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Below this, you will find a copy of Gigi Suhanic's excellent
article on Page IN1 of the Saturday, June 21st edition of the
National Post FP Money section.
I find it apropos because this afternoon a successful businessman
came in who had not read the article.
For the last 4 years, he has had 10 to 12 people working for him
as contract laborers and they have made from $40,000 to $80,000
each. He has not paid GST to any of them but they are all
supposed to collect it because they are grossing over $30,000
each. If I said a ten people at $50,000 each, there would be
total of $500,000 a year and 7% or $35,000 a year of GST should
have been paid to them and remitted with their GST returns. Add
up the 4 years and you have over $140,000 of GST plus interest
and penalties owing by his workers. Note that it would not have
cost him anything to pay them the GST. It would just have come
off his own GST bill. However, by not paying it, his workers are
all liable to (I guess) about $10,000 in penalties and interest
if they get caught by the CCRA before it gets fixed.
The irony is that this individuals returns were being prepared by
a Chartered Accountant and I presume that all ten or twelve of
the contract workers had their tax returns done by someone. In
all that time, apparently only one accountant told his client
that he had to be registered. To be fair, the CA doing this
fellows books had mentioned it but nobody got out a baseball bat
and hit anyone over the head to make the point that they HAD to
be registered and RIGHT NOW!
Having Gigi Suhanic's article to show him made it clear and I
commend Gigi for writing the article. We have had one more person
this last two weeks with an arbitrary $14,000 bill for two years
when they were not registered and grossing over $30,000 a year
Here is Gigi's Article -- pass it on to "anybody" you know who
is self-employed and is not registered for GST.
In Mr Kosela's case, I blame the CCRA and the 5 different
accountants he used to prepare his returns over the last 12
years. The CCRA with their computer system could have notified
him every one of the last twelve years that he should be
registered. The accountants should have hit him over the head
with a rolled up newspaper to register.
Here's 77,000 reasons to pay GST
Gigi Suhanic
Financial Post
Saturday, June 21, 2003
Question: I am self-employed and I've heard that I should
collect and pay GST to the government? Is that true?
Answer: "If you are self-employed in any type of profession
and expect to gross over $30,000, you must be registered for GST
and you must collect GST," says David Ingram, a financial advisor
with CEN-TA Group in Vancouver.
If you don't, Mr. Ingram says "the CCRA assumes that GST
has been collected" and you'll receive a bill for 7% of your
gross income -- the GST that ought to have been charged -- plus
interest and penalties.
One of Mr. Ingram's clients was hit two months ago with a
notice from Canada Customs and Revenue Agency, saying he owes
$77,000 in unpaid GST going back 12 years to 1991 including
interest and hefty penalties.
That client, Vancouver patio layer Patrick Kosela, says he
had his income tax returns prepared by accountants but doesn't
remember ever being told to register for GST.
"My wife, she almost got a heart attack. I was scared to
death," says the 62-year-old construction worker.
"I go through so much stress just to keep alive and I have
to deal with that now. I don't know what I'm going to do."
According to the 2001 census, there were 1,861,200
self-employed people in Canada.
"It's absolutely ludicrous that the government with its big
fancy computer can't go through and say wait a minute, you should
be paying GST," he says.
Mr. Ingram thinks the CCRA is on a bit of a GST tear and
says Mr. Kosela's troubles are a wakeup call for other
self-employed businessmen.
Like Mr. Ingram, Robert Gold, a chartered accountant and
managing partner with Bennett Gold in Toronto, also runs into a
lot of people who fail to register for GST.
People see it as a "paper burden," they just don't get
around to it or they don't understand the rules.
Even if you're making under $30,000 in gross income, Mr.
Gold says, it's still a good idea to register for and collect GST
because it makes you eligible for the tax credit for the GST you
paid on purchases. And if you pay more GST than you collect, you
can receive a refund.
In cases where fines and penalties are imposed, Mr. Gold
says he prepares a voluntary disclosure.
"It's a document that says 'I didn't understand the rules
before, I've gotten advice, I'm going to send you everything I
owe you.' If you do that you avoid penalties. You still pay
interest," Mr. Gold says.
"The thing people have to remember is that the government
has a lot of time and a lot of people and they eventually catch
everyone."
In extreme cases like Mr. Kosela's, Mr. Gold says the
sexagenarian may be able to appeal under a provision called
"fairness."
"Under fairness they give you the opportunity to have the
penalty removed if you've attempted to do everything you were
supposed to do but were unable to because of extenuating
circumstances or health issues. There's also hardship. If this is
going to cause him significant financial hardship, they may waive
the interest and penalties," Mr. Gold says.
Back at Mr. Ingram's office, he anticipates that with all
the input tax credits calculated, Mr. Kosela could get a
significant break and end up owing somewhere around $24,000 in
GST, interest and penalties.
PATRICK KOSELA'S GST BILL:
Patrick Kosela has been assessed as owing 12 years of GST
dating to 1991. Below is a breakdown.
Net tax $37,458.68
Interest $16,652.57
Penalty $23.011.47
Total $77,122.72
[email protected]
© Copyright 2003 National Post
david ingram - [email protected]
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - (604) 913-9123 www.centa.com
Cell is (604) 657-8451 (10 AM to 10 PM seven days a week)
US / CANADA / MEXICO
Working Visa and Income Tax Specialists
Be ALERT, the world needs more "lerts"
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