CRA Mailing “Error” Leads to Huge Tax Bill :CRA SOTW
Alan Baggett
Notice that ‘error’ is in quotes. Was this really an error? Doubtful.
Tax agency mailing mistake leads to huge tax bill
Canada Revenue Agency mailed audit notices to non-existent address
Last Updated: Tuesday, April 22, 2008 | 9:14 PM ET
BY KATHY TOMLINSON — The owner of a small construction business in
B.C. says a series of mistakes by the Canada Revenue Agency (CRA) has
left him with a $500,000 personal tax bill he says he doesn't owe.
"They can royally screw up and they are not accountable," said Dennis
Collins. "That doesn't make any sense to me at all."
Construction business owner Dennis Collins says he works hard and
always pays his taxes, but he can't pay the nearly $500,000 tax bill
he says he does not owe.
(CBC) Collins said he's worked hard and paid his taxes all his life.
He also considers himself a stickler for tax rules — never taking cash
under the table or making GST deals. About $500,000 flows through
Collins's business account each year, but he said most of that goes to
pay for construction materials and other expenses. Collins claims less
than $50,000 in personal income annually.
Huge bill could leave taxpayer penniless
If he had to pay $500,000 to Ottawa, he said it would wipe him out
completely.
"They [the CRA] would have my house and property, and I would still
owe money. And then I'd have to go start again."
Accountant Dave Hansen, left, tells Go Public reporter Kathy Tomlinson
the Canada Revenue Agency is 'incompetent' in Dennis Collins's case.
(CBC) In August of 2006, auditor Johnny Jagpal, from the CRA's
Verification and Enforcement Division in Vancouver, sent Collins a
letter, informing him he was being audited. Collins said he told
Jagpal that all of his paperwork was with his accountant, Dave Hansen,
in North Vancouver, and the audit would have to be done there.
Like any taxpayer, Collins has the right to have his accountant act as
his direct representative with CRA and he asked Jagpal to contact
Hansen to make an appointment.
"Hell — I am a builder, a carpenter," said Collins. "That's what I pay
my accountant for."
Dennis Collins says he can't stand to look at the huge tax bill that
amounts to nearly $500,000.
(CBC) Hansen said he heard nothing from Jagpal until February 2007,
when the auditor called requesting information. Hansen said he called
him back —twice — during the next few weeks, to tell him he was
working on getting the paperwork together.
"I never heard from the auditor again," said Hansen. "If they are
going to do anything, they issue you a proposal. They contact you.
They do something. In this case nothing happened. If it had come to
me, it would have been handled right away. And they would have been in
here doing that audit. But we never got anything."
Auditor sent letters to non-existent address
Records show the auditor then started mailing letters addressed to
Collins — not the accountant — to a non-existent mailing address in
Pemberton, B.C., with the street name misspelled. Collins says it
appears that Jagpal found the address that he used, 7844 Pemberton
MEDWS Rd., in a telephone directory. The street name address is
misspelled exactly the same way in the Canada 411 directory. Collins's
street address is 7844 Pemberton Meadows Rd., but his mail is not
delivered there.
Collins said the CRA had his proper mailing address — a rural route
postal address — in its system and have had it for years. Hansen said
the auditor's supervisor later told him that for some reason, Jagpal
had "overridden the system" instead of using the address on file.
"I had no chance to prove that I was clean because he didn't show up
to do an audit," said Collins. "Then, he starts mailing me stuff to
the address that doesn't exist."
In those letters Collins did not receive — dated June and August of
2007 — the CRA stated, "we have completed our audit review." The
letters also informed him CRA was disallowing all the business
expenses Collins claimed for 2004 and 2005 — because he didn't provide
them with information.
"Since you did not keep the proper supporting information and/or
failed to provide us with the proper supporting information to verify
the expenses and input tax credits claimed, the amounts were
disallowed for the audit period."
Taxpayer penalized
Eventually, in February and March this year, notices of the
reassessments were sent to the right places — the accountant’s office
and to the correct postal address in Pemberton, B.C.– telling Collins
he owed the taxman $493,467 plus $66,612 in GST.
"They have taken his gross revenue and denied all of his expenses
incurred. Wages. Sub-contract labour, materials that he's bought.
Everything," said Hansen. "I think [the] CRA is grossly incompetent.
If you can't use the proper mailing addresses that are provided to
you, why do you even have a job?"
"If they can do this — if they can just come along and slam you with
all this for no good reason that I can see," Collins asked, "where is
the incentive to keep on working and trying to stay ahead?"
Hansen said he was told Collins's only recourse was to file an appeal,
which he has done.That will likely cost him several thousand dollars
in accountant fees and, even if he wins, Collins fears that may not
wipe out all the penalties and interest he has incurred.
"Are they eventually going to say — well, we really screwed up here
and you know this is stupid, but then say, 'you still owe $35,000 in
interest' or something like that?" Collins asked.
No comment from tax agency
The Canada Revenue Agency refused to comment on this case, citing
taxpayer confidentiality.
"It's serious — and pretty common," said Don Cayo, a columnist with
the Vancouver Sun, who has written numerous columns on taxpayers going
through disputes with the CRA.
Cayo said that despite the new CRA Ombudsman and the "taxpayer bill of
rights" brought in by the federal government, he sees no evidence that
the agency is becoming more accountable for its mistakes.
"Somebody with great authority should be looking at these issues and
saying, 'That is stupid. That's not fair. That's not right. That's not
consistent," Cayo said.
Erroneous assumptions made by individual auditors are often impossible
for the taxpayer to reverse, he said, without spending thousands of
dollars on appeals or court challenges.
"I guess these guys can be wrong but never admit to it," said Collins.
"Whereas I would. Which is the difference between them and me."
Hansen said he is still optimistic.
"Once we appeal and go through the process, I hope we're going to find
somebody with a bit of brains and some common sense who is going to
sit down and understand the travesty of what has happened here."
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