Graycliff Financial Corporation: How to Keep Your Bank Account Safe from Garnishment and Reduce Income Taxes

Frequently Asked Questions

Call 1-888-351-9743 or send us a question:

Q. Does my employer continue paying me directly?

A. Yes, but there are no payroll deductions. In fact, the employer's share of payroll deductions are added onto the amount you receive directly from your current employer. You pay Graycliff for the services we provide ONLY after you are paid by your current employer. You are always in control of your money.


Q. If I am audited, won't they find me in violation of some law?

A. Absolutely NOT. You will not have broken any laws, and you will always be telling the truth and being completely candid. In fact, all of the components in our method have been dealt with by legislators to regulate the tax consequences of this type of business activity.


Q. This all seems too risky. Is it worth it?

A. If you earn $100,000 and pay $28,000 to $38,000 of it to the taxman, you have only $62,000 to $72,000 left. Now after paying Graycliff's fee of 7% of gross income ($7,000) you will get an additional $21,000 to $31,000. And the risk of an audit is nothing to be concerned about because there is almost nothing to audit, since you have no taxable income, and only one source of funds. And if an audit were to occur, we do all the talking to the income tax authorities, since we are the ones who set up the whole arrangement. And since all laws are fully complied with, there is never an audit problem.


Q. With respect to your plan for becoming judgment-proof, how would we protect our home if we ever needed to rely on being judgment-proof?

A. Here is one possibility that works in some cases. Put the house in the wife's name, and have her earnings used for mortgage payments, while the husband's earnings are used to pay for consumable living expenses, including realty taxes, utilities, etc.

That way the government cannot touch the house, even if the husband were to owe income tax, because the wife doesn't owe any income tax.


Q. What if my circumstances are not like those in your example?

A. We can provide a custom solution just for you.


Q. What effect will this method have on getting a bank loan for a car?

A. Even though your employment at the place you work will be different in form than that of the usual employee, your employer can still provide a letter stating that you work there and what is paid for your services. If necessary, another letter can be provided by Graycliff confirming the amount you receive in respect of your employment. The bank is not interested in the form of your employment, only your ability to service the loan.


Q. What effect will this method have on getting pension benefits when I retire?

A. Pension benefits depend on how much is paid into the pension plan. When you start using our method, you stop paying into the pension plan. Instead, you receive the money your employer would pay into the plan. Then you invest it, together with a large part of the money you would have paid as income taxes. Your retirement will be much richer than that provided to a pensioner.

In addition, the pension benefits under government pension plans are getting less secure as time advances, because the only way the government can pay pension benefits is to collect payroll deductions from younger people in the work force. (The money you have paid into government pension plans has already been spent by the government.) And the number of retired people is increasing a lot faster than the number of working people. So don't assume that a government pension will ever materialize for you.


Q. What effect will this method have on getting Unemployment Insurance benefits if I am laid off?

A. Unemployment Insurance benefits depend on how much is paid into the Unemployment Insurance system. When you start using our method, your employer stops paying into the Unemployment Insurance system. Instead, you receive the money your employer would pay for unemployment insurance. So if you are expecting to be unemployed, our method is not a good thing. Needless to say, being unemployed has its own income-tax advantages. And you don't need two tax-saving plans in operation at once.


Q. What effect will this method have on employee benefits?

A. That depends on the terms of your contract for services. There is no reason that our method cannot be used in conjunction with any benefit arrangements that you and your current employer wish to have. The only time our method wouldn't work well is when a large company does not want to make special arrangements just for you because it has so many employees. Giant corporations would not likely agree to use our method unless you were a member of their higher management.


Q. How does Graycliff avoid the "Form Over Substance" Rule, which is known in Canada as "artificial transaction" designation, on its employee-tax-saving methods [Income Tax Act, Section 245]?

A. Both the "Form Over Substance" Rule in the United States, and Section 245 of the Income Tax Act in Canada allows income tax authorities to disregard tax-saving strategies if they do not have a bona fide business purpose.

Graycliff's main purpose is to facilitate good employment contracts between prospective employers and good employees. Often an employer is reluctant to hire a new employee because of the risk that the new employee will turn out unsuitable and will want a large settlement when the employment is terminated.

By shielding employers from litigation by employees whose employment has been terminated, employers can hire new employees without fear of ever having to choose between keeping an unsuitable employee or paying a large settlement. By offering the services of employees without long-term obligations, Graycliff makes it possible for employers to hire risk-free an unproven employee that may prove good.

The employee-tax-saving methods used by Graycliff are comparable to the employee pension plans and insurance plans provided by large corporations like General Electric to their employees. General Electric provides employee pensions and insurance with the tax benefit for its employees of having part of employee compensation in the form of a pension plan and insurance, i.e., tax-free benefits [In Canada, this is set out in Income Tax Act, s. 6(1)(a)(i)].

Yet no one would say that General Electric is in the tax-avoidance business. They are in the manufacturing business.

Similarly, Graycliff is not in the tax-avoidance business. Rather it is in the business of facilitating good employment contracts between prospective employers and good employees. The result is that more people get jobs, and unemployment is reduced.

In addition, the courts have already ruled that the incorporated employee (leased employee) is a valid business arrangement: in the Federal Court of Appeal decision in The Queen v. Parsons, [1984] 2 F.C. 909, 84 DTC 6345, the Court held that to ignore the corporate structure of an incorporated employee (leased employee) would be to ignore the legal realities of the situation and further held that the corporation was not "sham" even though the sole purpose of the corporation was the reduction of tax. [In Canadian legislation, "leased employees" are called "incorporated employees."]

