Mark Feldstein & Associates

Anna McArthur pleaded guilty to four counts of failing to comply with a judge’s orders to file corporate income tax returns in the Ontario Court of Justice in North Bay. During the years 2002 to 2005, McArthur as director, officer or agent did not file corporate income tax returns for 1135650 Ontario Inc. She received a total fine of $8,000. Besides paying fines and penalties, income tax returns must still be filed and income tax payables must still be paid after conviction. This could have been avoided if McArthur filed her returns under the Canada Revenue Agency’s Voluntary Disclosure Program (VDP) before the government started investigating or contacting her.

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During his court appearance in the Ontario Court of Justice in Lindsay James Bradford Medd attempted to use the argument, still actively promoted by some individuals and groups, that it is possible to lawfully declare oneself exempt from tax.  Despite Medd’s statement that the Court had “no jurisdiction or authority” over him as “a human being” he was found guilty of four counts each of Income Tax and Goods and Services Tax (GST evasion) on September 21, 2010.  The $43,830 fine imposed by the Court represents 100% of the taxes evaded by Medd and is in addition to the taxes and interest owing and all penalties determined by the Canada Revenue Agency (CRA).

The charges related to the 2003 through 2006 taxation years.  Medd has income from several sources including bookkeeping, accounting, tax preparation and consulting work, the sale of puppies and farm income.  After a routine audit the CRA instigated an investigation which included a search of Medd’s residence, as authorized by a search warrant.  It became evident from Medd’s bank and business records that Medd had failed to report personal income of $208,288 during the years in question.  He also failed to file GST returns  for the same period of time, thereby evading $14,250 in GST.

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A fine of $62,033 was imposed when Douglas Braund pleaded guilty to one count of Goods and Services Tax (GST) evasion in the Ontario Court of Justice in Kingston on December 21, 2010.  The fine represents 100% of the federal tax that Braund attempted to avoid paying.  The hefty fine is an additional expense, as Braund is still required to pay the taxes and interest owing as well as penalties as determined by the Canada Revenue Agency (CRA).

As President and General Manager of Douglas Braund Investments (Kingston) Limited, Mr. Braund kept the books and records for the Company, which operates the bus terminal on John Counter Boulevard in Kingston, Ontario.  The GST returns filed were, in part, based on the records that Braund maintained.  When the CRA conducted an audit it became evident ath false Input Tax Credits were being claimed and that the GST claimed on returns was being considerably less than was warranted.  Based on these findings, the auditor transferred the file to the Enforcement Division for further action.

In a subsequent CRA investigation it became apparent that by creating fictitious entries in the Company books Braund was falsifying the Input Tax Credit Claims.  The

Mark Feldstein Corporate Taxes GST, Kingston, Tax Evasion

Robert Morrison of Holland Centre faced three counts of tax evasion in the Ontario Court of Justice in Owen Sound on December 20, 2010.  Following Mr. Morrison’s guilty plea the Court levied a fine of $47,344, to be paid in the next five years.  The fine is supplementary to the taxes and interest owing, as well as the penalties determined by the Canada Revenue Agency (CRA).

Morrison, a masonry contractor operating in the Owen Sound area, had substantial income which he failed to report during the 2003 and 2004 taxation years.  This fact was discovered during an audit by the CRA’s Underground Economy Section.  As a result of this finding, the file was referred to the CRA’s Enforcement Division, who subsequently expanded the investigation to encompass the 2005, 2006 and 2007 taxation years.  Total federal income tax evaded was $61,173 and the total GST evaded totaled $33,514 during the period of 2003 to 2007.

Upon conviction of tax evasion all taxes, interest and CRA penalties must be paid.  Where gross negligence has occurred the CRA has the authority to assess a maximum penalty of 50% of the unpaid

Mark Feldstein Corporate Taxes, Tax Convictions Holland Centre, Owen Sound, Tax Evasion, Underground Economy Section

Diverting income to a U.S. corporation in an attempt to avoid paying Canadian income tax is not an option.  Sylvie Clement, a self-employed human resources consultant, attempted to divert a portion of her income to a company located in the United States and owned solely by her.   The end result was that she was charged with, and found guilty of, one count of tax evasion on December 21, 2010 in the Ontario Court of Justice in Ottawa.  The Court imposed a fine of $20,000, which represents 50% of the total income evaded.

An investigation by the Canada Revenue Agency (CRA) revealed that while all of Ms. Clement’s work was performed for the same client, some of the invoices issued were in the name of a U.S. corporation owned solely by Clement.  The client was asked to wire payments for these invoices to the bank account for the U.S. corporation.   Only the income paid for in Canada was declared on Clement’s personal tax returns.  The income diverted to the U.S. bank account was used to pay for personal expenditures.  The total annual personal expenditures exceeded the income reported on personal tax returns.  During the

Mark Feldstein Corporate Taxes, Personal Taxes, Tax Convictions Ottawa, Tax Evasion

Sooner or later you have to file your tax returns.  Mark Martens of Sarnia, Ontario discovered this to be true when he defied a Court order to file his tax returns.  The sole Director of 542514 Ontario Inc., operating as Sarnia Pool Company, Martens had pleaded guilty to failing to file personal and corporate income tax returns for 2004, 2005 and 2006 on November 17, 2008.  The Court ordered him to file the outstanding returns by April 16, 2009.

When he did not meet the deadline given by the Court he was charged with six counts of failing to comply with a Court order and as a result he appeared in the Ontario Court of Justice in Sarnia again on October 7, 2010.  At that time the Court imposed a fine of $1,000 per count, for a total fine of $6,000.  In addition to the fine, Mr. Martens will have to pay all taxes, interest and penalties assessed by the Canada Revenue Agency (CRA) and will still have to file all delinquent returns.

