Tax Evasion and Tax Penalties : Tax tips
Jail terms for guilty to fraud for falsifying
Ambrose Dapaah, a Canadian tax return preparer, was sentenced to more than 4 years in jail after pleading guilty to fraud for falsifying more than $21 million of Canadian charitable Donations. He owned ADD Accounting Services and was the president of CanAfrica International Foundation. He "sold" charitable donation receipts to his clients.
Payment of a bonus
Payment of a bonus from a corporation is subject to source deductions. If the corporation fails to deduct and remit taxes it will be subject to penalties and interest.
Canadian Charter of Rights in a CRA investigation of tax evasion
Once the Canada Revenue Agency (the Canadian income taxation department) commences an investigation to look for evidence of tax evasion, the protections afforded by the Canadian Charter of Rights are applicable and CRA can no longer use its statutory audit and investigation powers such as the requirement to provide information set out in the Income Tax Act.
Offshore income
Offshore income earned by a Canadian resident is fully taxable in Canada and must be reported for Canadian income tax purposes. Failure to do so is tax evasion. A voluntary disclosure can avoid penalties and prosecution.
Deliberately falsification of Canadian income tax return
If you deliberately falsify your Canadian income tax return, or are grossly negligent in preparing it, you may be subject to a penalty of 50% or more of the additional tax liability, and you may also be prosecuted for tax evasion.
Paying service providers as independent contractors rather than as employees?
A business owner who pays service providers as independent contractors rather than as employees runs the risk of being assessed for penalties and interest if CRA (the Canadian income tax department) finds that the individuals were in fact employees.
Filing Deadline
If you missed the April 30th Canadian income tax return filing deadline due to missed filings in past years, do not file your returns directly with Canada Revenue Agency (the Canadian income tax department). If you do you will be charged penalties and full interest. Instead you should contact us, Canadian tax lawyers, to make a voluntary disclosure (Canadian Tax Amnesty) application that will eliminate all penalties and may reduce interest.
Civil penalties to third parties
Post-budget consultation has led the Department of Finance to reconsider the application of the proposed civil penalties to third parties. Revenue Canada will continue to consult with private sector professionals as it acquires experience with these new measures. The new culpable-conduct standard is intended to ensure that civil penalties apply only to third-party advisers who make or participate in making a false statement, and--unlike the budget's proposed gross negligence test--will prevent an honest error of judgment or an honest difference of opinion from attracting penalties. It is also specified that a penalty is not levied solely because the third party relied in good faith on information provided by another person, for example, to prepare or file that person's tax return. Explanatory notes contain specific examples of the rules' application. Revenue Canada indicates that it will assess such penalties only after a Head Office review.