Insure yourself against future reassessments
You've filed your 2007 tax return and are anxiously awaiting your Notice of Assessment. What if the Canada Revenue Agency disagrees with your filing position or denies some of your business expenses?
You have the option of formally objecting to the CRA's assessment by preparing a "Notice of Objection." Should the CRA still disagree, there is always the option of heading to Tax Court.
But doing either without professional representation can be risky.
While the obvious path may be to hire an accountant or lawyer, your professional costs can add up quickly as most professionals bill by the hour for the time involved. If your claim isn't in the "thousands of dollars," it may not be worth your while.
One way to help reduce the cost of fighting a future reassessment is to become a member of the Canadian Tax Audit Protection Plan (www.ctapp.ca). The plan was launched last month by Sixth Sphere Services Professional Corp., a law firm established by David Robertson, who is also a tax partner with Faksen Martineau in Toronto. Acting as counsel to Sixth Sphere is a retired former judge of the Tax Court of Canada, the Honourable Ron Bell.
The philosophy of the new plan is to provide access to justice for the average Canadian taxpayer and small business by reducing the cost of legal services and attempting to "level the playing field" between taxpayers and the CRA (which seems to have endless financial resources to litigate tax cases). Membership fees start at $19.95 for a "simple" personal tax return, which may include, for example, employment income and up to $1,000 of investment income. Small business returns, including returns with rental income, begin at $49.95.
What do you get for the fees?
Should your return be selected for audit or should you be reassessed in any of the next three years, you get 15 hours of legal advice, which includes two hours to review the audit, four
hours after reassessment and nine hours toward an appeal to the Tax Court of Canada.
If you maintain your membership for three consecutive years, you can get up to 45 hours of legal advice for no additional cost.
Before signing up, it's best to read the small print regarding what's covered-- and what's excluded.
Invested in one of those donation tax shelters currently under attack by the CRA? Sorry, you're out of luck as the CTAPP specifically excludes advice relating to any reassessment as the result of participation in a tax shelter.
Similarly, should the CRA attempt to attack your clever tax plan through the use of its ultimate weapon, the General Anti-Avoidance Rule, you are on your own. But for the average honest taxpayer, the CTAPP may be worth a look.
Mr. Robertson, who has already signed up 100 members in the plan's first two weeks, is optimistic about the future. Calling the plan "unique in Canada," he believes there is a role for this plan among taxpayers, as he believes that the cost of legal services is now "beyond the financial reach of average Canadians."