Tag Archives: Audit

Time Travelling Documents – why backdating is always a bad idea

August 3, 2020

Question: “So, my partner and I sat down this morning and we decided that the agreement has to be dated January 1, 2020.”

Me/Answer: “I need a bit more information before we can decide that January 1, 2020 is an appropriate date.”

Question: “What is the big deal?  Just use that date!  No one will ever know!”

I wish I could say that I made up this conversation, but I did not.  I have had this conversation several times in my career.  There are often attempts by others to “bully” advisors into preparing documents on terms that do not squarely match reality.

The purpose of today’s blog post is two-fold:

  1. What is backdating, and when is it appropriate (if ever)?
  2. A quick discussion of the ethical responsibilities of advisors.
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Large Corporations: What are they and why do we care?

July 20, 2020

Picture this:  You have set up a successful corporation and are up to date with all your tax filings.  One morning, you get a phone call from Canada Revenue Agency advising that you have been selected for an audit.  The audit happens and it results in a reassessment.  You do not agree with the reassessment and plan to object.  However, before you have a chance to call your lawyer, you find out that $50,000 was just scooped from your corporate bank account by CRA to pay a portion of the amount owing on the reassessment.

You are so confused and really mad.  You call your lawyer to ask how this could have happened!  You remember reading somewhere that CRA is prohibited from taking collections action until the deadline for filing an appeal has passed.  Your lawyer asks, “Are you a large corporation?”  You respond, “I don’t know – what does that have to do with anything???”

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When circus performers go to the moon…a candid discussion on business expenses, and the meaning of taxable benefits

June 22, 2020

In 2009, Guy Laliberté (Quebec billionaire, and co-founder of Cirque du Soleil) was Canada’s first “space tourist” – spending 12 days aboard the International Space Station.  Unfortunately, this little trip to outer space cost him a whopping $41.8 million dollars.  Laliberté took the position that this was a business trip, intended to boost the Cirque du Soleil launch in Russia, and to celebrate the 25th anniversary of the circus.  There was also an assertion that the trip would help to promote Laliberté’s clean water charity, One Drop.  As a result, he paid for the trip through his holding company and was reimbursed by the controlling company of Cirque du Soleil – except for a self-assessed $4 million dollar shareholder benefit.

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Don’t tell… or should you?

June 8, 2020

Last week, the National Post (and many other news outlets) published a story about Canada Revenue Agency (“CRA”) opening up a phone line to report “misuses” of the wage subsidy program (https://nationalpost.com/news/politics/canada-revenue-agency-opens-up-snitch-line-to-information-about-federal-covid-19-aid-program-fraud). Any Canadian can phone this line to report their neighbour, co-worker, or “frenemy”.

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“I’ll file my taxes later” – Why filing on time is the best policy

June 1, 2020

At least once a month, I get a call from someone who is wondering what to do if they have not filed a tax return for awhile.

Here are some typical comments I hear:

“Is it a big deal?” (It might be.)

“But I do not owe taxes anyway, so why does it matter?” (How can you be sure if you have not filed your return?)

“The Government won’t notice.” (Cut to me putting palm on forehead.)

In this COVID-19 world, the Federal Government has granted a myriad of filing extensions for individuals, trusts, and corporations (see https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/covid-19-filing-payment-dates.html for all the details). However, I am still a firm believer in filing tax returns on time wherever possible. In today’s post, I will review the top 5 reasons why you should file your return on time, and what you should do if you have fallen behind.

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CEWS, CERB, CESB, CEBA – You know the audits are coming – but are you ready?

May 25, 2020

There has certainly been no shortage of new Canadian tax acronyms to learn over the past couple of months.  Between mid-March and late-April, it felt like a new government program (or a change to an existing program) was being released every hour.  On more than one occasion, I had sat down to write a short informative piece on a new program, only to find out that the program had changed before I could publish!

However, now that the initial rush to understand these various programs has partially subsided, it is important to start focusing our attention on the potential audit risk associated with participation in these programs.

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