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TDMP Tax Audit Protection Plan (TTAPP)

TDMP TAX AUDIT PROTECTION PLAN

TDMP TAX AUDIT PROTECTION PLAN – RESPONSIBILITIES OF TDMP

The TDMP Tax Audit Protection Plan (“TTAPP”) is a professional services plan that is designed to augment TDMP by providing the Taxpayer with the peace of mind that their financial tax benefits are safe and protected.

TTAPP guarantees the Taxpayer’s financial tax benefits calculated by the TDMP Approved Accountant .  TTAPP is not insurance.  TTAP is a prepaid services retainer under the TDMP Premium Services Plan which entitles the Borrower to certain future services at no cost and other financial benefits as set out below.

TTAPP guarantees the Borrower that they will be entitled to the tax benefits that relate directly to the TDMP program as calculated and filed annually on the T1 Tax Return by the TDMP Approved Accountant.  In order make this guarantee, TDMP has established a fund called the TTAPP Compensation and Defence Fund (the “Fund”) which will be used to assist TDMP Borrowers in two ways:

1.       Firstly, the Fund may be used to pay direct compensation to a TDMP Borrower that has been reassessed as a result of TDMP.  The amount of compensation will be the difference between the TDMP calculated tax benefit as identified on the T1 Tax Return and the CRA Reassessment (note that the Fund does not actually pay the taxes of the Borrower).

2.       Secondly, The Fund will be used to finance the costs of assisting Borrowers in the audit process or in challenge and appeal process of CRA reassessments related to TDMP.

 TDMP has the sole discretion on whether to pay the Borrower the amount of the reassessment related to TDMP or whether to challenge or appeal the CRA reassessment.  For example, should the reassessment have a nominal cost to the Borrower related to TDMP (e.g. under $1,000), then TDMP may determine that it does not make economic sense to incur the costs of the CRA challenge and appeal process and simply pay the Borrower the amount of reassessed shortfall as related to TDMP. 

In the event that TDMP does challenge a CRA reassessment, TDMP reserves the right to abandon the challenge and appeal process at any time for any reason.  In such circumstances, TDMP will compensate the TDMP homeowner in the amount of the shortfall attributed to the TDMP portion of the reassessment. In the event that TDMP is unsuccessful in the challenge in the challenge and appeal process with respect to TDMP, homeowners will be entitled to compensation from the Fund in the amount of the shortfall from the reassessment related to TDMP.

RESPONSIBILITIES OF BORROWER

The Borrower is responsible to provide timely information to TDMP with respect to any relevant correspondence from CRA or other tax authority and to fully cooperate with TDMP in the provision of documents and such other requirements as the CRA challenge and appeal process may require.  Canadian tax legislation contains certain limitations periods and strict deadlines which must be adhered to in order to maintain the Borrower’s right of appeal.  If the Borrower’s right of appeal is lost as a result of the Borrower failing to provide TDMP with a notice or other key correspondence, or failing to correspond with CRA in the appropriate timeframe, then that Borrower’s entitlement to be compensated from the Fund will be forfeited.

Specifically, TDMP requires that all documents mailed to Taxpayers containing a reassessment of tax or a decision made by the Appeals Division of the CRA by delivered to TDMP and that receipt of such documents is acknowledged by TDMP within thirty (30) days of the Date of Mailing.  TDMP has only 90 days to determine its course of action in assisting and compensating the Borrower and therefore, the 30 day notification period is necessary such that TDMP has enough time to determine the course of action.

In the event of a Notice of Audit from CRA, the Taxpayer must also so advise TDMP.COM by providing a copy of the letter from CRA advising of the impending audit along with a copy of their Notice of Assessment and T1 Tax Return for the relevant year. 

TDMP will review the documents and confirm that the audit costs are covered by TTAPP and provide the Taxpayer with documentation required by TDMP to assist them with the process and contact the relevant accountants, financial planners and others that may be required to be engaged in the process.

LIMITATIONS AND SPECIFIC EXCLUSIONS

TTAPP is available exclusively to Borrowers that have engaged the TDMP financial strategy and have selected it under the TDMP Premium Service Package. TTAPP is not designed to assist those who attempt to evade taxes, fail to report income, purchase or participate in tax shelters, or who engage in aggressive or abusive tax avoidance schemes. TTAPP is designed to provide financial and legal assistance to honest, hard-working Canadian homeowners in TDMP. Therefore, specific exclusions are set out below.

