Mark Feldstein & Associates

 As a result of charges of income tax evasion, GST evasion and obtaining tax refunds and credits to which he was not entitled, Joey James Kezar of Bobcaygeon appeared in the Ontario Court of Justice in Lindsay, Ontario on June 17, 2010.  He pleaded guilty to the charges and was fined $16,592 for the tax evasion charge, $1,517 for the GST evasion and $3,981 for the charge of obtaining tax refunds and credits to which he was not entitled.  In addition to court fines Mr. Kezar will be required to pay additional taxes owed, penalties, interest charges as well as repay unwarranted refunds and credits.  The total amount owed is in excess of $116,000.

During an investigation by the Canada Revenue Agency it was discovered that Mr. Kezar had not fully disclosed his income when his tax returns for the 2005 and 2006 taxation years were prepared.  He had not reported the sales from his business, block and brick work and chimney repair services, on his GST Returns and had understated his net business income by more than $167,000 during the aforementioned taxation years.  As a result of inaccurately reporting his income he received a tax refund for the 2005 taxation year and his family received unwarranted GST credits and Canada Child Tax Benefits (CCTB) for 2005 and 2006.

All taxes owing, interest and penalties determined by the CRA, as well as court fines must be paid following a conviction of tax evasion.  Where gross negligence occurs the penalty may be up to 50% of the unpaid tax or improperly claimed benefit.  Further, a fine of 50% to 200% of the tax evaded and a jail sentence of up to two years may be imposed by the court on summary conviction.

CRA penalties and/or prosecution can be avoided.  If eligible, the taxpayer can file delinquent returns and claim previously unreported income under the Voluntary Disclosures Program.  The only stipulation regarding eligibility is that the tax returns must be filed and undisclosed income must be reported prior to any action or investigation initiated by the CRA.  Once the CRA initiates an action or investigation eligibility for the Program disappears.

Mark Feldstein Corporate Taxes, Personal Taxes Tax Evasion, Unclaimed Income

The sole Director and shareholder of Gold Seal Homes (K-W) Inc., Mr. Dumitru Lazar, appeared in the Ontario Court of Justice in Kitchener on June 16, 2010, at which time Mr. Lazar pleaded guilty to four counts of tax evasion.  Mr. Lazar was fined a sum of $75,280, which represented 50% of the federal taxes evaded.  Gold Seal Homes was fined $29,717.  Mr. Lazar and Gold Seal Homes will be required to pay not only the court fines, but also any civil penalties levied by the Canada Revenue Agency (CRA), as well as taxes and interest owing.

During an investigation by the CRA it became evident that Mr. Lazar built and sold 15 houses, but only reported the sale of one house.  In failing to report the sale of all 15 houses, income totaling $474,599 was not reported, resulting in evasion of federal income tax in the amount of $113,934.  Mr. Lazar also neglected to report GST totaling $36,626 for the 2001 and 2002 taxation years.

In addition to the above, it was learned that Gold Seal Homes paid $107,849 for non-deductible expenses related to construction of Mr. Lazar’s personal residence, having been directed to do so by Mr. Lazar, who alone has signing authority for Gold Seal’s bank account.  The Company did not report and remit GST totaling $39,735 for the 2002 to 2005 taxation years and underreported its income by $107,849, thereby evading income tax in the amount of $19,698.  Mr. Lazar was responsible for the information provided in Gold Seal’s tax returns. 

CRA penalties and charges can be avoided.  Provided the CRA has not initiated an action or investigation, the taxpayer is eligible for the Voluntary Disclosures Program.  Under this Program delinquent tax returns can be filed and previously undisclosed income can be reported.  By entering the Voluntary Dislosures Program, the taxpayer may only be required to pay the taxes owing, plus interest.

