What the CRA Said

Understanding CRA’s Recent Advisory on Cryptocurrency Risk Indicators

J5 issues notices to financial institutions about risk indicators tied to cryptocurrency assets

In a significant move to bolster the fight against financial crimes involving cryptocurrencies, the Joint Chiefs of Global Tax Enforcement (J5) issued a crucial advisory note to financial institutions on May 9, 2024. This advisory, detailed in the “Crypto Assets Risk Indicators” document, highlights five key risk indicators that may point to illicit activities such as money laundering, cybercrime, and tax evasion.

Key Risk Indicators

The advisory identifies the following risk indicators tied to cryptocurrency assets:

1. Cryptocurrency Asset Layering: This involves complex transactions designed to obscure the origin of illicit funds.
2. Geographic Locations: Transactions tied to jurisdictions with weak regulatory frameworks or high corruption levels are flagged as high-risk.
3. High-Risk Counterparties: Financial institutions are urged to monitor transactions involving darknet marketplaces or mixing services.
4. Unknown or Obscured Transaction Recipients: Vigilance is advised when dealing with transactions where the recipient’s identity is unclear.
5. Certain Online Behaviors: Patterns that might indicate criminal activity, such as financial flows related to ransomware payments, are highlighted.

Collaborative Effort for Enhanced Detection

The J5, comprising tax enforcement agencies from Australia, Canada, the Netherlands, the United Kingdom, and the United States, developed this advisory to enhance the detection and reporting of money laundering and other illicit activities involving cryptocurrency. By sharing these risk indicators, the J5 aims to receive valuable insights from the financial sector, thereby strengthening global efforts against financial crimes.

Actionable Steps for Financial Institutions

Financial institutions are encouraged to prioritize the detection of cryptocurrency layering, exercise heightened vigilance with high-risk jurisdictions, monitor transactions involving high-risk counterparties, and practice thorough know-your-customer (KYC) techniques. Additionally, they are advised to detect and report ransomware-related financial flows, a critical point where criminals interact with legitimate financial systems.

Global Collaboration for Financial Integrity

The J5’s ability to share intelligence across borders is pivotal in maintaining the integrity of the financial system. Eric Ferron, Director General of the Criminal Investigations Directorate at the Canada Revenue Agency, emphasized the importance of global collaboration in raising awareness of these risk indicators. Similarly, Niels Obbink of the Dutch Fiscal Intelligence and Investigation Service highlighted the value of international partnerships in combating cybercrime.

John Ford of the Australian Taxation Office and Richard Las of HMRC reiterated the commitment to enhancing the capabilities of financial institutions in detecting and combating crypto-related crimes. Guy Ficco, Chief of IRS Criminal Investigation, underscored the critical role of identification and detection in the global fight against cybercrime.

The J5’s Ongoing Efforts

This advisory follows the J5’s first set of red flag indicators issued in 2022, focused on non-fungible tokens (NFTs). The J5 remains at the forefront of tackling international tax crime and money laundering, including the emerging threats posed by cryptocurrencies. Through coordinated operations and intelligence sharing, the J5 continues to lead efforts against transnational financial crimes.

For more information about the J5 and their initiatives, visit www.irs.gov/j5.

Upcoming Changes to Electronic Filing of Information Returns: What You Need to Know

 

Get ready: By January 2025 there will be changes to the electronic filing of information returns

As of January 2025, the Canada Revenue Agency (CRA) will implement significant updates to the electronic filing process for information returns. These changes are aimed at streamlining submissions and ensuring compliance with regulatory requirements. Here’s what you need to prepare for:

Key Changes Effective January 2025

1. T619 Electronic Transmittal Update:

1. • The T619 Electronic Transmittal record will be updated. This affects all information returns filed electronically. Ensure you include the updated T619 record in your submissions. For detailed guidance, visit File information returns electronically (tax slips and summaries) – Get ready to file.

2. Single Return Type per File:

1. • Starting January 2025, you can only submit one type of information return per file. Mixed submissions (e.g., T4A and T4 returns in one file) will no longer be accepted.

3. Early System Shutdown in December 2024:

1. • The yearly system shutdown will occur earlier than usual in December 2024. Plan to file all your information returns before the shutdown to avoid disruptions. For more details, refer to File information returns electronically (tax slips and summaries) – How to file.