The CRA has a Program whereby outstanding tax returns can be filed and previously unreported income can be disclosed.  It is possible to avoid penalties and prosecution by entering into the Program.  The Voluntary Disclosure Program is available to all taxpayers who have not been contacted by the CRA regarding unfiled tax returns and/or unreported income.  However, as soon as the CRA begins an action or investigation into the taxpayer’s affairs, the Program is no longer open to the taxpayer.

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 If you haven’t filed your GST returns in awhile, you may want to file them as soon as possible.  Mr. Cecil Gorman, a self-employed roofer, neglected to file GST returns during the period from July 1, 2000 to December 31, 2004.  The outstanding returns were filed when the Canada Revenue Agency (CRA) charged Mr. Gorman with six counts of failure to file GST returns.  On September 10, 2010, in the Ontario Court of Justice in Toronto, Mr. Gorman pleaded guilty to all six counts.  The resulting fine imposed by the Court was $6,000, or $1,000 per count.  A grace period of one year was given by the Court for payment of the fine.

The CRA’s Voluntary Disclosure Program allows taxpayers to file delinquent returns or claim previously unreported income without fear of prosecution or penalty, if the returns are filed and the income is declared prior to any action or investigation being initiated by the CRA.

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After a plea of guilty to six counts of tax evasion in the Ontario Court of Justice in London on September 1, 2010, Michael Hersey was fined $52,865, received a six month conditional sentence, and was ordered to perform 75 hours of community service within ten months.  A grace period of eighteen months was given for payment of the fine.  As part of the conditional sentence Hersey was ordered not to provide investment advice or to prepare tax returns.  In addition to the fine, all taxes, interest and civil penalties assessed by the Canada Revenue Agency (CRA) had to be paid.

Mr. Hersey owned a company that sold insurance products and investment vehicles, Professional Insurance Management Inc.  He controlled a second firm, Global Export Consulting.  This second firm provided logistical support to Envision Global Charity, a charity operating in Cuba, which Hersey helped found.

In 2003 and 2004 the two companies produced income for Hersey in the amount of $187,395.  The income, not reported on tax returns, was used for living expenses, legal judgments and loans and was shared with Hersey’s wife.

Mr. Hersey was the financial advisor and tax preparer for two individuals.  These individuals invested $326,000 through Hersey and subsequently discovered that their investments were worthless.  False charitable donation receipts were provided by Hersey totaling over $43,000 under the name of Envision Global Charity, a charity which Hersey helped found.  Hersey included the false receipts when he prepared the tax returns for the two individuals.  Envision Global Charity’s charitable status was revoked effective August 18, 2007, after a CRA audit of the organization.

CRA penalties and/or prosecution can be avoided by filing outstanding tax returns and/or reporting previously undisclosed income under the Voluntary Disclosure Program.  The Program is open to all, provided that the CRA has not initiated any action or investigation against the taxpayer.

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Failing to file tax returns is very expensive: $1,000 for each tax return not filed. Mr. Steven Herring appeared in the Ontario Court of Justice in London on August 27, 2010 to face charges of failing to file tax returns. He pleaded guilty to seven counts and was fined $1,000 for each count. The total fine was $7,000. Following a conviction of failing to file tax returns, the delinquent returns must be filed and all taxes, interest, Canada Revenue Agency (CRA) penalties and Court fines must be paid.

Mr. Herring is the sole director of 1666155 Ontario Inc., the company which operates Jimmies Flowers in Amherstburg, Ontario. Mr. Herring had not filed corporate tax returns for 2005 to 2008, nor had he filed three quarterly GST returns in 2008 and 2009. When the CRA filed charges, all outstanding tax returns were filed.

Rather than go through a CRA audit or investigation, why not enter the Voluntary Disclosure Program? As long as the CRA has not taken action or initiated an investigation, the taxpayer can file delinquent tax returns and report previously undisclosed income under this Program. In this manner, CRA penalties and/or prosecution can be avoided and it is possible that the taxpayer will only be required to pay the taxes and interest owing.

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As a result of pleading guilty to two counts of tax evasion this past August, Issa Farid Nashash was fined $24,000 by the Ontario Court of Justice in Windsor.  In addition to the Court fine, Mr. Nashash was required to pay all taxes and interest owing and all civil penalties assessed by the Canada Revenue Agency (CRA).

During 2002 to 2006 Mr. Nashash, a self-employed cement finisher, operated Nashash Construction in Windsor, Ontario.  The billing for Mr. Nashash’s services included an amount for GST.  A CRA investigation found that on his personal tax returns for the 2002 to 2006 taxation years Mr. Nashash under-reported his taxable income by $153,966.  Given this reduction in his taxable income, he evaded $26,841 in federal income tax.  The company did not file GST returns for the years in question and as a result evaded $10,577 in GST.

All taxes and interest owing, all CRA penalties and all Court fines must be paid with a conviction of tax evasion.  A penalty of up to 50% of unpaid tax or improperly claimed benefits can be assessed by the CRA in cases of gross negligence.  Additionally, on summary conviction the Court has authority to impose a fine of 50% to 200% of the tax evaded and can sentence the convicted taxpayer to a jail term of up to two years.

CRA penalties and/or prosecution can be avoided by filing delinquent tax returns and reporting previously undisclosed income under the Voluntary Disclosure Program.  However, as soon as the CRA takes action or initiates an investigation the Program is no longer available to the taxpayer.

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