What Does It Cost ?
The cost of the average lawyer who specializes in tax law will vary according to how much experience they have in the area of tax law and administration as well as to where they are located in the country. Any of the larger law firms within Canada's larger cities will have a tax lawyer or two, or even an entire department of lawyers who are ready to help you. Even smaller law firms of ten or fewer associates will likely have an associate who dabbles in tax law or has some experience with the Canada Revenue Agency and its staff. Many, if not most of the lawyers in Canada today who work in the areas of tax, taxation, GST, HST, assessments and tax notices are well worth their hourly fees. These professionals can bill you anywhere from between $600 to $1500 per hour or more. Often, the firm will explain that in order to save you money, they will hand your file over to a junior, less experienced lawyer who bills at a much lower hourly rate. But in our experience, what will typically take an experienced lawyer two or three hours to research, write and file can take many times longer for the junior lawyer to do the same job. And, the senior lawyer will have to read it and check it over anyway and will typically add his time to your billing statement every month in any event. IT IS NOT INEXPENSIVE.
To show you what we mean, I can share with you an actual example from on of our clients. In 2010, Ted received several statements from the Canada Revenue Agency including requests for additional information, four assessment letters, a notice of re-assessment, and several demand letters for payment. After working through his accountant at one of the major accounting firms, Ted went to see his family lawyer at a larger firm in the city. The family lawyer was not a tax lawyer, so Ted was referred to one of the tax lawyers who worked with the family lawyer in the large firm. Ted was assured by the family lawyer that because Ted and his family had been working with him for many years, the initial consultation with the tax lawyer would be free.
Ted met with the tax lawyer for almost four hours. They went over the paperwork from the large accounting firm and also reviewed the communications from the Canada Revenue Agency. The tax lawyer then asked Ted if it would be OK to speak with the chartered accountant at the large accounting firm? Ted was also asked to provide any other communication he might have based on the conversation he had just had with the tax lawyer. The tax lawyer then explained that typically the law firm would request a retainer in the range of $3000 to $4000 dollars, but because Ted was an existing client, the retainer was reduced to $1000, which Ted paid for before he left the building.
The tax lawyer had a telephone conversation with the chartered accountant. The tax lawyer also reviewed less than six pages of additional documents provided by Ted a few days later. Ted and the tax lawyer spoke by telephone two more times for less than ten minutes each time and at the end of the month, a billing statement arrived from the tax lawyers office in the amount of $1342 plus tax. This was in addition to the retainer of $1000 that Ted had paid only three weeks before the bill was issued from the tax lawyer. The next week, his chartered accountant also issued a bill in the amount of $5657.60 plus tax, which also included the accountants time in speaking with the tax lawyer and other instructions that needed to be issued to adjust and respond to the Canada Revenue Agency communications and inquiries. And then, just when Ted thought he was done he received his quarter billing statement from his book keeper in the amount of $3500 plus tax.
To add it all up, the total came to:
$1000.00
$1342.00
$5657.60
$3500.00
$ 11,499.60 + tax TOTAL
And that total was BEFORE Ted paid any money to the federal government that was claimed by the Canada Revenue Agency to the Receiver General of Canada. By the time Ted found CRA Advantage, we were able to work with the Canada Revenue Agency and eliminate his notice of assessment and cut his professional services and other bills noted above by almost half.
Another example is Hilery. He is 42 years old and works from home in a consulting practice. Because Hilery is away from home from time to time his partner and his wife will often answer telephone calls, schedule appointments, make plane, train, hotel and rental car reservations and will occasionally take time to speak as well as interact with clients on an as needed basis. Which is to say, whenever Hilery is away from home. Hilery has two small children. The older of the two is 16 years old and helps out in the family business by cleaning up the home office consisting of about 650 square feet and contains two desks, two desktop computer systems linked to an office network and a private server that is connected to a high speed black and white printer as well as a XEROX Colour lazar printer and the internet. On desktop computer is for reviewing complex colour images and other graphics required for Hilery's business. The other desktop is used for communications, electronic mail, word processing, presentation manufacturing and often very large and very complicated spreadsheets. The home office also has two laptop computers as well as two Blackberry brand smart phones connected to the home server for travel communications and presentation purposes purposes.
