Any information contained on our website is for informational purposes only. Every taxpayers should be aware that each situation is unique and that until all variables have been brought into the light, nothing should be taken as professional advice and put in writing. We are not lawyers and hence anything you tell us can be held against us and used against you, technically speaking. Only lawyers can cite client privileges from the authorities.
We do not audit your work. We are not licensed as public accountants as such. Any financial statements are completed on a “Notice to Reader” basis unless we retain on your behalf an LPA (Licensed Public Accountant) for the purposes of a Review Engagement or Audit. That being said, the Canada Revenue Agency still holds our feet to the fire for something that we should have known…see below. So please do not pass crap across our desk and expect it to be made into a fillet mignon. Garbage in equals garbage out. Take responsibility and educate yourself, ignorance of the law is not an excuse, especially when it comes to financial affairs. We are also in the 21st Century…please get used to it and start using electronic record keeping unless you are a Mennonite or other sect which adheres to traditional values. Do not throw out receipts and keep a log book.
We cannot access your file unless you have given explicit consent via the appropriate forms which are filed with CRA or the appropriate body. A T1013 authorization for consent is good enough for the Canada Revenue Agency, but not for Service Canada or WSIB. A T-1013 is not a substitute for an RC59. Although this may be an inconvenience, this is for your protection under the Privacy Act.
We are not bankruptcy trustees, however, we know lots of them. We may refer you over to them, but nothing we say should be taken as gospel. Any decision on making an application for bankruptcy should only be made after a conversation with a qualified licensed trustee in bankruptcy. On that note, we are also not lawyers and we are not qualified to provide a legal opinion on HR, the Family Law Act, the Bankruptcy Act, Employment Standards Act. Any conversation in which any element of the above is used is for frames of reference. If you need a lawyer for a specific purpose, please ask and we can refer you to the appropriate firm.
We are not investment advisor’s, but again, we know lots of them and work with them successfully. We are not remunerated in any way shape or form, directly or indirectly from any interaction you may have with any financial advisor that we may recommend. Any financial advisor’s that we recommend are done so on the basis of a value set consistent with our own.
We love each and every single one of you as a client, we really do. And we want to see you get back every single cent you are entitled to. However, if we say no, really, there is a reason. The fines that we can suffer are substantial, up to $100,000+ per statement. Neither our firm, nor our staff and their families can afford what amounts to gross negligence or indifference to the law. Our Errors and Omissions insurance does not cover penalties under this application, so please keep that in mind when asking us about pushing that envelope or turning a blind eye.
The legislative structures under section 163.2 of the ITA and section 285.1 of the ETA are very similar. For each subsection under section 163.2 of the ITA there is a corresponding subsection under section 285.1 of the ETA. Therefore, as a general rule, this circular will refer to the relevant subsection or paragraph only. For example, subsection 163.2(2) of the ITA and subsection 285.1(2) of the ETA will be referred to as subsection (2). Where there are differences between the two Acts, a complete reference will be given and the differences will be discussed. Also, throughout the rest of the document, when the ETA is mentioned, it will refer only to the GST/HST provisions that are found in Part IX of the ETA.
Both section 163.2 of the ITA and section 285.1 of the ETA provide for two penalties, one directed primarily at those who prepare (or participate in), sell or promote a tax shelter or tax shelter-like arrangement, and the other directed at those who provide tax-related services to a taxpayer. The first of these two penalties will be referred to as the “planner penalty” and the latter will be referred to as the “preparer penalty” throughout the rest of this circular. Also, although mention is made in the circular of tax professionals, tax return preparers, accountants, advisors, practitioners, brokers, tax or financial planners, appraisers, valuators, and tax shelter promoters, the third-party civil penalty provisions apply to any person (defined in paragraphs 20 and 21) engaged in activities described in below
Subsection (2), the “planner penalty,” provides for a penalty on a person who makes, furnishes, participates in the making of, or causes another person to make or furnish a statement that the person knows, or would reasonably be expected to know but for circumstances amounting to culpable conduct, is a false statement that could be used by another person for a purpose of the ITA or for a purpose of the ETA. Unlike the preparer penalty (defined in paragraph 9), the person who could use the false statement does not need to be identified in order to apply this penalty. Examples of when this subsection could be applicable are:
tax shelter promoters holding seminars or presentations to provide information in respect of a specific tax shelter; and
appraisers and valuators preparing a report for a proposed scheme/shelter that could be used by unidentified investors.
Subsection (3) provides that the penalty to which a person is liable under subsection (2) for a false statement is $1,000. However, when a false statement is made in the course of a planning activity or a valuation activity, the penalty amount is the greater of $1,000 or the total of the person’s gross entitlements for the planning or valuation activity (calculated at the time at which the Notice of Assessment of the penalty is sent to the person).
Subsection (4), the “preparer penalty,” provides for a penalty on a person who makes, or participates in, assents to, or acquiesces in the making of a statement to, by or on behalf of another person that the person knows, or would reasonably be expected to know but for circumstances amounting to culpable conduct, is a false statement that could be used by or on behalf of the other person for a purpose of the ITA/ETA. Despite the name “preparer penalty,” it can apply to any person in the aforementioned situation and is not limited to a tax return preparer. Subsection (4) would be applicable to the tax return preparer for each investor or taxpayer that can be identified. Examples would include:
a person preparing a tax return for a specific taxpayer;
a person providing tax advice to a specific taxpayer; and
an appraiser or valuator preparing a report for a specific taxpayer or a number of persons who can be identified.
For a penalty levied under the ITA, subsection 163.2(5) provides that the penalty to which a person is liable under subsection (4) in respect of a false statement is the greater of:
a) $1,000, and
b) the lesser of:
(i) the penalty to which the other person (i.e., the person who could use the false statement for a purpose of the ITA) would be liable under subsection 163(2) if the other person made the statement in a return filed for the purposes of the ITA and knew that the statement was false; and
(ii) the total of $100,000 and the person’s gross compensation, at the time at which the Notice of Assessment of the penalty is sent to the person, for the false statement that could be used by or on behalf of the other person.
For a penalty levied under the ETA, subsection 285.1(5) provides that the penalty to which a person is liable under subsection (4) in respect of a false statement that could be used by or on behalf of the other person is the greater of:
a) $1,000, and
b) the lesser of:
(i) the total of $100,000 and the person’s gross compensation, at the time at which the Notice of Assessment of the penalty is sent to the person for the false statement that could be used by or on behalf of the other person; and
(ii) 50% of the decrease in the tax liability or increase in the net refund or rebate claim caused by the reporting of a false statement by the other person, if the section 285 penalty was applied to the other person.
Subsections (2) and (4), concerning the planner penalty and the preparer penalty, could both apply to the same false statement. However, subsection (14) provides that a person who is liable to pay penalties under both subsections (2) and (4) for the same false statement is required to pay penalties that are not more than the greater of the penalty under subsection (2) and the penalty under subsection (4). Examples would include:
a broker remunerated for promotional presentations of a tax shelter that is used by investors that can be identified; and
tax planners, appraisers and/or valuators preparing a report for a proposed scheme/shelter that is used by investors who can be identified.