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   From: sharx335@hotmail.com   
      
   "Alan Baggett"  wrote in message   
   news:9133102.156.1335893253482.JavaMail.geo-discussion-forums@ynid1...   
   > Tough tax penalty raises fairness concerns : CRA SOTW   
   > By Tom McFeat, CBC News Posted: Apr 9, 2012 5:19 AM ET   
   >   
   > Most people know that if they file their personal tax return   
   > after the deadline, they’ll be assessed a penalty – five per cent   
   > of the amount owing, along with one per cent a month in interest.   
   > If they don’t owe any tax, there’s no penalty. But each year,   
   > tens of thousands of Canadians are hit by something they may not   
   > have known even existed – the “repeated failure to report income”   
   > penalty.   
   >   
   > It doesn’t take much to trigger it. Forgetting to report two   
   > T-slips in a four-year period – once in the most recent tax year   
   > and once more in any of the previous three tax years – is enough   
   > to set the wheels in motion.   
   > And make no mistake, this penalty is a big one – 20 per cent of   
   > the amount that was not reported in the most recent year.   
   >   
   > To be clear, that’s not 20 per cent of the amount of tax that   
   > wasn't paid. In many cases, no tax is being evaded at all. This   
   > penalty is applied to the entire amount of income that never made   
   > it onto the tax return.   
   > This may come as a jolt to those who got a tax slip for some   
   > extra income after they’d filed their tax return. Often people   
   > don't bother forwarding the information to the tax authorities,   
   > assuming that the tax department would know about it anyway since   
   > the issuers always provide the same tax slip information directly   
   > to the Canada Revenue Agency.   
   >   
   > That turns out to be a mistake. It’s the failure to report the   
   > income that is the real offence here, not the failure to pay tax.   
   >   
   > Rationale   
   > The rationale behind this penalty isn’t hard to fathom. In a   
   > self-reporting tax system like ours, people are required to   
   > report all their income. Failure to do that repeatedly should   
   > bear some consequences beyond merely being assessed the   
   > additional taxes owed.   
   >   
   > “I understand what they [the CRA] are trying to do,” says Wayne   
   > Drew, a partner with the accounting firm MNP in Waterloo, Ont.   
   > “You don’t want people to not report income.”   
   >   
   > But the rigid application of this rule has caught people who   
   > never intended to avoid taxes.   
   >   
   > Accountants CBC News talked to say they have seen clients   
   > assessed thousands of dollars in penalties, sometimes tens of   
   > thousands of dollars, for what have often amounted to inadvertent   
   > slip-ups – tax slips sent to an old address, late-arriving slips,   
   > lost slips, forgotten slips. All of these situations can and have   
   > triggered penalties.   
   >   
   > Drew cites one recent example he’s aware of, a senior citizen who’s   
   > been assessed a $3,600 penalty. This on top of the tax and   
   > interest owed, a penalty levied for “repeated failure to report   
   > income.”   
   >   
   > What did this senior do wrong?   
   >   
   > It turns out a tax slip had been sent to an old address and he   
   > never got it. Combine that with one previous incident in which a   
   > tax slip had not been reported … and the result was a nasty and   
   > unexpected surprise for a man who’d never intended to evade his   
   > tax obligations. He’s appealing the penalty.   
   >   
   > As it stands, the assessment of the “repeated failure to report   
   > income” penalty doesn’t require that there be any evidence of tax   
   > evasion. Failing to report a couple of T-slips – even if the   
   > proper amount of tax had been withheld from both of them – still   
   > triggers the penalty.   
   >   
   > It’s assessed automatically by the CRA’s computers, and since the   
   > system of matching T-slips is more effective than ever, failing   
   > to report a slip is very likely to be caught.   
   >   
   > Repeated failure to report income penalty   
   > Year Number of Penalties Federal Penalty*   
   > 2008 67,580 $28.8 million   
   > 2009 72,839 $31.2 million   
   > 2010 79,790 $35.3 million   
   > 2011 81,389 $39.3 million   
   > * Note: Federal penalties are matched by provincial/territorial   
   > penalties   
   > Source: Canada Revenue Agency   
   >   
   > These penalty assessments are not rare. Figures provided to CBC   
   > News by the Canada Revenue Agency show that more than 81,000   
   > Canadians were assessed this penalty in 2011— and more than   
   > 300,000 in the past four years.   
   >   
   > Total federal penalties, which account for half the annual tally   
   > of penalties levied, came to $39.3 million last year. Provincial   
   > and territorial penalties account for up to another $39.3 million   
   > in penalties – $78.6 million in all.   
   >   
   > The average penalty works out to almost $1,000.   
   >   
   > It isn’t hard to find critics of the fairness of how these   
   > penalties are applied. Keith MacIntyre, a tax partner with the   
   > accounting firm Grant Thornton in Halifax, notes that the penalty   
   > in some situations can be even greater than the Income Tax Act’s   
   > penalty for a fraud.   
   >   
   > “The CRA’s audit staff have been understanding in different   
   > situations to the size of the penalty relative to the offence,”   
   > he notes.   
   >   
   > But the CRA can’t simply refuse to levy the penalty.   
   >   
   > “It’s legislation,” he says. “You can’t just go and waive away   
   > legislation.”   
   >   
   > While there are provisions that allow the CRA to waive penalties   
   > in accordance with taxpayer relief provisions, MacIntyre says   
   > fairness applications for this type of offence are not easy   
   > cases.   
   >   
   > The CRA acknowledges that questions about the appropriate   
   > application of this penalty have arisen before and have been sent   
   > on to the Department of Finance. Any changes to that penalty   
   > would be up to that department.   
   >   
   > As for the Finance Department, officials there defend the   
   > penalty.   
   >   
   > “Where a taxpayer fails to report income more than once over a   
   > four-year period, a penalty based on the amount of the most   
   > recent unreported income is justified,” the department said in an   
   > email to CBC News.   
   > While Finance says the CRA does have discretion to waive or   
   > cancel interest and penalties in some circumstances, it says that   
   > “officials generally exercise this discretion when taxpayers have   
   > not complied with the income tax law because of circumstances   
   > beyond their control or because of delays or errors on the part   
   > of the CRA.”   
   >   
   > The taxpayer’s conduct is critical in making the decision about   
   > whether to waive or cancel penalties. Basically, the CRA wants to   
   > see that taxpayers “have exercised a reasonable amount of care in   
   > administering their affairs under Canada’s self-assessment system   
   > of taxation.”   
   >   
   > So it comes as no surprise that accountants CBC News spoke to   
   > stressed the importance of listing every T-slip on tax returns.   
   >   
   > “Anyone who doesn’t report a T-slip is foolish,” MacIntyre says.   
      
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