Mark Feldstein Corporate Taxes, Personal Taxes, Tax Convictions GST, Kitchener, Tax Evasion, tax penalties, Unclaimed Income

As a result of a charge of tax evasion, Mr. Michael James Savage, of Port Coquitlam, British Columbia was fined $40,000 by the Ontario Court of Justice in Toronto on June 9, 2010.  Mr. Savage pleaded guilty to the charge.  His fine represents 88% of the federal income taxes he evaded in 2000 and 2001.   The court gave Mr. Savage one year to pay the fine.

An investigation by Canada Revenue Agency (CRA) revealed that Mr. Savage, the founder and President of Savage Telecom, as well as one of three shareholders in the firm, transferred money from the company to pay for personal expenses.  Substantial amounts were transferred:  $74,673 in 2000 and $88,871 in 2001.  These amounts were not reported by Mr. Savage on income tax returns and as a result a total of $45,074 in federal taxes were evaded in the 2000 and 2001 taxation years.  It was discovered that Savage made use of the bank accounts of his sister and his girlfriend in his attempt to evade taxes on the transferred funds.

Had Mr. Savage been aware of the Voluntary Disclosures Program, he would have had the opportunity to declare the unreported income and could have avoided prosecution.  Under this Program, undisclosed income can be reported and outstanding tax returns can be filed, as long as the taxpayer has not been contacted by the CRA and/or no investigation has been undertaken by the CRA.  If there is full disclosure of undisclosed income, and delinquent returns are filed under the Program, it is possible that the taxpayer may only have to pay taxes and interest owing.  However, eligibility for this Program disappears as soon as the CRA contacts the taxpayer.

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

In the Ontario Court of Justice in Kitchener,  Bolton Dental Manufacturing Inc. and Mr. Robert Bolton, President and sole shareholder of the company, pleaded guilty to tax evasion.  Mr. Bolton’s non-deductible personal expenses totaling $421,890 were claimed by the corporation on its 2003 and 2004 tax returns.    By claiming these disallowed expenses the corporation evaded paying federal income tax amount of $76,268.  There was also an evasion of $24,717 in GST, as the corporation also claimed false GST input tax credits relating to the non-deductible expenses they had claimed.  While the corporation was fined $100,985, Bolton was fined $129,475.  The amount of Bolton’s fine is 100% of the federal income taxes he temporarily evaded by not reporting income of $446,466 on his 2003 and 2004 personal tax returns.

A routine audit by the Canada Revenue Agency (CRA) revealed Mr. Bolton made a number of unsupported cash withdrawals  from the corporation bank account that were then expensed by the corporation.  Mr. Bolton’s personal expenses, including legal fees, maid services, landscaping and insurance expenses had been paid for and expensed by the company.  Mr. Bolton personally issued cheques to pay for the expenses and then directed the company controller to attribute the expenses to various accounts, including numerous expense accounts, capital assets accounts, his personal dividend account and his personal loan account.  As much as 40% of the credit card charges made on three corporate credit cards were personal expenses of Bolton.   These expenses were subsequently attributed to the corporation.  When the Enforcement Division  of the CRA determined that the shareholders appropriations received by Mr. Bolton  were not reported as income on his 2003 and 2004 personal income tax returns and had been expensed through the company a charge of tax evasion was laid.

In order to avoid prosecution and/or penalties the taxpayer can file outstanding tax returns and report previously undisclosed income through the CRA’s Voluntary Disclosures Program.  If the CRA has not initiated any action or investigation, outstanding tax returns can be filed and unreported income can be declared.  The taxpayer may be allowed to pay the taxes and interest owing without penalty or prosecution.

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

Mr. Daniel Brown pleaded guilty to two counts of tax evasion in the Ontario Court of Justice in Kitchener this past May.  As well as paying the outstanding taxes, interest and any civil penalties determined by the Canada Revenue Agency (CRA), Mr. Brown must now also pay a fine in the amount of $27,010.

The failure to report income in the amount of $226,185 on his personal income tax returns for the 2005 and 2006 taxation years was deliberate.  The federal income tax Mr. Brown tried to avoid paying amounted to $23,800.  There was also an attempt to avoid paying $15,034 in GST for the same period.