Their business is a numbered provincial company with multiple operations and will occasionally employee outside consultants or other experts as required by the clients. Hilery uses the services of a professional book keeping service, employees an accountant at one of the larger accounting firms to keep his books and records up to snuff and has a lawyer from a medium-sized firm file his annual corporate returns and other legal matters on a regular basis.
In 2007 and again in 2008 the Canada Revenue Agency performed an audit of the company books, They also sent representatives to his office located in his home to observe his operation and to take measurements of the rooms of his home in which he was operating his business. When asked, Hilery could supply records, receipts, meeting dates and other notes relating to his business activities. In total, the Canada Revenue Agency spent no less than 6 hours in the office located in their home. The federal employees also spent nearly two full days working with the book keeper for nearly 12 hours. And after that, the Canada Revenue Agency staff spent another 5 full days over one month working with the professional accounting firm Hilery had employed for the last 4 years.
The first notice of assessment disallowed several several input tax credits including a percentage portion of the heating, cooling and cleaning costs. The notice of assessment further noted that the percentage claimed for electricity were being disallowed because the bills for the heating and cooling of the home and the home office were not in the name of the business but were in Hilery's name. The assessment went of to further disallow most of Hilery's travel and related costs because meeting notes were not as detailed as preferred by the Canada Revenue Agency. The bottom line was that, due to the reassessment, Hilery now owed the Canada Revenue Agency a total of $72,348.50 plus interest and penalties. It took Hilery nearly four years an a total of $168,250 in legal fees as well as $16,188 dollars in accounting fees and other disbursements to challenge the Canada Revenue Agency.
To add it all up, the total came to:
$ 72,348.50 CRA Assessment
$168,250 Legal fees
$ 16,188 Accounting fees
$ 8,812 Book Keeping & Other services
$ 193, 312.00 + tax TOTAL
Ranni and Marko have a small convenience store with a gas bar and a car wash. The gas bar and convenience store are open 24 hours a day 7 days per week. It is mostly Ranni and Marko who operate the store, although their children Shumi and Mikheil have also worked in the family store for several years to help out their parents. Mikheil will also work long and non-standard hours before and after classes in the car wash area as it can be extremely busy during certain times of the year. When the car wash and the gas bar are very busy, Mikheil has asked his parents to hire a school friend to also help out as they do occasionally need funds for school trips, field trips, school mixers (dances) and other extra curricular activities sanctioned, encouraged and support in principal by the school administration.
Ranni and Marko less that 4 million liters of fuel and diesel fuel per year. Their convenience store was recently expanded to accommodate the high school students and their teachers who will enter their establishment to buy fruit, newspapers, gum, cigarettes, bread, milk, lottery tickets and the other usually things you will find in a convenience gas bar. Students, faculty and staff will also purchase gas and wash their cars. However, for the first year of the expanded convenience store the business did not do as well as they had hopped. Ranni and Marko did not do any advertising and were hoping to capitalize on word-of-mouth as the two high schools were within walking distance of their establishment. Also, when the water heating and filtration system broke down and needed to be replaced it took several weeks to find the necessary replacement equipment and it took several more weeks for the contractor to find the time to install, test and certify the car wash equipment.
While they waited for the expansion and the repairs to start and eventually complete the only operating part of their business was the gas bar. Business was down and so were their remittances to the Canada Revenue Agency. One day last year, an auditor from the Canada Revenue Agency called to say he wanted to see them as soon as possible. During the audit, the federal auditor consistently asked them when they expected to be fully operational again and suggested at least three times during that single visit that since they were losing money it was probably in their best interest to close up shop. Marko stated very plainly to the Canada Revenue Agency official that he did not think it was appropriate for the auditor to criticize them while they were losing money. So they auditor pressed Ranni and Marko for a firm date when he could tell his supervisors their business would be making money again.
