Mark Feldstein & Associates

A resident of Stoney Creek, Colin Fox, pleaded guilty in the Ontario Court of Justice in Hamilton, on October 22, 2010 for failing to comply with a court order to file his 2004 income tax return. Since this was the third time Mr. Fox was convicted of this offence he was sentenced to four months imprisonment and a fine of $2,000.

If Mr. Fox applied under tax amnesty program and filed his tax return before CRA commenced an investigation then he would not have been prosecuted and penalized. He would only have to pay interest and taxes.

Mark Feldstein Personal Taxes, Tax Convictions failure to file, Hamilton, Tax Amnesty

Faiz Khan of Markham was convicted of one count of fraud over $5,000 in the Ontario Court of Justice in Toronto on November 26, 2010. Faiz received a conditional sentence of 2 years less a day. Khan will be under house arrest for a year and a half with 6 months under curfew. He will be on probation for the next two years. He has to pay $824,971, and was banned from gambling and preparing tax returns. If Khan had voluntarily disclosed the tax scheme to Canada Revenue Agency before they started any investigation, he could have avoided penalties, prosecution, and the loss of his livelihood.

During an investigation by Canada Revenue Agency, it was revealed that Faiz prepared false tax returns and false donation claims. During the years 2004 – 2008, he falsified documents on behalf of his 52 clients which understated their federal taxes by $575,971, thereby increasing their tax refunds.

The names of four charities on the falsified donation slips were City Chapel Ministries International, Destiny Ministries International Christian Mission, Pan African Canadian Multicultural Centre and Ave Development Foundation. They had their charity status revoked by CRA. Read more…

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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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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

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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.

Mark Feldstein Corporate Taxes, Personal Taxes Sarnia

Gregory Bolak of Hillsdale, Ontario appeared in the Ontario Court of Justice in Barrie, Ontario on September 30, 2010.  Mr. Bolak had not filed his 2003 to 2007 personal income tax returns and as a result was charged with failure to file by the Canada Revenue Agency.  He pleaded guilty to five counts of failure to file income tax returns and was subsequently fined $1,000 per count.  In addition to the $5,000 fine, all taxes, interest and Canada Revenue Agency (CRA) penalties must be paid and the outstanding returns must be filed.

Avoiding court fines and CRA penalties is possible.  If the taxpayer enters into the CRA’s Voluntary Disclosure Program, delinquent returns can be filed and unreported income can be disclosed, however,   eligibility for this Program rests on the fact that there has been no contact by the CRA.  Once an action has been undertaken or an investigation has been initiated by the CRA, eligibility for the Program disappears.

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Subsequent to a four day trial in July, 2010 the Ontario Court of Justice in Windsor found John Spooner guilty of one count of making false statements and 13 counts of evading GST payment.   The Court sentenced Mr. Spooner on January 21, 2011, imposing a fine of $27,000 as well as a conditional sentence of 120 days to be served in the community.  The fine is equal to 147% of the federal taxes evaded.  Taken together, the fine and federal taxes owing amount to $45,396.

As a self-employed sales agent, Mr. Spooner operated a business in the Windsor area, J B & B Enterprises.  For the quarter ending March 31, 2003, Spooner had made false statements on the GST return for his business.  The net GST owed was understated by $1,312.  There was also a failure to file eleven consecutive quarterly returns from April 2003 to December 2005 and the GST owing for this period of time was not remitted.  Total GST evaded was $18,396.

In all such cases, upon conviction, all taxes owing, plus interest, Canada Revenue Agency (CRA) penalties and Court fines must be paid.  It should be noted that the Court may impose a fine of up to 200% of the taxes evaded as well as a jail sentence of up to five years.

If full disclosure is made under the Voluntary Disclosure Program, it is possible that the taxpayer will avoid penalties and/or prosecution by the CRA.  Under this Program delinquent returns can be filed and previously unreported income can be disclosed, provided that the CRA has not taken action or initiated an investigation against the taxpayer.

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 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.

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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.

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On June 15, 2010 Ashley Kenneth Silva of North York, Ontario was fined $6,000 in the Ontario Court of Justice in Toronto, Ontario after pleading guilty to six counts of failure to file income tax and GST returns.  Following a conviction of failure to file, the taxpayer is required to file the outstanding returns and pay all fines, penalties determined by the Canada Revenue Agency (CRA), taxes and any interest owing. 

Mr. Silva is self-employed and operates Silva Communications.  He did not file income tax returns for the 2002, 2003 and 2004 taxation years, nor did he file GST returns for 2003, 2004 and 2005.  The court frequently imposes a fine of $1,000 per count and this was the case for Mr. Silva.   While he was given one year to pay the fine, he was also placed under six months probation and ordered to file all delinquent returns.

The charges noted above could have been avoided if Mr. Silva had entered the Voluntary Disclosures Program.  Under this program, provided that all outstanding tax returns are filed and/or any previously undisclosed income is reported prior to the CRA initiating any action or investigation, the taxpayer can avoid penalties and prosecution and it is possible that the taxpayer will only be required to pay taxes and interest owing.

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