and, as Chobotar found out, there are serious consequences — interest costs and penalties and, possibly, jail time — for pursuing this course. So, long story short: pay your taxes — you are legally obligated to do so. Expert knowledge provided by the Knowledge Bureau http://www.finlay-associates.com/index.cfm?i=13291&mid=25&blogid=6100&comments=32766 32766 Fri, 16 Mar 2012 07:51:00 +0000 The Ontario government is changing the way it delivers its Ontario Energy and Property Tax Credit (OEPTC) as well as its Northern Ontario Energy Credit (NOEC) and Ontario Sales Tax Credit (OSTC). Instead of quarterly cheques, come July, all three will be rolled into the Ontario Trillium Benefit (OTB) and will be delivered to the low- to moderate-income Ontarians who qualify as monthly cheques. "Through the OTB, the Province transformed the delivery of Ontario's key refundable tax credits by making payments to Ontarians earlier and more frequently than before,” the provincial government says. "This approach ensures that the payments better match when people incur these costs.” The move has caused some heated discussion among recipients of the tax credit who still prefer to receive one, lump-sum payment. Ontario Finance Minister Dwight Duncan admits his government did a poor job of communicating the change. In future years, he promises, taxpayers will be given the option to choose monthly payments or a lump-sum payment. Ontario instituted quarterly payments in 2011 with payments for the 2011-12 benefit year — based on the 2010 personal income tax return — going out in July 2011, December 2011, March 2012 and June 2012 for the OETPC and NOEC. The OSTC benefits were paid August 2011, November 2011, February 2012 and May 2012. Payments for the 2012-13 benefit year — based on the 2011 personal income tax return — will be monthly beginning in July. That means Ontario taxpayers receiving the credits get one more quarterly installment — May for the OSTC and June for the OETPC and NOEC — before the new, monthly regime begins.   Expert knowledge provided by the Knowledge Bureau http://www.finlay-associates.com/index.cfm?i=13291&mid=25&blogid=6100&comments=32765 32765 Wed, 14 Mar 2012 07:48:00 +0000 T400A Objection - Income Tax Act. If you wish to object to a Notice of Assessment sent to you by the Canada Revenue Agency (CRA), you have one year after the date of the return's filing deadline, or 90 days after the day on which the CRA sent the notice of assessment, whichever comes later, to file a T400A. Businesses have 90 days after receiving the Notice of Assessment to submit their objections. Corporations must be much more specific in their objections than individuals; they must fully describe each matter with which they take issue and specify the relief they are seeking. T2125 Statement of Business or Professional Activities. The CRA has updated this form to clarify and correct errors on the printed version, distributed in the 2011 General Income Tax and Benefit Package. The corrections have occurred on page 1, in "Business income” and in "Part 2: Professional income".   RC4060 Farming Income and the AgriStability and AgriInvest Programs Guide. This guide is exclusively for participants in Prince Edward Island, Ontario, Saskatchewan and Alberta. Participants from British Columbia, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Newfoundland and Labrador, and Yukon will continue to use Guide RC4408, Farming Income and the AgriStability and AgriInvest Programs. Participants from Quebec will continue to use Guide T4003, Farming Income. What's new? The Commodity Code List, used for reporting commodity sales and purchases, has been extensively amended and can be found on page 63. Participants in Saskatchewan will now use T1163 and T1164 to apply for AgriStability and AgriInvest. Expert knowledge provided by the Knowledge Bureau http://www.finlay-associates.com/index.cfm?i=13291&mid=25&blogid=6100&comments=32767 32767 Wed, 7 Mar 2012 07:54:00 +0000 At a time when investment returns are low and markets volatile, CRA has been busy handing out stiff penalties for late filing, and invoking other weapons for collection, albeit not always successfully. Tax and financial planners can help preserve well-laid plans for savings, by reminding procrastinators to file sooner rather than later, in order to preserve capital.   There can be serious—and expensive--consequences for failing to file your taxes on time. Late filers can face not only fines, but must pay the full amount of taxes owing, interest, and any civil penalties that may be assessed by the CRA. A Mission, BC drywaller, for example, was recently fined $5,000 for not filing returns. He was given one year to pay the fine, which resulted from not filing returns on personal income tax and GST from 2006-2008. But in another case, CRA lost, having used the GAAR (General Anti-Avoidance Rule) to deemed that a non-resident, Lehigh Cement Ltd., was wrongly withholding tax payable on interest income. Lehigh, however, won this round. While the company had used the rules in a novel way, the court concurred none-the-less they used them correctly, stating that by "the fact that an exemption may be claimed in an unforeseen or novel manner, as may have occurred in this case, does not necessarily mean that the claim is a misuse of the exemption”. Taxpayers feeling guilty for not filing returns or reporting all of their income, should also be encouraged to voluntarily correct their tax affairs. A valid disclosure must be made before any compliance action by CRA against you. While penalties can be avoided, be aware taxes owing, plus interest, must be paid. (However, interest may be waived in hardship cases.   Thanks to the Knowledge Bureau www.knowledgebureau.com http://www.finlay-associates.com/index.cfm?i=13291&mid=25&blogid=6100&comments=26575 26575 Wed, 7 Sep 2011 13:07:00 +0000 A seamless way to produce T4 slips online and electronically file the T4 summary is now available to small employers who have 6 or fewer T4 slips to file for 2010. If this speaks to you, check out T4 Web Forms on the CRA website. It is a quick and accurate way to complete your T4 filing for 2010. Those who qualify, based on last year's T4 filing pattern, should have received a Web access code in the mail by now. If you don't have the code, it can be retrieved online or by calling the CRA e-services Helpdesk for business at 1-877-322-7849. If you think you should qualify (i.e. you are a new employer with 6 or fewer employees), you should contact this number to become registered. Have your Business Number ready. Once logged in to T4 Web Forms, the process to generate T4s and the T4 summary is easy to follow. Enter the total income and deduction data for each employee and the documents will be generated. When you enter the 2010 remittance total (found on the January, 2011 Statement of Account after Amount Paid for 2010), the T4 summary will automatically calculate amounts owing or an overpayment. Once you have printed the T4s and the T4 summary, click to submit the record and you have completed the filing requirements for 2010! http://www.finlay-associates.com/index.cfm?i=13291&mid=25&blogid=6100&comments=20549 20549 Sat, 26 Feb 2011 08:39:00 +0000