In their Notice Of Assessment toe Ranni and Marko the Canada Revenue Agency stated that source deductions for the part time time help running the convenience store, gas bar and car wash had not been calculated properly resulting in a considerable underpayment on the part of their business for those staff. In addition, a second notice of reassessment by the Canada Revenue Agency stated that the claim for input tax credits for the water heating devices replaced in the car wash were overstated and would be disallowed in addition to several other input tax credits relating to the reconstruction and refurbishment of the convenience stare. All totaled, the original notice of assessment and subsequent other notices of assessment and re-assessment came to a total of $133,831.10 and the payment had to be sent in full to the Canada Revenue Agency within 30 days of receipt of the final notice.
Neither Ranni or Marko had the money to pay the Canada Revenue Agency in full within the few weeks they were advised they had to pay by. They began with a series of telephone calls to the auditor. Unfortunately the original auditor was away for a 6 week training session and their file had been passed on to someone else. While they thought they were negotiating with the Canada Revenue Agency in "good faith" a demand for payment was mailed to them. They contacted the auditor of record and was told the person was still on their training course and would be working on other assignments upon their return. Ranni and Marko asked to speak with the supervisor and were advised that someone from the Agency would contact them as quickly as possible. Several days later when taking their deposit to the bank, they were told by the bank tell that their business account had been seized and frozen by the Canada Revenue Agency and that the account had been completely emptied of thousands of dollars while the bank had no choice but to comply with the Governments demand for payment. In fact, the bank accounts for their business were frozen and drained of all monies no less than 4 separate occasions in one year.
After being nearly put out of business, it was only through the generosity of their extended family, friends and neighbours that they were able to raise the necessary cash to challenge the Canada Revenue Agency in Tax Court. It took nearly 30 months and their legal bill was nearly one-quarter of a million dollars at $247,209.12
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And let's face it. . . If the federal government of Canada and the Canada Revenue Agency really want to take a close look at you and your finances, there really isn't all that much you can do about it. In fact, you'll probably be the last to know just how closely the Canada Revenue Agency is actually looking at you. By the time you know what is going on, the Canada Revenue Agency will know almost everything there is to know about you.
They will know where you live. How much money you make. Where you bank. How much money you have in your bank accounts. How much money you have set aside for retirement as well as what pension plans you have. The Canada Revenue Agency will even track how many vehicles you own or lease. How many children you have and weather or not you are making child support payments or if you have put money aside for the education of your children.
They will know if you are married, single, divorced or living in a common law union. In fact, the chances are very good they will have all this information and much much more about you as well as your spouse and even your children. This information is kept in an electronic database that is available to any employee, manager or contractor working for or on behalf of the Canada Revenue Agency. And yes, the Canada Revenue Agency does have rules, regulations and safeguards relating to who can access the information and when, but these "rules" are often regarded by government staff as only guidelines and are lightly or rarely enforced. You only need to do a quick search on the internet or CLICK HERE to read about some of the news stories relating to Canada Revenue Agency staff and related misuse of Government data about you.
The federal government and the Canada Revenue Agency will take any and every advantage they have at their disposal to collect what they think you owe them. In fact, in Canada, the federal government and the Canada Revenue Agency are the country's only "Super Creditor." Simply put, that means that entities like your employer or even your bank must hand over your money if requested to do so by the Canada Revenue Agency. Neither your employer nor your bank can refuse to comply when told to hand over your money. And it happens every day.
In fact, most financial institutions, banks and trust companies have entire departments and staff set aside to process the Canada Revenue Agency garnishee notices. These one-page demand letters are routinely sent to financial institutions electronically for processing while they are sent to you through regular mail. So, by the time you receive your copy of the demand letter to the bank in the mail, you'll rush to the bank to check on your account only to find out that the funds have already been drained from your account.
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