Negotiations with CRA
Can the taxes owed be negotiated with CRA?
You could ask this question a different way. “Are there any ways to get CRA to accept less money than they are after?”
The answer is generally a “NO,” unless you have leverage. CRA sees it as they have you by where it hurts the most and see no reason to give up anything. Not when the team leader is giving them the rally call to collect as much as you can.
The answer is yes, if you know how. Of course the easiest way is to go to a Trustee and do a proposal. Then CRA has to negotiate, because now the taxpayer has leverage.
The second easiest way to negotiate is to appeal to the tax court and then negotiate with the Department of Justice. You cannot make an offer that does not relate to a specific amount of money in a specific category. Forget about offering a percentage…. it is more of a give and take negotiation of specific items amounts.
The tax system in Canada is believed to be a “self-reporting” honour system type format. Which of course is popycock. Just try not filing your tax returns or getting audited. It is not about honour, it is about scaring taxpayers into compliance. Taxes are monies that are seen by CRA as owed to the Government. As simple as that. It makes sense that CRA sees these monies are non-negotiable with regards to whether you have to pay these amounts to the Government. There spoken but not written mandate is to get as much as they can. In this world actions speak louder than words. The actions of CRA have to be interpreted as they will show no quarter when it comes to getting all the money they can.
Auditors do not go back to their team leaders and say… “I gave the taxpayer a break, she was a single mother with six kids and a debt that will keep her poor for the rest of her life, so I omitted a whole bunch of disallowable items… We need to be a kinder kind of government.” Compassion and forgiveness are not known characteristics of CRA auditors.
Payroll taxes and GST are amounts collected on behalf of the Government and are seen as “trust funds”. Not remitting these particular amounts to the Government is basically deemed to be “theft” in their eyes. CRA auditors will look to capitalize on this through going after interest and penalties.
An accountant I know of writes on his web site. “The best example that I give my clients is “poker-related”. Let’s say you are sitting at a poker game with Canada Revenue Agency. You have a pair of 8s and CRA is sitting with a royal flush, the highest card hand that you can have in the game of poker. With both “players” knowing what the other player has, you are sitting there asking CRA to “split the pot”. Why on earth would CRA “split the pot” in this situation? Why would they “negotiate” with you when they have already won?”
This pretty well nails the reality of negotiations down. A negotiated amount is not in CRA’s best financial interest. If you have an RRSP, equity in your home, other assets, it is all on the line and CRA does not have a track history of compassion when it comes to money.
You can do a fairness application, but if you can afford to pay the bill, CRA will be less inclined to forgive any penalties and interest. But the concept that “taxes can be negotiated.” is not true. Under the Fairness Program of Canada Revenue Agency, you can negotiate the “interest and penalties” portion of an assessment if you qualify under their provisions. It is worth a shot to do a Fairness application.
Negotiating an amount owing is a series of steps starting with audit ready bookkeeping. www.auditreadybooks.com Then there is the audit, then the notice of objection, then there are the service complaints, and then the appeal to the Tax Court of Canada. You have to negotiate your way there from the perspective of a path, where you prove your facts so that you get to keep what is rightfully yours.
Your best solution to reducing your taxes owing is to dig in right from the beginning, do your bookkeeping properly, have an audit trail, learn how to fight, and scream bloody murder and knock yourself out. Or much better; hire a professional Tax Rep who is a fighter… If the tax rep says “I’ll see what I can do,” drop him and keep looking. You want someone who says “I can fight this!” who knows what he can do and will fearlessly and aggressively pursue every dollar that really should have been yours without a fight.