Electronic Filing Thresholds Reminder

From January 2024, businesses filing six or more information returns (slips and summaries) must file electronically to avoid penalties. Common information returns include:

• T4 (remuneration paid)
• T5 (investment income)
• T3 (trust income)
• T4A (pension and other income)

For more information, visit File information returns electronically (tax slips and summaries) – Get ready to file.

How to File Electronically

The CRA offers several digital services for easy and secure tax management:

With a Web Access Code:

• Web Forms: Suitable for smaller returns, up to 100 slips.
• Internet File Transfer (XML): Use payroll, commercial, or in-house developed software to submit an XML file up to 150 MB over the Internet.

Without a Web Access Code:

• My Business Account: Secure portal for business owners to manage GST/HST, payroll, corporation income taxes, excise taxes, duties, and other levies online.
• Represent a Client: Secure portal for representatives to access tax information on behalf of individuals and businesses.

Additional Support

The CRA provides resources and services to help businesses navigate these changes:

• Resources for Small and Medium Businesses: Direct access to tax-related services and information.
• Liaison Officer Service: Available to small business owners and self-employed individuals for help understanding their tax obligations.

For more information, visit the CRA’s Resources for Small and Medium businesses web page.

Stay informed and prepared to ensure a smooth transition to the new electronic filing requirements by January 2025. If you have any questions or need further assistance, the CRA is here to help.

CRA’s Next Phase in COVID-19 Benefits Debt Recovery: What You Need to Know

 

COVID-19 benefits – The CRA is moving to the next phase of debt recovery

As we move forward in managing the aftermath of the COVID-19 pandemic, the Canada Revenue Agency (CRA) is transitioning to the next phase of debt recovery for overpayments related to various COVID-19 benefit programs. This includes the Canada Emergency Response Benefit (CERB), the Canada Recovery Benefit (CRB), and the Canada Worker Lockdown Benefit (CWLB).

Key Actions Starting July 2024

Beginning in July 2024, the CRA will issue legal warnings to individuals who have not responded or cooperated, and who have been determined to have the financial capacity to repay their debt. Legal measures may follow if there is no cooperation. It’s important to note that legal actions are only taken when individuals with the ability to pay fail to engage with the CRA.

How to Pay Your Debt

Paying off your debt immediately is the best way to avoid legal measures. There are no penalties or interest on emergency benefit overpayment debts. The CRA offers several payment options, including online payments or payments through financial institutions. It is crucial to follow the instructions provided in any correspondence from the CRA promptly.

If You Can’t Pay on Time

The CRA understands that not everyone can repay their debt immediately. If you are unable to pay the total amount owing, contact the CRA to discuss suitable payment arrangements based on your financial situation. Ignoring legal warnings will lead to legal measures that could be avoided through cooperation.

The Debt Collection Process

The CRA has always been clear that eligibility for COVID-19 benefit programs relied on self-assessment and would be reviewed later. This ongoing review process began with initial contact letters requesting documents to support benefit claims. This was followed by Notices of Redetermination for those deemed ineligible or unresponsive.

In May 2022, the CRA started its collection efforts by encouraging voluntary payments. By February 2023, collection letters were sent to individuals who had not resolved their overpayments, with additional attempts made to reach them by phone.

Additional Information

For more details on how to make a repayment, visit Repay COVID-19 benefits or contact the CRA at 1-833-253-7615, available Monday to Friday from 7 a.m. to 8 p.m. (ET).

Canadians expect the CRA to ensure that benefits are paid only to those who are eligible, while also considering the financial situations of individuals and families. This meticulous review process is ongoing to ensure fairness and accuracy.

By staying informed and proactive, you can manage your repayment obligations effectively and avoid unnecessary legal complications. If you have any questions or need assistance, the CRA is here to help.

Act Quickly: File Your 2023 Corporate Income Tax Return to Get the Canada Carbon Rebate for Small Businesses

Act quickly:  File your 2023 corporate income tax return now to get the Canada Carbon Rebate for Small Business

As the July 15 deadline swiftly approaches, small and medium-sized businesses are urged to file their 2023 corporate income tax returns to be eligible for the Canada Carbon Rebate for Small Businesses. Announced in Budget 2024, this refundable tax credit is set to return a portion of federal fuel charge proceeds directly to an estimated 600,000 businesses across Canada.

