CRA, court docket do not purchase ‘blame the accountant’ excuse for past due tax submitting

Article content material

It’s essential to report your tax go back on time, whether or not you’re a person taxpayer or submitting on behalf of your small business. Failure to report your go back on time may end up in late-filing consequences and arrears pastime, charged on the prescribed price for underpaid taxes, which is lately at 9 in line with cent in line with annum, compounded-daily — and isn’t tax deductible.

Article content material

Must you be hit with consequences and pastime, you’ll all the time ask the Canada Earnings Company to waive or cancel them beneath the taxpayer aid provisions. Must the CRA refuse your request for aid, you’ll have the CRA’s resolution reviewed via a Federal Court docket pass judgement on to decide whether or not it was once “cheap.” That’s in the long run what took place in a up to date case that was once heard in court docket remaining month, involving a late-filed company tax go back.

Article content material

The company taxpayer was once assessed $8,783.14 in consequences and pastime because of the late-filing of its 2018 company tax go back. The company was once represented in court docket via its president and proprietor, who, whilst no longer a attorney, was once granted permission via the pass judgement on, in her discretion, to constitute his company on the listening to.

Article content material

The trade proprietor argued that the past due submitting of his company’s taxes was once no longer the company’s fault, however somewhat the fault of the company’s accountant. The landlord argued that he had supplied the source of revenue tax knowledge to the accountant smartly sooner than the submitting cut-off date, however the accountant had relocated, and didn’t report the go back on time.

The company filed its tax go back for the yr finishing Dec. 31, 2018 over six months past due, on Jan. 17, 2020. The traditional company tax submitting cut-off date for companies is six months from its year-end, which on this case would had been June 30, 2019.

Once you have hit with the late-filing penalty and pastime, the company submitted an preliminary request for aid to the CRA to cancel or waive those consequences and pastime. In that request, the company mentioned that its tax go back was once past due as a result of its president, the landlord, have been excited about his unwell folks and that his accountant had moved workplaces. It sort of feels that company had supplied its bureaucracy to the accountant on April 12, 2019, however the accountant didn’t report the company’s go back via the June 30 cut-off date. The landlord additionally cited “monetary hardship” and the company’s certain compliance historical past.

Article content material

Article content material

The CRA officer, acting a first-level assessment, denied the taxpayer’s request for aid, announcing that the landlord’s private monetary state of affairs was once no longer related to the company’s monetary state of affairs “as they’re separate entities.” In relation to the landlord’s folks’ scientific state of affairs, the CRA officer was once not able to conclude that there have been instances that avoided the company from submitting its go back on time. In any case, the officer held that, in spite of the accountant’s transfer, the company is in the long run answerable for making sure its tax returns are filed on time.

The company then asked a second-level assessment of its utility for taxpayer aid at the sole foundation that the first-level CRA officer didn’t correctly imagine the failure of its accountant to report the tax go back on time because of the relocation of the accountant’s follow.

Article content material

This second-level assessment additionally denied the company’s request for aid, declaring that “beneath Canada’s self-assessment tax machine, firms are answerable for making sure their tax returns are … filed on time.… Even if it’s possible you’ll use the products and services of a pro, the connection between a taxpayer and a tax preparer is one in every of selection, and any unfavorable penalties of that selection stays between the ones events. Depending on a certified, does no longer absolve you out of your duty.”

The company then took the subject to Federal Court docket, the place the pass judgement on was once tasked with figuring out whether or not the CRA’s second-level resolution to disclaim aid was once cheap. A cheap resolution is “one this is according to an internally coherent and rational chain of study and that’s justified in the case of the info and regulation that constrain the decision-maker.”

Article content material

The pass judgement on, in reviewing the proof, became to the CRA’s printed administrative pointers for cancelling or waiving consequences and pastime. Particularly, in eventualities involving third-party delays, the CRA will assess whether or not the instances had been past the taxpayer’s regulate, pursuant to positive components which come with: herbal or human-made failures, comparable to flood or hearth, civil disturbances or disruption in products and services, comparable to a postal strike, critical sickness or twist of fate, and critical emotional or psychological misery, comparable to a loss of life within the fast circle of relatives. In the end, alternatively, taxpayers are in most cases answerable for delays brought about via a 3rd social gathering appearing for the taxpayer instead of in “outstanding eventualities.”

Article content material

The company argued that the CRA failed to correctly imagine its explanation why for the late-filing of its tax go back, particularly that its accountant had moved workplaces. In court docket, the landlord argued that this was once a question out of the company’s regulate and that the company must no longer be penalized in consequence.

Sadly for the taxpayer, the pass judgement on concluded that the accountant’s transfer “does no longer represent both an abnormal circumstance or a phenomenal state of affairs … that avoided the well timed submitting of the (company’s) tax go back.” Moreover, the pass judgement on famous that even if the company supplied its source of revenue tax knowledge to the accountant on April 19, 2019, which was once smartly sooner than the June 30 submitting cut-off date, the company didn’t follow-up to verify the go back was once being filed on time and handiest followed-up 3 months later, on July 20, 2019, after the submitting cut-off date had expired. In the end, the tax go back was once no longer filed till Jan. 17, 2020, which was once over six months after the submitting cut-off date.

Article content material

In consequence, the pass judgement on decided that the CRA’s resolution to not cancel the consequences and pastime was once cheap. The pass judgement on was once additionally sympathetic in opposition to the trade proprietor, refusing to grant the CRA its asked “prices” of $2,040 in opposition to the taxpayer, “having regard to all of the instances of (the) case.”

Whether or not the taxpayer would achieve success in creating a declare in opposition to the accountant (or, in the long run, the accountant’s insurer) is dependent upon all of the info and instances surrounding their interplay, and whether or not the taxpayer can reveal that the accountant was once negligent in no longer submitting the company’s go back on time.

Jamie Golombek, CPA, CA, CFP, CLU, TEP is the managing director, Tax & Property Making plans with CIBC Personal Wealth in Toronto. Jamie.Golombek@cibc.com

Article content material