The tax evasion was discovered when the CRA carried out a routine audit of an electrical contractor based in Kitchener.  The electrical contractor received 308 invoices from Brown and paid him by money order, bank draft or cash.  In spite of the fact that the invoices included GST of $15,034, Brown did not file GST returns for 2005 and 2006.

While a conviction of tax evasion carries a fine, the taxpayer must still pay the taxes owing, plus interest and any penalties assessed by the CRA.  The CRA is allowed to assess a penalty of up to 50% of the unpaid tax or the improperly claimed benefit in cases of gross negligence.  A fine of 50% to 200% of the tax evaded can be imposed by the Court on summary conviction.  The court may also sentence those  convicted of tax evasion to a jail term of up to two years.

The Voluntary Disclosures Program allows individuals and/or corporations who have outstanding tax returns or who have neglected to report all of their income to correct their tax situation.  Provided the returns are filed and the income is reported prior to the CRA initiating action, the taxpayer will not be penalized or prosecuted.  It is possible that the taxpayer will only be required to pay the taxes owing, plus interest.

Mark Feldstein Corporate Taxes, Personal Taxes Tax Evasion, tax penalties, Voluntary Disclosure

Soda Trading International Inc. of Guelph, Ontario was charged with two counts of failing to file corporate tax returns.  Stephen McDonald, one of the company’s corporate officers, pleaded guilty  to failing to file corporate returns for 2005 and 2006 and was fined $1,000 for each count.  Once charges were laid by the Canada Revenue Agency (CRA), the company filed the outstanding tax returns.

As well as paying the fine imposed, taxpayers and corporations are required to file the outstanding tax returns, pay all taxes owing, plus interest and pay any civil penalties determined by the CRA.

In order to avoid penalty or prosecution, individuals and corporations can file outstanding tax returns and declare previously unreported income under the CRA’s Voluntary Disclosures Program, if they do so before the Agency commences any action or investigation against them.  By voluntarily disclosing the above noted information, penalty and/or prosecution by the CRA may be circumvented.

Mark Feldstein Corporate Taxes, Tax Convictions Tax Evasion, tax penalties, Voluntary Disclosure

As a result of failing to file his 2007 personal income tax return and two GST returns for his business, Bill Swan of Sarnia, Ontario faced three counts of failure to file. He pleaded guilty to all three counts and was fined a total of $3,000. Consequently he must pay taxes and interest owed, any civil penalties assessed by the Canada Revenue Agency (CRA) as well as the $3,000 fine. Subsequent to charges being laid Mr. Swan filed all outstanding tax returns.

The CRA’s Voluntary Disclosure Program allows individuals to file outstanding tax returns and/or report any income not previously reported without penalty or being prosecuted, if the taxpayer makes a full disclosure prior to the start of any action or investigation by the Agency. By filing under the Voluntary Disclosure Program the taxpayer may only be responsible for taxes owing, plus interest.

Mark Feldstein Corporate Taxes, Personal Taxes, Tax Convictions CRA, Goods & Services Tax, GST, Sarnia, Voluntary Disclosure

Although we have transitioned from a 5% Goods & Services Tax (GST) to a 13% Harmonized Sales Tax (HST), the process of instalment payments has not changed. However, the consequences of not paying correct instalments or paying instalments late have substantially increased.

While the threshold to begin owing instalments for GST/HST remains at $3,000, many GST/HST registrants who were not paying instalments in the past may find themselves at the $3,000 threshold with HST and need to begin making instalment payments.

In order to avoid interest charges on GST/HST instalments, one must pay instalments at least in the amount of the prior year GST/HST owing. For example, if you (your company) owed $4,000 in GST last year, and you pay $1,000 in instalments for each quarter this year, then you will not be charged interest for under-paying your instalments. Instalment payments are due within one month after each quarter.

However, by only paying instalments equal to your prior year GST owing, then at the year-end you will owe a lump-sum payment of HST that will represent the additional 8% (from 5% to 13%) of HST you have collected during the year. Therefore the $4,000 in GST you may have paid in a prior year, may balloon to $10,400 of HST in the current year.

