CRA Help

Protect Your Rights and Minimize Financial Risk When the CRA Audits Your Business or Personal Finances**

Receiving an audit letter or a review notice from the Canada Revenue Agency (CRA) is a high-stress event, but you do not have to face it alone. At KLCA CPA, we specialize in representing individuals and business owners through every stage of a CRA audit.

Whether you are facing a personal, corporate, GST/HST, or payroll audit, our team acts as your professional shield, handling all communications and ensuring the CRA stays within its legal boundaries.

Audit Specialties: What We Defend

The CRA targets specific areas where they believe tax revenue is being missed. We provide expert defense for:

Self-Employed & Small Business Audits

Targeting freelancers, contractors, and T2125 filers, the CRA looks for personal expenses claimed as business costs. We defend your deductions—from vehicle and home office logs to travel and meals—using case law and meticulous documentation.

Real Estate & Capital Gains Audits

The CRA is currently aggressive in auditing "property flips" and the Principal Residence Exemption. If they attempt to reclassify your capital gain (50% taxable) as business income (100% taxable), we build a defense based on intent, holding periods, and financing to protect your profit.

GST/HST & Payroll Audits

Errors in GST/HST Input Tax Credits (ITCs) or the misclassification of employees vs. independent contractors can result in massive assessments. We reconcile your filings and push back against auditor overreach.

Lifestyle & Net Worth Audits

If the CRA believes your lifestyle (homes, cars, travel) exceeds your reported income, they may perform a "net worth" assessment. We perform lifestyle reconciliations to justify your reported income and identify non-taxable sources of funds, such as gifts or loans.

Offshore & Foreign Asset Audits (T1135)

With increased global data sharing, the CRA is scrutinizing foreign rental income and offshore accounts. We help you correct missed filings and navigate the complex T1135 requirements.

The KLCA CPA Audit Defense Strategy

When you hire KLCA CPA, we take the burden off your shoulders immediately. Our process includes:

1. Authorized Representation: We become your official representative. All CRA phone calls, letters, and emails go through us. You never have to speak to the auditor directly.

2. Scope Control: Auditors often ask for more information than they are legally entitled to. We limit disclosure to what is specifically relevant to the audit period, preventing a "fishing expedition."

3. Document Organization: We gather, verify, and organize your receipts and records into a professional package that leaves little room for auditor "assumptions."

4. Legal Arguments: We rely on the Income Tax Act and prior Court precedents to defend your tax positions and minimize penalties.

5. Post-Audit Resolution: If the auditor issues an unfair assessment, we prepare a formal Notice of Objection to fight the decision at the Appeals level.

Why the CRA Audits You (Common Triggers)

Audits are rarely random. You may have been flagged due to:

• Industry Benchmarks: Your expenses are higher than the average for your specific industry.

• Recurring Losses: Claiming business or rental losses for multiple consecutive years.

• Mismatched Data: Discrepancies between your income and the T-slips or GST/HST returns filed by third parties.

• High-Risk Sectors: Construction, hospitality, real estate, and gig-economy workers are currently under increased scrutiny.

Don’t Call the Auditor First—Call Us

An auditor’s job is to identify errors and maximize tax revenue—they are not there to help you find more deductions. Before you submit a single document or answer a questionnaire, consult with KLCA CPA.

Unfiled Tax Returns: Get Back in Good Standing with the CRA

If you haven’t filed your personal taxes, corporate returns, GST/HST, or payroll remittances for years, you aren't alone. Whether it’s due to illness, overwhelming stress, or simple procrastination, falling behind is a common challenge. The good news? It is never too late to fix it.

At KLCA CPA we specialize in resolving long-term tax delinquency. Whether you are behind by a single year or more than a decade, we have the expertise to help you regain control and protect your financial future.

The Risks of Not Filing: Arbitrary Assessments

When you ignore CRA filing demands, the government doesn't just wait. The CRA may issue an Arbitrary Assessment (also known as a Notional Assessment). This is an estimate of what the CRA believes you owe, often based on inflated data.

The dangers of an Arbitrary Assessment include:

• Inflated Debt: They rarely include the deductions or expenses you are actually entitled to.

• Aggressive Enforcement: These assessments trigger immediate collections, including wage garnishments or bank account freezes.

• Compounding Costs: Interest and penalties accumulate from the date of the assessment, not the date you actually file.

