Mark Feldstein & Associates

Panagiotis Tourikis of Toronto pled guilty on August 31, 2009 on three counts of failing to remit GST. There was a $72,000 fine from the Ontario Court of Justice in Toronto. The fine is in addition to taxes and interest due.

CRA investigated Mr. Tourikis and discovered that he failed to remit $140,616 in GST that was charged and collected during the years 2002 to 2004. The GST was charged and collected on worm sales made to several wholesalers in Ontario.

If Mr. Tourikis applied under the voluntary disclosure program before CRA began their investigation, there would be no penalties or prosecution. There would only be interest and taxes due.

If an individual or a corporation is convicted of tax evasion, they have to pay the full amount of tax owing, plus interest, and any penalties that is assessed by CRA. If there is a gross negligence penalty, the Income Tax Act and Excise Tax Act allow CRA to assess an additional 50% penalty of the unpaid tax. In addition, the court on summary conviction could fine them 50% to 200% of the tax evaded and sentence them to jail for up to two years.

Mark Feldstein Corporate Taxes, GST Tax Evasion

Arlen Scherba of Sombra, an officer of 952768 Ontario Limited which operates as Restoration Masters pleaded guilty in the London Ontario Court of Justice for GST and income tax evasion. The corporation was fined $129,177. Scherba also pleased guilty personally on three counts of tax evasion and was fined $99,771. The fines delivered by the court represented 90% of the taxes evaded which is in addition to any taxes and interest due. CRA’s audit of Restoration Masters determined that during the years 2002 to 2004, the company understated its taxable income by $494,557. This resulted in reducing their corporation income tax by $133,935 and their GST by $9,595. Scherba did not report shareholder loan appropriations totaling $384,158 on the 2002 and 2004 personal income tax returns. Consequently, there was $110,856 in federal taxes evaded.

The CRA investigation determined that the company used different methods to reduce taxes, including corporate officers claiming personal expenditures as business expenses. Scherba claimed costs relating to renovating his home, landscaping services, furniture and electronic purchases, golf membership fees, sporting goods and family vacations. The son- in law of Scherba claimed boat repairs, towing, dockage fees, flooring costs and electrical work for the home, insurance, clothing and sporting goods as expenses charged to the company. When a shareholder and their families claim personal expenses as business expenses in a company, CRA will add back these expenses and will increase the corporations taxable income. They will also add back to the shareholder the benefit derived by the company paying for their personal expenses. For example, if a corporation paid $100,000 in personal expenses and claimed them as a business expense, CRA on an audit would add the $100,000 to the taxable income of the corporation and a another $100,000 to the taxable income of the shareholder. Therefore, the corporation and the shareholder will be taxed on a total of $200,000 plus penalties and interest. It is very costly to claim personal expenses in a corporation.

If Mr. Scherba and the 952768 Ontario Limited applied under the voluntary disclosure before a CRA investigation began, then they would be exempt from penalty or prosecution. They would only be liable for the income taxes and the interest.

Mark Feldstein Corporate Taxes, GST, Personal Taxes CRA, fraud, Tax Amnesty, Tax Evasion, tax penalties, Unclaimed Income