Only income tax audits and reassessments by the CRA of income tax owing by you under Part I of the Income Tax Act that are directly attributable to TDMP are covered.  For greater clarity, other types of assessments and reassessments and transactions are specifically excluded include but are not limited to:

Cash Damming Rental/Business Expenses.

2.       Where income tax deductions resulting from an investment in property or other unincorporated business income are used to accelerate the Cash Damming technique under TDMP, client agrees to:

• Seek the advice of a TDMP Approved Accountant in determining the annual rental/business expense amounts to be used in monthly Cash Damming. TDMP.COM will incorporate those deductible expenses in addition to regular monthly mortgage prepayments.
• Open a dedicated bank account to trace income and expenses from rental/business expenses and ensure that this bank account is capable of automated monthly transfers to and from the TDMP Clearing account.
• Maintain a reasonable minimum balance or overdraft protection limit in the TDMP Clearing account as advised by TDMP.COM.
• Apply automated transfers between the Rental/Business Clearing account and TDMP Clearing account as advised by TDMP.COM

1.       Tax Evasion & Other Offences are excluded from benefiting from the TTAPP Fund.

2.       Investigations undertaken by the Special Investigations Unit of the Canada Revenue Agency or by any other tax authority, and any charges laid for allegedly committing any criminal or quasicriminal offence under any taxing statute (i.e. tax evasion investigations or charges) or any other law are excluded.

3.       Tax Shelters: According to the CRA a tax shelter is generally an investment in property (other than a flow-through share or a prescribed property); or a gifting arrangement under which a person entering into the arrangement makes a gift to a qualified donee or makes a monetary contribution to a registered party, a provincial division of a registered party, a registered association, or a candidate as those terms are defined in the Canada Elections Act; or incurs a limited-recourse debt that can reasonably be considered to relate to a gift to a qualified donee or to a monetary contribution. Tax Shelters are excluded.

4.       General Anti-Avoidance Rule (GAAR) Assessments. If you undertook a series of transactions for the sole purpose of reducing tax payable (e.g. there were no net CRA qualifying investments) and this is deemed by the CRA to constitute abusive tax avoidance resulting in a reassessment under GAAR.  Note, under TDMP, the principal purpose of the series of transactions is to invest in the Wealth Portfolio – and this investment is an essential component of the strategy eliminating all liability to the possibility of a GAAR Assessment. Therefore, GAAR assessments are excluded.

5.       Partnerships and Corporations: TTAPP is only designed to assist TDMP homeowners registered as an individual Taxpayer with the CRA. Partnerships and Corporations are specifically excluded.

6.       Net Worth Assessments: The CRA has the authority under subsection 152 (7) of the Income Tax Act (Canada) to summary assess or reassess individual Taxpayers on the basis of a net worth which significantly exceeds the income the Taxpayer previously reported on their prior tax returns without reasonable explanations. Since such assessments are extraordinary actions taken by CRA where a Borrower is significantly under reporting income, they are excluded.

7.       Audit and Assessments of Other Taxes: TTAPP is designed to provide assistance to individual TDMP homeowners in respect of audits and reassessments by the Canada Revenue Agency of normal income tax payable under Part I of the Income Tax Act (Canada) and the equivalent provincial income tax payable under equivalent provincial income tax laws that are administered by the Canada Revenue Agency. Audits, assessments, and reassessments of other forms of taxes (i.e. payroll source deductions, CPP/EI, GST/HST, Part XIII Withholding Taxes, etc.), or of taxes administered by tax authorities other than the CRA (i.e. provincial sales taxes, Quebec personal income taxes, etc.) are all specifically excluded.

8.       Third-Party Assessments: The Income Tax Act (Canada) and other taxing statutes contain provisions that allow the CRA to assess a person for the tax liability of others. For example: (1) if you are a director of a corporation and the corporation fails to remit payroll source deductions or CPP or EI Premiums, the CRA can assess the directors of the corporation for these amounts; (2) If a family member or someone with whom you are not dealing at arm’s length transfers money or property to you at a time that the other person owes taxes to the CRA, section 160 of the Income Tax Act (Canada) allows the CRA to assess you for the taxes owing by the other person to the maximum value of the money or property they gave you. All such third-party assessments are specifically excluded.