Companies who do not plan ahead to leave enough cash on hand to pay the HST collectible to the CRA at this time will find themselves in a difficult situation. It is extremely important to ensure you can make this payment as CRA will begin to charge you interest compounded daily for the outstanding amount. Interest will be charged on overdue balances and/or late or insufficient payment.

Companies may want to set up a separate savings account to collect the GST/HST collectible in order to ensure that the cash is available at year-end. Alternatively, you may choose to increase your instalments throughout the year (current instalment x 2.6 to account for the 8% tax increase) in order to prevent a single large payment from paying only the minimal required instalments.

Mark Feldstein Corporate Taxes, HST Goods & Services Tax, GST, Harmonized Sales Tax, HST

A corporate officer, Mark Stanley Stever of Kitchener, Ontario pleaded guilty to six counts of failing to file tax returns. The returns not filed included a 2007 corporate and a 2006 GST tax return for Franchise Investment Group Inc., a 2006 corporate and 2005 GST return for LED Solution Inc., and a 2006 corporate and 2005 GST return for National Sign Group Corporation. A fine of $1,000 per count was imposed, resulting in a total fine of $6,000.

As well as paying fines imposed, individuals or corporations charged with failing to file tax returns must file their returns and pay all taxes owing, plus interest. They may also be required to pay civil penalties as assessed by the Canada Revenue Agency.

There is an avenue available to correct tax affairs. Under the Voluntary Disclosures Program a taxpayer can file outstanding tax returns and/or report any previously undisclosed income without incurring a penalty or suffering prosecution, if the Canada Revenue Agency has not already initiated any action or investigation. Any taxes owing and interest on the outstanding taxes must be paid.

Mark Feldstein Corporate Taxes CRA, fraud, Kitchener

On April 8, 2010, Antonio Amaral of Hamilton, Ontario pleaded guilty to two counts each of Income Tax evasion and GST evasion. He willfully evaded paying personal income tax in the amount of $23,709 and GST in the amount of $27,158. He was given two years to pay a fine of $38,152, the fine being in addition to any taxes and interest owed, as well as any civil penalties that may be assessed by the CRA.

A cross reference check of Statement of Contract Payment Forms submitted by contractors who had hired Mr Amaral for masonry services determined that he had not declared this income on his personal Income Tax Returns. Furthermore, a search of Mr. Amaral’s residence, revealed that he deliberately failed to report income from his masonry business; Active Masonry on his personal income tax returns for 2005 and 2006. According to invoices discovered during the search Mr. Amaral had unreported income of $39,771 for 2005 and $84,125 for 2006.

Active Masonry began operating and was registered for GST in January 2003. However, the 2003, 2004 and 2005 personal income tax returns filed by Mr Amaral reported business income from a cleaning business “Azores General Cleaning” with no mention of a masonry business. Mr. Amaral reported the masonry business on his 2006 return but the income earned was significantly understated. Additionally, Mr Amaral failed to report and remit GST for Active Masonry, thereby evading $4,792 in GST for the period ending in 2005, and $22,366 in 2006.

When individuals or corporations are convicted of tax evasion, they have to pay the full amount of tax owing, plus interest compounded daily and penalties the CRA assesses. In cases of gross negligence, the Income Tax Act and Excise Tax Act allow the CRA to assess a penalty of up to 50%. In addition, on summary conviction there can be an additional penalty of up to 200% of the tax evaded. The court can also levy a jail sentence for up to two years.

Individuals who have not reported all of their income or are behind in filing their returns can apply under the voluntary disclosure program to correct their tax problem. There will be no penalty or prosecution if they make a full disclosure before the Canada Revenue Agency starts any action or investigation against them. The individual will still be required to pay taxes owing plus interest.

Mark Feldstein Corporate Taxes, Personal Taxes, Tax Convictions Tax Evasion, tax penalties