No Records? No Problem.

Many people avoid filing because they’ve lost their documents due to a move, business shutdown, or personal hardship. We are experts at tax record reconstruction. Even without your original slips, we can rebuild your tax history using:

• CRA Internal Data: Accessing T4, T5, and other third-party slips directly from the CRA.

• Bank & Credit Records: Analyzing statements to identify deductible business expenses.

• Proxy Methods: Using industry benchmarks and gross margin calculations to create defensible returns.

Strategy for Multi-Year Filings

Filing five, ten, or fifteen years of back taxes requires more than just filling out forms—it requires a professional strategy. We optimize your returns by:

• Coordinating with CRA Officers: We communicate with Non-Filer and Collections agents to pause enforcement actions while we work on your file.

• Maximizing Credits: We ensure RRSP carryforwards, loss carrybacks, and HBP repayments are applied in the most tax-efficient order.

• Managing Time Limits: Personal returns older than 10 years are generally not accepted, and corporate returns become "statute-barred" after 3 years. We act quickly to protect your right to claim refunds.

How We Get You Back on Track

When you partner with KLCA CPA, we handle the entire process from start to finish:

• CRA Account Audit: We authorize as your representative to identify missing years, arbitrary assessments, and existing slips.

• Full Representation: We handle all calls and letters from the CRA so you don't have to.

• VDP & Relief Assessment: We check if you qualify for the Voluntary Disclosures Program (VDP) to eliminate penalties and prosecution, or Taxpayer Relief to cancel accumulated interest.

• Debt Settlement: Once returns are filed, we help you set up affordable payment plans or refer you for a consumer proposal if the debt is overwhelming.

Immediate Protection Against Bank Freezes, Wage Garnishments, and Property Liens

If you have received a legal warning letter or a notice of intent to garnish from the Canada Revenue Agency, your financial stability is at immediate risk. Unlike private creditors, the CRA does not need a court order to seize your assets or stop your cash flow.

At KLCA CPA, we specialize in intervening during the most aggressive stages of CRA collections. We act fast to halt enforcement, negotiate settlements, and protect your livelihood.

Understanding the CRA’s Power: Common Enforcement Tools

The CRA has a powerful toolkit to collect unpaid taxes, and they often deploy these tools without a second warning if you have been unresponsive:

• Bank Account Freezes: The CRA issues a "Requirement to Pay" to your bank, which immediately freezes your funds and redirects your balance to the government.

• Wage Garnishment: The CRA can legally compel your employer to redirect up to 50% of your gross pay (and often 100% for subcontractors) directly to your tax debt.

• Property Liens: The CRA can register a certificate of judgment against your home or commercial property, making it impossible to sell, refinance, or renew a mortgage without paying the debt in full.

• Third-Party Demands: They can intercept money owed to you by customers or tenants, effectively cutting off your business or rental income at the source.

• Director Liability: If your corporation owes GST/HST or payroll remittances, the CRA can assess you personally as a director, making your personal assets vulnerable to corporate tax debt.

How KLCA CPA Stops the Escalation

The moment you hire us, we take over all communication with CRA Collections. Our goal is to stabilize your situation and find a path to a permanent resolution.

1. Negotiating a Stay of Enforcement We contact the assigned collections officer to request a temporary hold on legal action. By providing a professional point of contact and demonstrating a commitment to resolution, we can often get bank freezes lifted and garnishments reduced.

2. Filing Outstanding Returns The CRA will rarely negotiate a settlement if you have unfiled tax years. We work around the clock to bring your filings up to date, which often reduces the total "arbitrary" debt and shows the CRA you are cooperating in good faith.

3. Proposing Structured Payment Plans If you cannot pay the full balance immediately, we help you prepare a formal Payment Arrangement. We back these proposals with detailed financial disclosure to prove what you can realistically afford, ensuring the plan is sustainable and that further enforcement is suspended.

4. Assessing Relief and Settlement Options We evaluate your eligibility for the Voluntary Disclosures Program or Taxpayer Relief to cancel penalties and interest. If the debt is truly unmanageable, we consult on legal settlements through a Consumer Proposal to settle the debt for a fraction of what is owed.

Why You Must Act Now

CRA collections officers have a mandate to collect as much as possible, as quickly as possible. Ignoring their letters is seen as "refusal to pay," which leads to the immediate seizure of assets.