9.       Loss Carryforwards & Carrybacks: On lines 251, 252, and 253 of your income tax return, you are permitted to deduct from your taxable income losses that you may have incurred and reported in your income tax return filed in respect of previous years. The CRA will, at times, review these losses and deny all or part of them on the basis that the amount of the loss you reported in the prior year was incorrect. While the CRA’s audit and reassessment may be in respect of your current tax year, the basis for the reassessment (i.e. the denial of the prior years’ losses) is based upon information you reported when you filed your income tax return for the prior years. Any audit or reassessment based upon a denial of the prior-year’s losses are specifically excluded. The same applies with respect to loss carrybacks.

10.    Exploration & Development Expenses: The Income Tax Act (Canada) allows individuals who invest in petroleum, natural gas, or mining ventures but who did not actively participate in the venture to deduct expenses related to the venture. These expenses are claimed on line 224 of your income tax return. If you claim exploration and development expenses in these circumstance, it is based upon information provided to you by the principals of the venture. As these expenses which are claimed as a deduction by you are determined by others, audits, reviews, and tax reassessments based upon a denial of a portion or all of these expenses fall outside the scope of the Plan.

11.    Scientific Research & Experimental Development Investment Tax Credits: The Canada Revenue Agency administers the federal government’s Scientific Research & Experimental Development (SR&ED) program. It is a tax incentive program that provides for an investment tax credit (ITC) for qualified expenditures incurred for SR&ED engaged in Canada. Audits, reviews, and reassessments by the CRA of SR&ED expenses and claimed ITCs fall outside of the scope of TTAPP and are excluded.

Borrowers that are reassessed by CRA for co-mingling funds are also specifically excluded from entitlement to compensation from the Fund.  Borrowers under TDMP have been required to open and or identify a dedicated bank account as the TDMP Tax Clearing Bank Account.  Borrowers are given strict instructions not to use their TDMP Tax Clearing Bank Account for any other purpose that TDMP investing on the advice of TDMP or their TDMP Certified Financial Planner.  If a CRA audit or CRA reassessment is as a result of the Borrower comingling monies in this bank account, the Borrower will not be entitled to compensation from the Fund.

EXCLUDED COSTS

Travel Costs: The services provided to you under TTAPP  will be provided to you by telephone, fax, email, post, or the Internet. There are steps in the tax objection and appeals process when you will need to meet a TTAPP lawyer in-person. For example, when oral examinations-fordiscoveries are held as part of the appeal process to the Tax Court of Canada and for actual hearings before the Tax Court of Canada. Such in-person meetings and proceedings will take place in whichever of the following major Canadian cities is closest to you:  Vancouver, Calgary, Edmonton, Saskatoon, Winnipeg, Toronto, Ottawa, or Halifax. Should a TDMP Borrower choose or request that such meetings or proceedings take place outside of these major cities, the Borrower shall be responsible for reimbursing TDMP for the travel and accommodation costs of the attending lawyer. Likewise, should the Borrower choose to travel to one of these major cities, the Borrower will be responsible for their own travel and accommodation expenses.

Interest and Penalties: If you are reassessed by the CRA, TTAPP does not pay any taxes, interest, or penalties owing by you. You remain solely liable for these amounts and the Income Tax Act deems the amounts assessed by the CRA to be immediately due, owing, and payable. Therefore, if you are reassessed, it is generally in your best interest to pay the amounts assessed immediately and then to engage TDMP who will proceed to object to or appeal the reassessment or compensate you directly from the Fund. If you do not and the objection or appeal is not successful, interest will continue to accrue on the amounts reassessed by the CRA, resulting in you owing even more money to the CRA than the original reassessment. Your entitlement to claim form the Fund is limited to the original reassessment amount and any interest and penalties that accrue will be the sole responsibility of the Borrower. Furthermore, such interest is not deductible for income tax purposes. If you do pay the additional amounts assessed immediately and the subsequent objection or appeal is successful (in whole or in part), the CRA will pay interest to you on your excess payment.