Voluntary disclosure - Eight year for fraud - unlimited for not filing - Bankruptcy discharge - Chapter 7 and or 13 -

QUESTION: Is the 10 year time limit for using CRA's voluntary disclosures program hard and fast? If so, why? What happens when someone only discovers they made a mistake much later and they want to straighten it out? Can they still do so? (Since the CRA can go back as many years as they want, it only seems fair that someone who discovers a mistake more than 10yrs old should also have a chance to correct it.)
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david ingram replies;

The tax office is usually restricted to going back 3 years unless they allege serious fraud.  If there is fraud, they have a method of going back eight years.  In my 44 years in this business, I have only seen the tax office go back under this legislation ONE time against an ordinary individual and he was a logger.  By the time they were finished in a court room, the CRA had proven that he did not report $5,000 of log sales in the right year. (He reported a $4,000 sale on about Dec 21st of one year in the next year because that was when he cashed the cheque).  The judge found him guilty of tax evasion on a technicality, chastised the CRA investigators AND the prosecutors, and then gave him a  mandatory $2,000 fine (the amount of tax delayed) with no date set to pay it.  The gentleman died in 2006, 20 years later, without ever having paid the fine..  For the record, at one time I administered over 700 tax preparation offices and have had lots of chances to see more situations.

Canada also has an amazing piece pf legislation which allows YOU, the TAXPAYER to go back 10 years.

No matter what you find, the US will only allow you to go back 3 years.

Now that I have said that he CRA (and the IRS as well) only go back 8 years when there is fraud involved, if you have not filed the returns, the IRS can ask for back returns back to 1967 and Canada can go back
as far as they want if nothing was filed.  Although not common, we regularly see them go back fifteen or sixteen years when someone did not file period.  These are usually devastating because even a $5,000 bill in 1990 is now about $20,000 with penalties and interest.

I have seen many people's lives ruined when they were caught by the CRA and ended up with the tax massive fines, penalties and interest and sometimes a criminal conviction..  I have never really seen anyone hurt (other than financially) when they do a voluntary disclosure.  With a voluntary disclosure, you get a big tax bill, no or little penalties, and an interest bill.  If the results are too devastating , the entire bill can be  eliminated in Canada with a bankruptcy. If you are going to do this in Canada, I recommend that you consult a bankruptcy attorney such as Murry Morrison at (604) 930-9013.  You can find a link to his website on my site at www.centa.com.
 
Personal taxes can also be eliminated in a US Chapter 7 bankruptcy.  The rules took effect in April 2005. In general, US  personal income taxes can be discharged if  the taxes are at least three years old, and were assessed at least 240 days prior to the bankruptcy filing.  The taxes also have to have been filed voluntarily.  If the IRS sent you a SFR (Substitute for Return) consult a competent bankruptcy attorney prior to filing your original returns!   This is a must.  

Income taxes less than three years old can NOT be discharged in a US bankruptcy.  Tax returns filed less than two years ago and taxes assessed less than 240 days ago can  not be discharged in a chapter 7 filing.

You might also consider a Chapter 13 proposal in the US where you offer payments on a dollar or a Compromise solution in the USA.

If you do decide to do a compromise, be careful.  Some of the mills being run are just going to get you  in more trouble. Watch out for heavy pitches on television.  The experience I hear from clients int eh US and Canada is that they approached a high profile person, paid a chunk of money and then were ignored.   In one case in Canada for instance, they did a compromise when none was needed, charged the client $10,000 up front and then prepared the returns incorrectly so that the CRA came back with $20,000 more tax. 

I have personally left five messages for the high powered TV and radio pitchman for the business and neither he nor his daughter have returned a phone call or email.

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On Mar 14, 2008, David Ingram wrote:

It is very unlikely that blind or unexpected email to me will be answered.  I receive anywhere from 100 to 700  unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients.  Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject line and get answered first.  I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when I am out of town. 
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However, I regularly search for the words"PAYING CUSTOMER" and always answer them first if they did not get spammed out. For the last two weeks, I have just found out that my own email notes to myself have been spammed out and as an example, as I wrote this on Dec 25, 2007 since June 16th, my 'spammed out' box has 47,941 unread messages, my deleted box has 16645 I have actually looked at and deleted and I have actually answered 1234 email questions for clients and strangers without sending a bill.  I have also put aside 847 messages that I am maybe going to try and answer because they look interesting. -e bankruptcy expert  US Canada Canadian American  Mexican Income Tax service and  help
Therefore, if an email is not answered in 24 to 48 hours, it is likely lost in space.  You can try and resend it but if important AND YOU TRULY WANT OR NEED AN ANSWER from 'me', you will have to phone to make an appointment.  Gillian Bryan generally accepts appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321.  david ingram expert  US Canada Canadian American  Mexican Income Tax  service and help.
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Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included." e bankruptcy expert  US Canada Canadian American  Mexican Income Tax  service and help.
David Ingram gives expert income tax service & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
 
Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST if in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.
$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,200 would be the same with one rental
 
$1,300 would be the same with one business no rental
 
$1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
 
$1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,700 would be for two people with income from two countries

$3,000 would be all of the above and you moved in and out of the country.
 
This is just a guideline for US / Canadian returns
 
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up.
 
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
 
A Business for $400 - Rental and business likely $550 to $700
 
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
 
Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up.
 
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
 
8891 forms are generally $50.00 to $100.00 each.
 
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
 
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.
 
This from "ask an income trusts tax service and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily basis with expatriate tax returns with multi jurisdictional cross and trans border expatriate problems  for the United States, Canada, Mexico, Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax  Immigration Wizard Antarctica Rwanda Guru  Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist expert preparer expatriate anti money laundering money seasoning FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income Tax Convention. Advice on bankruptcy  e bankruptcy expert  US Canada Canadian American  Mexican Income Tax service and help .

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