KLCA CPA provides the professional buffer you need to stop the harassment and save your assets. We have decades of experience dealing with the most difficult collections files in Canada.

CRA Collections: Frequently Asked Questions & Warning Signs

When dealing with CRA Collections, information is your best defense. Below are the most common questions our clients ask and the red flags you should look for before the CRA takes legal action.

Warning Signs: Is the CRA About to Take Action?

The CRA usually follows a specific escalation path. If you notice any of the following, enforcement is likely imminent:

• The "Final Warning" Letter: You receive a notice titled "Final Notice" or "Notice of Intent to Garnish." This is the last step before your employer or bank receives a legal demand for your funds.

• Unreturned Phone Calls: If you have been speaking with a collections officer and they suddenly stop returning your calls, they may have moved your file to the legal department for enforcement.

• Arbitrary Assessments: If the CRA has filed a return for you (a Notional Assessment) and you haven’t disputed it within 90 days, the debt becomes "certified" and ready for collection.

• Request for Financial Disclosure: If a collections officer asks for a list of your assets, bank accounts, and customers, they are likely mapping out exactly what they intend to seize.

• Requirement for Information (RFI): If your bank or clients mention they received a letter from the CRA asking about your relationship with them, the CRA is preparing a "Requirement to Pay."

Frequently Asked Questions (FAQ)

Can the CRA freeze my bank account without a court order? Yes. Unlike a credit card company or a landlord, the CRA has the statutory authority to issue a Requirement to Pay (RTP) to your financial institution. The bank must comply immediately by freezing your funds and sending them to the CRA.

How much of my salary can the CRA garnish? For regular employees, the CRA typically garnishes up to 50% of your gross wages. However, if you are a subcontractor or a "gig economy" worker, they can garnish 100% of your paychecks from your clients.

Will a bank freeze affect my mortgage or car payments? Yes. If your account is frozen, any pre-authorized debits for your mortgage, car loan, or utilities will bounce. This can lead to additional NSF fees and damage your credit score. This is why immediate intervention from KLCA CPA is critical.

Can the CRA take money from my joint account with my spouse? Generally, the CRA can only seize funds that belong to the debtor. However, if the funds are in a joint account, the bank may freeze the entire account until the ownership of the funds is proven. This often causes significant hardship for the non-debtor spouse.

Does filing for bankruptcy or a consumer proposal stop the CRA? Yes. Filing a Consumer Proposal or Bankruptcy triggers an "Automatic Stay of Proceedings." This is a legal injunction that forces the CRA to stop all garnishments and bank freezes immediately.

Can I negotiate with the CRA myself? You can, but it is risky. Collections officers are trained to secure payment in full. If you provide them with your financial information without a professional strategy, you may inadvertently give them a roadmap of which assets to seize if negotiations fail.

Notice of Objection: Your Right to Dispute a CRA Assessment | KLCA CPA

If you have received a Notice of Assessment or Reassessment that you believe is incorrect, you have the legal right to challenge it. A Notice of Objection is the formal first step in disputing the CRA’s findings. It triggers an independent review by the CRA’s Appeals Division, which operates separately from the audit department that issued the original assessment.

At KLCA CPA, we specialize in drafting technical, evidence-based objections that protect your rights and aim to overturn unfair tax bills without the need for costly litigation in Tax Court.

Why File a Notice of Objection?

Filing an objection is essential because the CRA’s assessment is legally deemed "valid and binding" as soon as it is issued—even if it contains clear errors. Without a formal objection, the CRA can begin aggressive collection actions once the deadline passes.

Common reasons to file an objection include:

• Disallowed Expenses: The auditor rejected legitimate business, vehicle, or home office deductions.

• Income Reclassification: The CRA reclassified a capital gain (50% taxable) as business income (100% taxable).

• Marital Status Changes: Reassessments that deny child benefits or spousal credits based on incorrect family data.

• Net Worth Assessments: When the CRA "estimates" your income based on your lifestyle or bank deposits.

• GST/HST Denials: Incorrectly disallowed Input Tax Credits (ITCs) for your business.

Strict Deadlines: The 90-Day Rule

Time is your greatest enemy when disputing a tax bill. The deadlines for filing are rigid:

• For Individuals: The deadline is the later of 90 days from the date on the Notice of Assessment OR one year from the filing due date for that specific tax year.

