Wednesday, June 9, 2010

CRA Decision Making

Organizations are collections of individuals who don't necessarily agree on all things. This is very evident at the Canada Revenue Agency (CRA). You can call multiple times with a complex tax question and get a different answer each time. The only important answer is the one that is made in actually assessing a tax return, but it seems impossible to access this answer until you actually file the return.

I am caught in a complex tax situation where the latest federal budget changed the rules so that I will owe much less money. Technically I'm supposed to pay the large sum, wait for the appropriate budget legislation to pass, and then re-file my 2009 income taxes and get the money back.

If lending a large sum of money to CRA only to get it all back again later sounds insane to you, I agree. I decided to contact CRA to see if a more reasonable approach was possible. After penetrating the first few layers of CRA phone help the pleasant senior tax person I spoke to agreed that the temporary loan made little sense.

She went away for a day or so to find out whether I could avoid paying the large sum just to get it back later. She came back and said that she had consulted with the appropriate group and that there were many people in my situation. If I filed my taxes in the way she described (which I did) my return would be set aside until the tax legislation passed at which time my return would be assessed.

Predictably, things have not played out in the way I was told they would. My return was assessed right away and the CRA machinery is demanding its money. The demand came with a leaflet explaining the steps CRA follows to get its money. This information is both illuminating and intimidating. I'm left wondering whether I can still expect that people in my position will be handled later when the tax legislation passes or whether the full force of CRA tax collection will be aimed at me in a month or two.

Eventually, I will call CRA to try to find out what is going on, but I'm not sure I will be able to rely on whatever new answer I get. If someone could have told me in April that I would have to pay the large sum of money, at least things would have been clear even if I didn't like the answer. I would have headed down to my bank to open a mortgage planning to close it a few months later (grumbling about CRA the whole time).

My complaint isn't that I don't like CRA's decision. My complaint is that I don't know what CRA's decision will be. And I know of no reliable way to find out what their decision will be. If I thought this was a case of CRA having just changed their minds, I could live with that. But my assessment showed no evidence that the extra documentation I was told to send in was ever received.

I can understand that CRA must hire a huge number of people at tax time and that CRA can't be held responsible for the many wrong answers these people give. However, when the amount of money at stake is very large, it would be nice if it were possible to get access to correct answers.


  1. It would be nice if they could assign someone to manage your tax return for complicated cases -- flag SIN X to go through to Agent Y so you can get consistent answers and follow-up... There would still be inconsistencies agent-to-agent (and people would probably start to shop for lenient enforcers/interpreters), but at least you wouldn't get one answer on the phone, and another on your notice of assessment...

  2. @Potato: That would definitely solve the problem. I could even live with a system where notes were left on my file for other CRA people to read. This could work if the note writing and note reading were taken seriously.

  3. is just starting up and is getting better every day. it will be able to help with most technical Canadian income tax questions in a straightforward way.

  4. @Benjamin, while it will be useful to have a Tax Wiki, I doubt that it will be well maintained, and even if every article is correct in it, the CRA's ability to interpret the rules differently for each case may cause the whole system to be less than useful (IMHO). I hope I am wrong.

  5. I recently had a fairly uncomplicated tax question about which I consulted a tax accountant. CRA's own legislation did not specifically address my situation so he could not say for certain how it would be handled. When I queried if a letter could be written to CRA to get a response beforehand, he indicated that such things take months and months and that if the situation is not exactly as described in the enquiry, the ruling will not hold.

    With CRA they hold all the cards, so you roll the dice and take your chances. Don't challenge, always be polite, give them what they ask for. Unless you know you have never, ever made an error or a questionable call on your taxes you are vulnerable to being put in a world of hurt by them. Their powers are far-reaching and you don't want to piss them off. Someone close to me had a 'warning shot fired off their bow' so to speak over a very innocuous enquiry. They can make life a living h*ll and very, very expensive.

  6. @Benjamin: Improved online tools for answering tax questions is undoubtedy a good idea, but it would have no relevance to my sutuation.

    @Anonymous: I agree that CRA hold all the cards. In addition it is a good polcy to be polite in almost all situations. I would be inclined to give them what they ask for if they could do it with a single voice. It is hard to do several different things when some of them are contradictory.

  7. Interesting post Michael, FYI there is not-well-enough-known govt agency called the TaxPayers' Ombudsman at where you can actually file a complaint about CRA.

  8. @Canadian Investor: I've heard horror stories from people who could definitely use the services of an ombudsman. I'm nowhere near that stage yet and am still hopeful for a reasonable resolution.

  9. Michael - the phone, auditors and other users do leave notes on your file. However, different users have different permissions, and some may not be able to access all notes, or an individual agent may not write things down like they should.

    Call them again and see what they can work out. As I understand it, a lot of tax assessment is automated, so if your return goes into the big machine (no doubt last upgraded in the late '80s), it'll kick back whatever it's programmed for no matter what you've previously discussed. A manual override after the fact is more likely to be possible, or possibly just a "payment plan" that would defer payment until the rules change and you can be reassessed.

  10. @Neil: You sound you have some direct experience with CRA systems. I will definitely call CRA to try to straighten everything out. I've set a personal deadline of the end of next week. I'll probably procrastinate as along as possible on this one.

  11. I don't really have much sympathy for your situation. You owe taxes. You should pay them. IF and WHEN the proposed changes get passed, then you file an adjustment. There is no guarantee that those changes will pass. Until the Governor General's signature is on the bill it's not law yet.

    Imagine if police could enforce changes to the criminal code before they are actually passed.

  12. @Ghostryder: I think you've missed the point. If that was CRA's position and they told me this, then at least I'd have clarity.

    But setting that matter aside, the issue of whether to pay the money and get it back later is not a dire one for me -- I can afford it. However, there are others who would be wiped out. Driving someone into bankruptcy for a "temporary" debt is senseless.