Key Details About the Rebate

• Eligibility and Retroactive Payments: Over $2.5 billion in retroactive payments will be issued to eligible Canadian-controlled private corporations (CCPCs) for the fuel charge years from 2019-2020 to 2023-2024. The rebate covers the periods running from April 1 to March 31 each year.
• Eligibility Criteria: To qualify for the rebate for one or more fuel charge years, a CCPC must:

• 1. Have employed one or more persons in a designated province during the calendar year in which the fuel charge year begins.
  2. Have had 499 or fewer employees throughout Canada in that calendar year.
  3. Have filed their corporate income tax return for the tax year ending in 2023 by July 15, 2024.

• Automatic Rebate Issuance: CCPCs do not need to apply for this rebate. Once the Minister of Finance specifies the payment rates for each designated province for an applicable calendar year, the CRA will calculate and automatically issue the rebate amounts to eligible CCPCs.

Filing Your Return

To ensure you receive the rebate, it’s crucial to file your corporate income tax return for the tax year ending in 2023 by the upcoming July 15 deadline. Filing promptly will position your business to benefit from this significant financial support.

Stay Informed

The exact distribution date for the rebate amounts has not yet been determined. The CRA will provide updates on the timelines in the coming months. For more information on how the rebate payments will be calculated and the designated provinces, visit the Canada Carbon Rebate for Small Businesses.

Contact Information

For any questions or further assistance, you can reach out to the CRA.

By acting quickly and filing your 2023 corporate income tax return by the July 15 deadline, your business can take advantage of the Canada Carbon Rebate, providing valuable financial relief and supporting your operations. Don’t miss out on this opportunity—file now to secure your rebate.

CRA Enhances Access to Digital Services with New Identity Validation Option

 

The CRA is making it easier to access its digital services

In an effort to streamline the registration process for its digital services, the Canada Revenue Agency (CRA) has introduced a new identity validation option this tax season. This initiative aims to make it easier for Canadians to access their online CRA accounts quickly and securely.

New Identity Validation Option

The CRA’s new document verification service allows users to validate their identity using a government-issued photo ID, such as a passport or driver’s license. This new option applies to services like My Account, My Business Account, and Represent a Client. By utilizing this method, users can gain immediate access to their accounts without waiting for a CRA security code to arrive by mail, which can take up to 10 business days.

Benefits of the New System

The CRA’s digital services enable users to manage their tax affairs conveniently online. Key benefits include:

• Updating personal information
• Registering for direct deposit
• Checking for uncashed cheques
• Accessing important tax and benefit information
• Speeding up the tax filing process

By providing self-serve options, individuals can avoid potential delays and reduce the need to contact the CRA during peak tax season.

How to Use the New Validation Option

To use the new identity validation service, users must:

• Be 16 years of age or older
• Have a camera-enabled mobile device to take a photo of their government-issued ID
• Provide their social insurance number (SIN), date of birth, and information from their most recent tax return

Accepted forms of identification include:

• Canadian passport
• Canadian driver’s licence
• Provincial/Territorial ID card

Commitment to Security

The CRA prioritizes the protection of personal information and assures Canadians that this new identity validation option is both safe and secure.

Ministerial Support

“The Honourable Marie-Claude Bibeau, Minister of National Revenue, emphasizes the importance of digital access, noting that 20.5 million Canadians already use the CRA’s digital services. This new solution is expected to encourage even more people to register and easily access the information they need for their taxes and benefits.”

Quick Facts

• The CRA’s digital services facilitate easy management of tax and benefit information from anywhere.
• Common tasks like updating address, direct deposit details, or marital status can be quickly handled online, reducing the need for phone calls.
• With My Account, individuals can check the status of their requests and apply for benefits such as the interim Canada Dental Benefit.

For more information on registering for My Account and using the new identity validation option, visit the CRA’s website. This enhancement is part of the CRA’s ongoing commitment to improving service accessibility and efficiency for all Canadians.

Alberta Man Convicted for Tax Fraud: A Reminder of the Importance of Honest Tax Reporting

Alberta man convicted for tax fraud:  Misleading Individual Tax Returns

In a recent case highlighting the serious consequences of tax fraud, Sean Nethercott of De Winton, Alberta, was sentenced on March 7, 2024, by the Alberta Court of Justice. Nethercott received a conditional sentence order of 12 months and a fine of $50,000 after pleading guilty to making false or deceptive statements in his T1 Individual Tax Returns. These actions were aimed at evading taxes and securing refunds and tax credits to which he was not entitled.

