The Chaos at CRA Continues

More stories from the small business community


Last month we wrote about the CRA and how they violate their own rules.

We received an enormous amount of comments from other Small Business Owners and others and how they have been treated, ignored and neglected by CRA.

 

Here are a few highlights:

Client #1 - a CRA Trust Account Review;

We have seen many of these, CRA sends the form letter, “we need to review your trust (payroll) account to ensure compliance (...) call us to schedule an appointment for the trust examiner (...)".

Well, here is the twist. Up until recently, we have virtually always seen the letter say that the Trust Examiner will be at your place of business on a certain date and at a certain time. They detail a list of items to be made available for examination.

This letter however, stated that the business owner was to print all of the necessary information, box it and deliver it personally to the CRA office (some distance away) and be prepared to work with the examiner... WHAT?

What happened to CRA’s mandate to reduce the cost of compliance? Now the small business owner is to close their business for the day, print numerous documents, drive countless miles and wait for the auditor to finish their examination?

How is this reducing the cost of compliance?

 

Client #2 - Claimed an Allowable Business Investment Loss (ABIL) on their Personal Income Tax Return

Many small business owners have faced this, they personally lent money to the business, the business failed or closed and did not have the ability to pay back the loan. The business owner (shareholder) is then (usually) able to claim the amount lost on their personal taxes.

The client filed the necessary tax return, and of course, CRA questioned the ABIL. We provided as much information as possible, however, CRA demanded copies of bank statements etc. going back to the original date of cash injection into the business (more than 12 years ago).

The client of course, did not have these records, the bank could not provide the copies as they too destroy old records.

The end result, the client is out again, over $50,000.

How is this fair when CRA’s own rules only require you to maintain and keep records for 6 years (plus the current year)?

 

How about the latest? The Government plans to introduce tax incentives and tax breaks to help offset the increased labour costs to small business due to the recent minimum wage hikes in Ontario and Alberta.

Not really sure what the plan is here, but how do tax breaks and incentives help when most small businesses will not have the cash flow required to meet the increased labour costs?

Can’t take advantage of tax breaks when you can’t meet your payroll needs!

 

Has anyone looked at the other side of the great benefits of the increased minimum wages (to the Government).

 

Here is an example. Assuming you have 20 employees all working 30 hours per week at the Ontario Minimum wage rate (current) of $11.40 per hour.

Currently, those 20 employees would have a combined total of $53,726 in taxes deducted over the course of the year. However, with minimum wage increasing to $15.00 per hour, their annual combined tax deductions increase to $106,735; an almost 50% Increase for CRA!

We should also note, that the Gross pay for the individual employee (with the above details) goes up by about $108 per week, but their net pay increases only $74 per week; an additional $34 per week is going to the government.

 

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