Don't toss CRA envelopes

Author: Michele Lawson

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Michele Lawson

Ronda Hales, who owns Well Balanced Bookkeeping, realizes the brown envelopes from the CRA that arrive periodically in a business mailbox can seem like harbingers of doom. Regardless, she recommends they not be ignored. If business owners can’t face opening them, it’s her job to do it for them.

Receiving a little brown envelope in the mail from the Canada Revenue Agency (CRA) can strike fear into the hearts of even the most compliant of business owners, acknowledges bookkeeper Ronda Hales, but she suggests resisting the urge to toss them into a corner unopened.
“I would say 75 per cent of the time, the brown envelopes are filing – either statements or remittance forms,” says the owner of Well Balanced Bookkeeping. Of the rest, “at least half are as a result of a misposting or misunderstanding and the agents are just trying to clarify a situation.”
Hales says payments get posted to the wrong accounts all the time.
“If you paid income tax late last year, it could be sitting in the current year’s account,” she says as an example. “If you get in touch with them, the government will correct the error and reverse whatever interest applies.”
But regardless of whether you’re behind on your remittances, those little brown envelopes are reminders to keep in line.
“We’re afraid of the government,” Hales says with a shrug. “We almost feel like they’re bullies – it’s their way or the highway. We’re afraid of getting in trouble. It’s that fear of authority and of feeling powerless.”
Hales says opening the envelopes as soon as they’re received provides a sense of empowerment.
“Every letter you get and the more time that goes by, the more your stress is increased,” she says. “Just open them or give them to your bookkeeper.”
Hales works with sole proprietors to complete all bookkeeping, payroll and personal income tax returns. She’s also very experienced in the financial needs of corporations and will take their records to a trial balance, at which point the accountant takes over to prepare the year end, financial statements and the corporate tax return.
She gets called in to work with clients on an ongoing basis to help business owners stay compliant, but also to help clients cope with requests or demands from the CRA.
“The first thing I do is organize the office or filing system to make the process more efficient,” she says. “It reduces the stress level.”
Hales prides herself on being exceedingly efficient. She has virtually eliminated the need for her own services with many clients because she sets up such easy-to-use systems, she laughs.
“When I sit down to do something, I block everything else,” she says. “I can multi-task when I need to, but I don’t think it’s the most efficient way to do bookkeeping.”
Consequently, she can quickly and inexpensively turn around a situation for someone facing an audit or commands to file.
“So many people do get behind in their government remittances,” she says. “The brown envelopes are reminding them that they’ve procrastinated in their recordkeeping.”
She has been contacted by many clients who are being sent letters or who are getting calls from the CRA (which get increasingly insistent and decreasingly polite) which have gone unanswered because business owners don’t know what to do or don’t have the money to pay. But she says government agents are (at first) very polite and non-judgemental and will work to set up a payment schedule that will work.
“But if you ignore them long enough, they’re going to assign an auditor to your company,” she warns. “You might have just missed one quarter or one year, but the audit will likely go back three years. At this time the auditors aren’t really being nice anymore because you’ve ignored them.”
If the payment money isn’t readily available, it pays to file the forms without an attached cheque regardless.
“It says to them you’ve done your bookkeeping and you’re just having financial difficulties,” she explains. “But you’ve committed to owning that money.”
For clients who dread calling back the CRA, Hales is happy to do it for them. In fact, after the permission process is complete, she can deal directly with the CRA on behalf of that client whenever necessary.
She’ll also prepare the paperwork for an audit, if necessary.
“If the recordkeeping is already done, it’s just a matter of pulling together the statements the auditors want,” she says. “If not, I’ll probably have to organize the paperwork and do the bookkeeping first. Either way, I’ll put together the package.”
When she’s the one contacting the government, it not only reduces the stress level of the client, it can also have a calming effect on the CRA agent who gets the impression the situation is being handled.
“It makes you look more professional,” Hales says. “A bookkeeper can establish a better rapport with the government than a business owner who is unsure.”
She suggests setting up a system where 10 per cent of business income is set aside in a savings account, so it’s not a shock at the end of the year – or when you get the envelope.
“It never was your money in the first place,” she reminds. “If you put aside the tax money you collected, you would be less afraid of the brown envelopes. It’s the same thing for the payroll remittances.”
For more information, call Hales at 705-345-2112.