Don’t Throw Money at your CRA Problems

Alright here we go again. ITS STORY TIME! You just have to know that when I start off a blog like that it can’t be good. And you would be correct.

As the title suggests (ok it is pretty blunt) you don’t want to just send money to the CRA. Don’t get me wrong, they want your money, but they want tax returns filed so they know exactly how much you owe. Sending them money will NOT stop them from wanting tax returns. In fact sending them money without filing can prove to be even more costly, as the CRA starts to think you owe even more, and start taking collection action to collect even more money.

Now for the much anticipated story. So I have a client who was way behind on filing taxes (and I mean waaaaaaaayyyyyyyyyyy behind). He had however been sending in money, because he figured he owed (which he did). Problem is he sent in too much money. Now here is the rub. The CRA is claiming under ss. 164(1) of the Income Tax Act that since the returns were filed so late, that they don’t have to refund the tax overpayments. Here is a small tidbit of information to give you some perspective. Did I mention the refund is in the six figures? No? Well it is. And no I am NOT including decimal places. The CRA owes the client more than $100,000 (a whole lot more!!!!!). If your jaw is open and you are thinking WTF, then welcome to the club. If you think that this section of the Income Tax Act is unfair and that the client is getting screwed you are right! Welcome to dealing with the CRA.

Now unless the CRA decide to play nice (I am NOT holding my breath on this), I will have to jump through a bunch of hoops to try and get the money back, including getting our tax lawyers involved ($$$$$$). Funny thing is that the CRA can still ask for more money if the client owes, but miraculously they don’t seem to think that they have to refund it if you overpay. Needless to say there will be a follow up to this once all appeals and Tax Court are exhausted. Just to tantalize you, I have already talked with our tax lawyers and they think we have a good case. Time will tell.

I guess if there is a moral to this story, it is to file your tax returns on time so that you don’t end up on the wrong side of the CRA and have to spend a bunch of money just to get your money back from the CRA. Yeash, what a pain in the @$$ this is gonna be.