Taxman giving you a hard time?

Ray Turchansky
Province

EDMONTON — An interesting new service called The Canadian Tax Audit Protection Plan is being offered to taxpayers who have caught the attention of the Canada Revenue Agency.

Many taxpayers have been receiving their Notices of Assessment from CRA, saying all is well with their income tax return, so far. But even an attached cheque for your calculated refund amount doesn’t mean you are out of the woods.

A few months later you may receive a follow-up letter, either saying CRA has adjusted your return to reflect incorrect or missing information — such as T-slip income you failed to report — or asking to see medical, education, moving or child-care receipts for verification.

The latter is often done randomly, or when you make a first-time claim or for an amount much greater than usual.

Make copies of any originals you send to CRA; one of my tax clients is still in limbo because the copy of the T2202A education slip sent to CRA went missing.

And send the originals within 30 days of being asked; another client didn’t send medical receipts and was reassessed back tax and interest until remitting the receipts six months later.

But chances are your original slips and receipts will be verified by CRA and returned to you, usually with no changes made to your return.

However, if you are reassessed or even face an audit because a claimed deduction or credit is disallowed or reduced, and if you cannot understand why, you should go to your accountant or tax preparer.

It may turn out that an amount was included as business rather than personal income, or that one expense claim included two or three expenses you had listed separately.

The Canadian Tax Audit Protection Plan is being offered by the Toronto-based law firm Sixth Sphere Services Professional Corp., founded by David Douglas Robertson of the law firm Gasken Martineau and R.D. Bell, former judge of the Tax Court of Canada.

Robertson says a main benefit of the plan is that it is “designed to make such legal services affordable for those individuals who generally could not afford them.”

After people prepare their tax returns, they can apply for membership in the plan through their accountant or financial planner or online at www.ctapp.ca. If their 2007 tax return is audited by CRA within three years of it being received, the plan member is entitled to up to 15 hours of legal services from the Sixth Sphere to advise and assist with the audit, including legal representation before the Tax Court of Canada.

Robertson says the fee for a taxpayer to join the plan, based on his or her sources of income plus types of deductions and credits, generally starts at $20 for an average taxpayer and $50 for people who are self-employed.

The plan is worth considering if you are making tax claims that CRA may contest, and which cannot be explained away by producing slips and receipts, or through an explanation from your accountant. But you should ask beforehand how the plan would cover your situation.

For instance, the plan might seem of interest to people who contribute to tax shelters.

But Robertson writes that “the 15 hours of legal services provided under the plan do not apply [given the virtual certainty that the tax shelter will be reviewed and audited]. However, members are still entitled to a 20-per-cent reduction of our normal hourly rates should they wish to consult us regarding the CRA’s reassessment of the tax shelter.”

He notes that most tax shelters include an escrow fund to help defend it against a CRA challenge.

An interesting angle is that the plan says it extends solicitor-client privilege to discussions between you and your accountant for the purpose of obtaining legal advice under the plan.

© The Vancouver Province 2008

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