Newcomers to Canada are being warned by the Canada Revenue Agency (CRA) about a tax scheme that is specifically targeting those who have recently arrived in Canada.

According to the CRA, this latest tax scheme tells newcomers which benefits and credit payments they may claim for periods before they arrive in Canada.

"In benefit schemes, promoters target newcomers with the promise of securing them a tax refund, while taking a percentage of the refund for their service. The promoter will file an income tax and benefit return for the tax year the person arrived in Canada, but also for many years before. This results in multiple tax returns filed, generating refunds that the newcomer is not entitled to."

The CRA clarified that newcomers are not entitled to benefits and credit payments from the Government of Canada before they arrive in the country.

"[These] can only be claimed for periods after arriving in Canada and according to certain eligibility requirements. Newcomers do not need to file a Canadian tax return for the years before they live in Canada," The CRA stated. "Newcomers to Canada can apply for benefits and credit payments to help with the cost of living as soon as they arrive."

Benefits may include the GST/HST credit and the Canada Carbon Rebate (CCR) if you reside in a relevant province.

"You may also be entitled to the Canada Workers Benefit (CWB), Canada Child Benefit (CCB), and other provincial/territorial benefits, depending on your residency status and personal situation."

The CRA adds that for those who are new to the country, it's important to be cautious, as promoters, who can be individuals or corporations promoting or selling tax schemes, could include tax representatives, tax preparers, or consultants.

"If you participate in a tax scheme, you could face serious consequences. If you receive payments you are not eligible for, you will have to repay the money. You may also receive penalties, court fines, and possibly even jail time. The same consequences apply to those who promote the schemes."

The CRA said that the best way to protect oneself from a tax or benefit scheme is to know the elements of a scheme; these include:

  • they are positioned as financial products or business opportunities
  • they are advertised (internet, social media, newspapers, fliers sent to households)
  • there is often a sales pitch (free info session, paid seminar, webinars)
  • they promise tax savings which often include large returns on small investments
  • a portion of the anticipated tax refund is the promoter’s fee
  • they seem “too good to be true”

The CRA is also warning residents about how to spot a tax promoter. Promoters are often very personable and charming and often deliver polished presentations, as well as:

  • can be an individual or a group
  • will receive a commission or payment from you and/or your investment
  • may claim the scheme is approved by the CRA
  • provides letters from professionals
  • discourages you from seeking a second opinion
  • discourages you from speaking with the CRA

"If you are approached by a tax preparer who offers unusually or uncharacteristically large refunds, this can mean questionable practices. Do not assume that these schemes and the promised tax benefits are legal under the Income Tax Act. While most preparers provide excellent service to tax filers, there are dishonest ones who file false or fraudulent tax returns. If you suspect anything suspicious, get a second opinion."

The difference between a tax scheme and a scam or fraud is that scams and fraud often attempt to imitate government services to gain access to your personal and financial information.

"You should be cautious if you receive any communication that claims to be from the CRA and requests personal information such as a social insurance number (SIN), credit card number, bank account number, or passport number."

The CRA is encouraging both newcomers and Canadians to seek an independent, second opinion from a reputable tax professional on important tax matters, and to also regularly check the CRA website for verified information. 

"People who avoid or evade taxes take resources away from social programs that benefit all people in Canada."

If you suspect tax evasion, you can report suspected tax or benefit cheating in Canada or by contacting the Informant Leads Centre at 1-866-809-6841.

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