• For Corporations: You generally have exactly 90 days from the date on the Notice of Assessment.

Missed the deadline?

If you are past the 90-day window, you may still be able to apply for an Extension of Time. This must be done within one year of the original deadline and requires a justifiable reason for the delay. KLCA CPA can assist in preparing these extension requests to ensure your right to appeal is not lost.

The KLCA CPA Objection Process

A simple letter stating "I disagree" is rarely enough to win an appeal. Our team takes a methodical, professional approach to build the strongest possible case:

1. Legal Review: We analyze the CRA’s assessment against the Income Tax Act and current tax court precedents to identify errors in their logic.

2. Evidence Gathering: We help you compile the specific documentation—invoices, logs, contracts, or bank records—that directly counters the auditor’s assumptions.

3. Technical Submission: We draft a comprehensive submission that clearly outlines the facts, the issues in dispute, and the specific "relief" (the dollar amount change) we are seeking.

4. Appeals Representation: Once a CRA Appeals Officer is assigned, we act as your primary contact. We manage all discussions, rebut their "Proposal Letter," and negotiate for a favorable settlement.

Collection Protection During an Objection

One of the most significant benefits of filing an income tax objection is the Stay of Collections. For most personal and corporate income tax disputes, the CRA is legally required to pause collection actions—such as bank freezes or garnishments—while your objection is under review.

Note: This protection does not always apply to GST/HST or payroll source deduction debts, which often require a separate strategy to manage.

Professional Defense vs. Self-Filing

The CRA Appeals Division is a formal environment. Errors made during the objection stage can limit your options if the case eventually proceeds to the Tax Court of Canada. By working with KLCA CPA, you ensure that your arguments are framed correctly from day one.

Voluntary Disclosures Program (VDP): A Second Chance | KLCA CPA

The Voluntary Disclosures Program (VDP) is a unique opportunity for taxpayers to come forward and correct past errors, omissions, or unfiled returns before the Canada Revenue Agency (CRA) contacts them. If your application is accepted, the CRA will grant you relief from prosecution and, in most cases, waive 100% of the penalties and a significant portion of the interest.

At KLCA CPA, we specialize in managing the VDP process for individuals and corporations, ensuring your disclosure is handled with the highest level of professional discretion and strategic accuracy.

Why Use the VDP?

The VDP is designed to encourage compliance. It is an "amnesty" program that offers three primary benefits:

• No Criminal Prosecution: You are protected from tax evasion charges and potential jail time.

• Penalty Waiver: You can avoid "Gross Negligence" penalties, which are often 50% of the tax owed, and late-filing penalties.

• Interest Relief: The CRA may reduce the interest accumulated on your debt for years prior to the last three years of filing.

The Four Pillars of a Successful Disclosure

For the CRA to accept your VDP application, it must meet four strict criteria. KLCA CPA ensures your submission is built to satisfy every one of them:

1. It Must Be Voluntary: You cannot apply if the CRA has already started an audit, sent a demand to file, or initiated an enforcement action against you. You must move first.

2. It Must Be Complete: You must disclose all errors and omissions for all years. Selective reporting will result in the rejection of your application.

3. It Involves a Penalty: The disclosure must involve the application of a penalty (such as a late-filing penalty or a penalty for failing to report foreign assets).

4. It Includes "Past-Due" Information: The information being disclosed must be at least one year past the filing deadline.

Common Scenarios for Disclosure

We represent clients in a wide variety of VDP cases, including:

• Unreported Income: Failing to report cash earnings, rental income, or capital gains.

• Foreign Assets (T1135): Neglecting to report overseas bank accounts, investment properties, or business interests exceeding $100,000 CAD.

• Understated GST/HST: Business owners who collected sales tax but failed to remit it to the government.

• Employee Payroll Deductions: Failing to withhold or remit source deductions for employees.

• Ineligible Expenses: Correcting previous returns where personal expenses were incorrectly claimed as business deductions.

The KLCA CPA Strategy: How We Protect You

Filing a Voluntary Disclosure is a sensitive legal process. If done incorrectly, you risk handing the CRA the evidence they need to prosecute you. Our process mitigates that risk:

• Pre-Assessment & Risk Analysis: We review your records to ensure you meet the "voluntary" criteria before notifying the CRA of your identity.

• Forensic Accounting: We meticulously reconstruct your financial history to ensure the disclosure is 100% complete and accurate.

