Sooner or later, every tax payer may have to take on the CRA. It’s not just a matter of whether you are guilty of doing something wrong but, rather, whether tax laws change (and to what extent), whether the present administration wants to play hardball with suspected tax cheats, and whether your financial situation and reporting habits have undergone any major changes.
A number of errors (not reporting income, listing a dependent someone else also claimed, misusing deductions, etc.) and discrepancies can motivate the CRA to come after you. If this happens, you may be tempted (if you are convinced that you are innocent) to fight them on your own. Here are ten good reasons for not making this common but often costly mistake:
#1 You may unwittingly admit to a crime.
It does not matter whether you broke the law unknowingly or if you were trying to pull a fast one over the CRA. The CRA does not differentiate. Legally, anything you say to the CRA may be held against you, even if the CRA never read you your rights when you met with them or spoke with them over the phone. Sadly, many people end up being in hot water with the CRA not over anything they were suspected of doing but over what they admitted to during official communication with the CRA. With advice from a tax professional or attorney, you can sometimes sidestep legal land mines of this nature.
#2 You may bring to the CRA’s attention something that might have otherwise gone unnoticed.
Contrary to popular opinion, the CRA does not know everything about you; nor do they have a crystal ball that tells them about all the mistakes and omissions you have committed. Your best approach is to not provide any more information than is requested, being sure not to bring up any incident or fact that the CRA does not specifically bring up.
#3 You probably do not know enough about tax laws.
This means that you most probably do not know about your rights as a tax payer, what limitations have been imposed on the CRA, what you should say and not say, under what circumstances may certain information be requested (and how), and when you should refuse (if ever) answering specific questions.
#4 If alone, the CRA may see you as being more vulnerable, prompting them to possibly take advantage of you.
As a general rule, the CRA treats differently people who come in on their own from those who show up with legal counsel or with a tax professional. Having a knowledgeable professional watching out for your interests will provide you with peace of mind and may compel the CRA to play by the book.
#5 You can’t take advantage of the special relationship that some tax advisors and attorneys have with CRA agents and supervisors.
In some instances, the person representing you may be able to smooth over an otherwise rough situation, simply by virtue of that special connection. This does not mean CRA agents will not do their job but well-connected attorneys may know what might be negotiable and forgivable and what would ultimately have to be taken to court. Sometimes, the CRA can be persuaded to settle a matter quietly, especially if a tax payer was treated unfairly or disrespectfully by an agent.
#6 If the matter has to go to court, you will not be in as good a position as an attorney to prepare for the event.
Every good attorney knows that every word uttered (orally or in writing) can play a crucial role later on; consequently, an attorney will not only document all meetings, but will also know what documents to subpoena (if necessary), whom to contact on your behalf, and how to bring together the most beneficial evidence.
#7 You may not realize that everything you say to the CRA can later be used against you.
Even if you realize this, you are probably not as well prepared as tax professionals to know what you should and what you should not say. Simply refusing to answer the CRA’s questions will only get you in hot water, unless you can preface the refusal with “Upon advice from legal counsel…“ The CRA may have good grounds for going after you but you have the right to not have to help them put the noose around your neck.
#8 CRA agents are notorious for sometimes misrepresenting, exaggerating, or even misinterpreting the facts surrounding a case.
This is especially true if an CRA agent has a vendetta against a tax payer, a certain ethnic group, or someone he/she is convinced is a liar or a crook. Tax professionals are probably better equipped to deal with these types of situations. A “personal” situation is more easily defused by someone who can objectively look at the facts, hopefully being not only your advocate but a cool-headed, objective professional.
#9 You may not be as adept as a lawyer when it comes to negotiating for a reduced tax-owed amount, a special, affordable payment plan, or no jail time (if a criminal act is suspected).
The fact is that many special deals are conceived of and proposed by attorneys and tax professionals, not by the CRA or taxpayers. Such “deals” can often greatly ameliorate otherwise egregious situations.
#10 Your dilemma may be resolved more quickly and with fewer long-term repercussions if a knowledgeable and well-connected tax professional is representing you.
Some CRA cases get drawn out for years, usually inflicting unnecessary stress and financial devastation upon the taxpayers involved. When you get someone to deal with the CRA, you may greatly reduce or eliminate this kind of stress and financial woe.
How to File a Formal Dispute with Canada Revenue Agency (CRA)
Should You Pay Yourself Salary or Dividends When You Incorporate Your Business?
The Personal Tax Filing Deadline is April 30th – Some Last Minute Reminders
Need Help With Your Return? Where to Get Answers to Your Income Tax Questions
What is CRA ReFile and How Does it Work?
What are Input Tax Credits?
What Happens if You File Your Income Tax Return Late
How to File Your Income Tax Return Electronically