Poll Results: No Sympathetic Ears for Non-Compliant Taxpayers

The verdict is out on non-compliant taxpayers: 87% of Knowledge Bureau readers gave a big thumbs down on putting themselves at risk by tolerating bad behaviors by taxpayers. Given the changes to the Voluntary Disclosures Program, starting March 1, 2018, so has the CRA.

Specifically, the new VDP will limit the amount of penalty and interest relief that is provided to non-compliant taxpayers.  Under the “general track” it’s possible to apply for some relief, but only if the disclosure is voluntary; complete and involves the potential application of a penalty and includes information that is at least one year past due.

In all cases, payment of the estimated tax owing is first required before any leniency will be considered.  If it is, relief may come in the form of cancelled penalties, and no criminal investigation will occur.  However, only for interest relief only 50% of the interest charges will be forgiven and only for years prior to the 3 most recent years.  Full interest charges will be assessed for the three most recent years.

It gets much worse for the really bad apples, who have displayed an element of intentional conduct in their non-compliance. Relief for them, if granted at all will fall under what CRA is calling the “limited track”. For them, potential relief from the gross negligence penalties (50% of taxes payable)  may be possible on a case-by-case basis.  No other relief – including interest charges – will be extended.  No relief will be extended to those in receivership or bankruptcy either.

It’s important to note that adjustments can still be made using normal processing procedures in cases with no taxes owing or with refunds expected and it is still possible to make requests under the Fairness Provisions when there has been a severe hardship or CRA has missed in their provision of timely and accurate information that enables taxpayers to comply with the law.

Readers of Knowledge Bureau Report overwhelmingly stated that they would not put their careers at risk for those who chose not to comply.  Here is what some had to say:

From Sybille Schaufler:  “Documentation, documentation. To put it in the words of a seminar presentation title which I attended many years ago: “Cover your butt”. But you can only minimize your risk that way. Thus, if a client consistently, and deliberately is non-compliant, it’ll be better to part ways.

And if you see it coming, as I did with a recent client, who told me point blank: “I already told you why I did it this way…end of subject.”, then it is better to part ways, as I did after an 11-hour, prepaid review, including my documentation, noting important missing documentation and information. This was followed by the client’s off-hand dismissal of the idea to sign a contract, since he never was asked to do so in 30 years of being in business. Needless to say, I was glad he concluded he ‘had enough of this nonsense’, and left after stating that he thought we were even. I gladly agreed.

Sandra Gibbs agreed:  “I wanted to answer maybe. The fact is that if we follow all of the rules of recognizing income and expenses, and, if we express our opinions (in writing) to the client who is filing under Voluntary Disclosure regarding the rules and risks, our risk is less.  If we become aware that the client is not fully disclosing, then we need to resign the client and suggest they tell the truth to the next advisor.

And we give a thanks and a high five to Wanda Tighe who added:  “Great to have access to Knowledge Bureau, truly gives good insight on situations.”

Thanks to all who responded.  Please join us for this month’s poll which asks:  “In your view is it fair for CRA not to process tax returns before February 26 thereby delaying refunds into March?”

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