In addition, the Government of Canada has already enacted legislative amendments to alter the income-tax consequences of such arrangements [Income Tax Act Section 18(1)(p) which prevents personal service businesses from deducting business expenses that other employees would not be able to deduct; Section 80.4(1) which deems interest income on interest-free loans; and Section 125(7) which prevents use of the Small Business Deduction].

In the United States, the IRS has even set out in its publications for taxpayers what the tax consequences are for this type of arrangement. See Publications 15-A and 535 referred to in the "USA" tab in the left column of this web page.

These publications, rulings, and amendments actually give full government approval of our methods, thereby eliminating attempts by income tax authorities to attack our methods. Of course, no such attack would be successful anyway, because our methods are completely legal and they give the protection you need to ensure that you owe no income tax.


Q. What happens when I want to terminate my relationship with Graycliff?

A. You merely go back to doing what you did before ­­ you work as an employee of your employer, and you pay income tax on the income that you earn thereafter ­­ but you don't pay any tax ever on the money you received using our method. The loans of the money you earned and the salary owing remain as loans and salary owing forever. When you die, your estate is dealt with as though they never existed, because from an asset-and-liability point of view, the one cancels out the other.


Q. My tax advisor sees problems with Graycliff's method. How do you deal with these problems?

A. We cannot anticipate every conceivable question that may arise from our presentation here. We do answer the most obvious questions on this web site. However, if you have any other questions, please let us know what they are and we will answer them. You can use our toll-free telephone number, fax, e-mail, or regular mail.


Q. Isn't this whole thing illegal? Won't the government charge everyone involved with conspiracy?

A. No they won't. This plan is completely legal. Even under scrutiny by income tax authorities, no problems would arise because no laws are ever broken. So there is nothing to worry about.

You will notice the government didn't charge Frank Stronach (Chairman of the Board of Magna International Inc.) with avoiding Canadian income tax by becoming a resident of Switzerland. The most that happened was Liberal and NDP politicians complained to his politician daughter, who said that it was his affair, not hers. And no one ever complained when John Paul Getty, the wealthiest man on earth until he died in 1976, never paid any income taxes at all, either to the UK where he was a resident, or the the USA where he was a citizen. He knew the way to get rich. He didn't pay his hard-earned money to any government for them to squander. He kept it for himself.


Q. How much does Graycliff charge for its services?

A. 7% of your gross income. In other words, $3,500 on earnings of $50,000 (instead of $12,000 to $16,000 income tax), or $7,000 on earnings of $100,000 (instead of $28,000 to $38,000 income tax).


Q. Why do I need Graycliff? Can't I set this up for myself?

A. Here are four reasons:

1. You need a firewall so that if income tax authorities start asking questions, you can refer the matter to Graycliff, who set up the whole arrangement and is accountable for it.

2. You want the matter to be handled not merely by tax experts, but by tax experts who have a particular expertise in this particular area of tax law.

3. If you were to set up this arrangement by yourself, the company taking the place of Graycliff would not be dealing with you "at arm's length," and so would be "related" under the provisions of the Income Tax legislation. If Graycliff and either the employer or employee were related, they could be sued by litigants (including income tax authorities), even if the litigant had no case recognized by the law. By having an outside company (Graycliff) as the intermediary, this problem does not arise.

4. If you use an ordinary temporary services company as the intermediary, the following problem arises: An employer (the temporary services company) applying for bank financing does not want large, slow receivables or large payables because bankers don't like these items on a borrower's financial statements. To a person who is not familiar with our method of avoiding income tax, they make the business look like it is not performing well.


Q. I have other income-tax problems that arose from the past. Can you solve these problems too?

A. Call us. We may be able to help. We have helped others with tax problems that their accountants and lawyers could not solve. And we never charge any fee unless we provide a solution satisfactory to you. We never charge for an opinion.


Q. How do I know you are competent to do a good job for me?

A. By the solution we offer. A tax problem is like a math problem. You don't ask a mathematician how competent he is. You ask him to solve a difficult math problem. The solution is the proof, and it is the only proof that is worth anything. And the proof is easily understood by anyone who understands math--or who understands income tax, if the problem is an income-tax problem. Qualifications are not relevant if your problem is not solved.

Some tax accountants and tax lawyers are only good at convincing you that your problem cannot be solved. They tell you that you can't escape the net. And they make you feel good by convincing you that they have done for you all that can be done. Their impressive offices, their $525.00-an-hour fees, and their self-assured, and sometimes arrogant, manner convince you that they are giving you all that is possible. And so you feel relieved when you end up paying a lot of money in taxes--money that could have been yours to keep if your tax problem had been solved.

So don't be fooled by the giant international accounting firm or the law firm that has hundreds of lawyers, including a large tax department.

It doesn't hurt to call us for a free second opinion. We never charge for attempting to solve a problem. And we don't tell you it is impossible to get a good result just to make you satisfied with a poor result. We keep your expectations high, and we deliver what you expect: good results. Our solutions speak for themselves. And we charge nothing unless we provide a solution satisfactory to you.

Q. I have been assessed for income taxes and both my accountant and my tax lawyer tell me there is no hope for me to avoid this tax liability. They both recommend that I settle by giving them the money they claim. Can you save me from having to pay this tax assessment?

A. We have done that for others and we may be able to do it for you too. Call us for additional information.