Details of the Case

A thorough investigation by the Canada Revenue Agency (CRA) revealed that Nethercott had understated his taxable income and claimed false losses, expenses, and deductions for the tax years 2014, 2015, and 2016. By doing so, he attempted to evade $51,952 in taxes and obtain $28,637 in tax credits illegitimately.

The Consequences of Tax Evasion

Tax evasion is a serious crime with severe repercussions. Activities such as falsifying records, not reporting income, or inflating expenses can lead to criminal charges, prosecution, fines, jail time, and a criminal record. Cheating on taxes undermines the services and programs that improve our quality of life. To maintain fairness in the tax system, the CRA ensures that those who attempt to evade taxes are held accountable.

Convicted taxpayers not only face court-imposed fines and possible jail sentences but also must pay the full amount of tax owing, along with any related interest and penalties assessed by the CRA.

CRA’s Commitment to Tax Integrity

The CRA is dedicated to upholding the integrity of Canada’s tax system, which is crucial for the social and economic well-being of Canadians. The agency continues to aggressively pursue tax evasion and false claims using all available tools. Ensuring that individuals and businesses report all income earned and claim only the benefits to which they are entitled is essential for administering important benefit programs to those in need.

Stay Informed

The CRA offers a free subscription service to help Canadians stay current on the agency’s enforcement efforts and other updates. By staying informed, taxpayers can better understand their obligations and the importance of honest reporting.

This case serves as a stark reminder of the importance of accurately reporting income and claiming only legitimate benefits. The CRA remains vigilant in its efforts to maintain a fair and just tax system for all Canadians.

Fugitive Brampton Tax Preparer Jailed for $34 Million Fraudulent Charitable Donation Scheme

Fugitive Brampton tax preparer caught and jailed for $34 million fraudulent charitable donation scheme

In a significant enforcement action, the Canada Revenue Agency (CRA) announced that Festus Bayden of Brampton, Ontario, has been sentenced to three years in jail for his role in a massive fraudulent charitable donation scheme. On February 27, 2024, the Ontario Court of Justice in Brampton handed down the sentence after Bayden pleaded guilty to one count of fraud over $5,000 under the Criminal Code.

Details of the Fraud

Bayden, a partner in the tax preparation business E & F Tax Associates (also known as Bankay Financial Services Inc.), was involved in preparing false income tax returns for over 30 clients. The CRA’s investigation revealed that Bayden falsely claimed more than $34 million in charitable donations on individual tax returns for the 2004 to 2006 tax years. He misled his clients by promising larger refunds or reduced taxes if they made a charitable donation significantly lower than the amount claimed on their returns.

To facilitate this scheme, Bayden provided clients with fraudulent charitable donation receipts from various organizations he was connected with, charging approximately 10% of the face value of the false donation amounts claimed.

Evasion and Capture

Bayden fled Canada to avoid prosecution but was apprehended upon his return to the country on June 13, 2023. This marked the end of his evasion and the beginning of his accountability for the fraudulent activities.

Impact of Tax Fraud and CRA’s Response

Tax promoters like Bayden undermine the fairness of Canada’s tax system by promoting schemes that encourage tax evasion. These individuals or corporations make false statements to help clients avoid taxes, gaining financial benefits from the fees charged. The CRA is committed to maintaining the integrity of the tax system by holding both the promoters and users of such schemes accountable.

The CRA continues to aggressively pursue tax evasion and false claims using all available tools. Ensuring that individuals and businesses report all earned income and only claim entitled benefits is crucial for administering essential benefit programs to those in need. Convicted individuals must repay the amounts owed and may face additional penalties and legal actions.

CRA’s Commitment to Tax Integrity

The CRA’s dedication to maintaining the integrity of Canada’s tax system is essential for the social and economic well-being of Canadians. By pursuing tax evasion and fraudulent claims, the CRA ensures that the tax system remains fair and effective.

For more information on the CRA’s efforts to combat tax fraud and promote tax compliance, visit the CRA’s website or contact their support services.

This case serves as a stark reminder of the serious consequences of tax fraud and the importance of honest tax reporting. The CRA remains vigilant in its efforts to uphold the integrity of the tax system for all Canadians.

 

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2024 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning service.

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