• Professional Narrative: We draft a formal submission that explains the reasons for the non-compliance, framing your situation in the best possible light under the VDP guidelines.

• Anonymous (No-Name) Discussions: In complex cases, we can sometimes engage in preliminary discussions with the CRA to gauge the likelihood of acceptance before your name is officially disclosed.

• Payment Negotiations: Once the disclosure is accepted, we help you arrange a payment plan for the principal tax amount.

Two Categories of Relief: Limited vs. General

The CRA recently changed the rules for the VDP, creating two tracks:

• General Program: For honest mistakes or oversights. Offers full penalty relief and partial interest relief.

• Limited Program: For intentional non-compliance or sophisticated tax avoidance. This provides protection from prosecution but offers less relief on interest and may still include certain penalties.

KLCA CPA will analyze your specific facts to determine which category you fall into and build a strategy to push for the maximum relief possible.

Don’t Wait for the CRA to Call

The Voluntary Disclosures Program is only available as long as you remain "anonymous" to the CRA’s enforcement branch. Once they start an audit or send a letter, this door closes forever.

Taxpayer Relief Applications: Canceling Penalties and Interest | KLCA CPA

Tax debt often spirals out of control not because of the original tax amount, but because of the compounding interest and late-filing penalties added by the Canada Revenue Agency. The Taxpayer Relief Program (formally known as Fairness Relief) provides a legal avenue for the Minister of National Revenue to cancel or waive these extra charges under specific circumstances.

At KLCA CPA, we specialize in building persuasive, evidence-based relief applications. We help you demonstrate that your non-compliance was due to factors beyond your control, providing you with a path toward financial recovery.

What Can Be Relieved?

It is important to note that Taxpayer Relief cannot reduce the principal tax debt (the original amount you owed). However, a successful application can eliminate:

• Late-Filing Penalties: Often 5% of the balance plus 1% for every month the return was late.

• Repeated Failure to File Penalties: For those who have been late in previous years, these penalties can be as high as 10% plus 2% per month.

• Arrears Interest: Compounding daily interest charged on overdue balances.

• Instalment Interest: Penalties for failing to make required tax prepayments throughout the year.

Do You Qualify? The Primary Grounds for Relief

The CRA does not grant relief simply because a tax bill is high. Your application must fall into one of the following categories to be considered:

1. Extraordinary Circumstances

Situations that physically or mentally prevented you from filing or paying on time, such as:

• Natural or human-made disasters (fire, flood, or significant property damage).

• Serious illness, accident, or hospitalization.

• Serious emotional or mental distress (including the death of an immediate family member).

• Civil disturbances or disruptions in essential services (e.g., a postal strike).

2. CRA Errors or Delays

You should not be penalized for the government’s mistakes. Relief may be granted if your debt grew due to:

• Errors in CRA processing or published materials.

• Unreasonable delays by the CRA in completing an audit or resolving an objection.

• Incorrect information provided to you by a CRA agent.

3. Inability to Pay (Financial Hardship)

The CRA may waive interest if paying it would deprive you of "basic necessities of life," such as food, medical care, or shelter. Proving hardship requires a rigorous forensic look at your household finances—a process KLCA CPA manages for you to ensure your financial reality is clearly documented.

4. Other Circumstances

A "catch-all" category for unique situations that do not fit the criteria above but demonstrate that enforcing the penalties would be unfair or inequitable.

The KLCA CPA Strategy for Relief

Most self-filed relief requests are denied because they are too vague or lack supporting documentation. We ensure your application is professional and persuasive by:

• Evidence Coordination: We don't just tell your story; we prove it. We assist in gathering medical letters, death certificates, insurance claims, or police reports to substantiate your claim.

• Technical Narrative: We draft a formal submission that maps your life events directly to the CRA’s internal legislation and "Income Tax Information Circular" guidelines.

• Financial Disclosure: If applying based on hardship, we prepare a comprehensive "Statement of Assets and Liabilities" and "Monthly Income and Expense" report.

• Second-Level Appeals: If your initial request is denied, we handle the "Administrative Review" to challenge the CRA’s decision at a higher level of authority.

The 10-Year Limitation Period

You can only request relief for penalties and interest applied within the last 10 years. Because the clock is always ticking and interest continues to compound daily, it is vital to apply as soon as possible.