Whose numbers are they anyway?
Whether you are an individual, an entrepreneur, or a non-profit entity, any financial data or return that you submit to the Canada Revenue Agency (CRA) are your numbers. That seems obvious doesn’t it? However, often times when the preparation of financial data or a tax return is divested to a third party, the taxpayer signs the return without question, and trusts that the preparer has done their job well. In fact, unless asked specifically, many tax preparers will not offer to review your tax return with you.
Notwithstanding this, the CRA does not assign responsibility for the content of your tax return to the third party preparer, in fact, the buck stops with the taxpayer.
Ongoing cases involving a tax preparation company called Fiscal Arbitrators (FA), exemplifies the point of this article. In summary, FA persuaded many Canadians to file tax returns or adjustments to previous year’s returns in order to deduct fabricated business expenses. Essentially, FA convinces taxpayers that claiming personal expenses against a fictional business will lead to legitimate tax refunds. CRA’s response has been to audit the tax returns at issue, deny the deductions and levy gross negligence penalties on the taxpayer. In turn, many of the taxpayers object to the application of the gross negligence penalties because they claim they were legitimately duped.
In the recent case Chenard v. The Queen, 2012 TCC 211, the Tax Court of Canada considered the gross negligence penalties in the context of the FA program, and unfortunately, the taxpayer’s penalties were upheld. Two of the considerations that convinced the Tax Court that the taxpayer was grossly negligent were that
Another case involved Doreen Tennina, owner of Executive Accounting Inc. who, according to sentencing judge, Justice Cory Gilmore “gained the trust of hundreds of clients in her role as a tax preparer and then effectively rigged their tax returns to include deductions they did not know about and donations they had not made”. Notwithstanding that Doreen perpetrated the fraud, her clients were subjected to reassessments by the CRA, and are facing penalties and interest charges.
How do you become the Empowered taxpayer?