Mark Feldstein & Associates

Jacob (Jake) Knelsen of Aylmer, Ontario appeared in the Ontario Court of Justice in St. Thomas, Ontario on September 28, 2010 to face charges of failure to file tax returns.  Following a plea of guilty to all six counts, Mr. Knelsen received a fine of $1,000 per count.  Mr. Knelsen is required to pay the $6,000 fine as well as all taxes, interest and penalties imposed by the Canada Revenue Agency (CRA).

A self-employed subcontractor in the construction industry, Mr. Knelsen failed to file personal income tax returns for the 2004, 2005 and 2006 taxation years.  He also failed to file annual Goods and Services tax returns for 2005, 2006 and 2007.  After charges were laid all outstanding returns were filed.

Mr. Knelsen could have saved himself $6,000.  Had he filed the tax returns under the CRA’s Voluntary Disclosure Program he would have avoided the fine and the CRA penalties.  Delinquent tax returns can be filed and previously undisclosed income can be reported under the Program, provided there has been no contact by the CRA.  Unfortunately, once the CRA initiates an action or investigation against the taxpayer, the Program is no longer available.

Mark Feldstein Tax Convictions Aylmer, failure to file, GST, St. Thomas

A prison inmate received a sentence of 30 months in jail on September 14, 2010 in the Ontario Court of Justice in Toronto after he pleaded guilty to two counts of fraud over $5,000 at a previous court appearance.  Michael Bannon, currently incarcerated, prepared bogus tax returns for prison inmates and received refunds as a result of the fraudulent returns.  

The scheme was discovered during a joint investigation by the Canada Revenue Agency (CRA) and other government agencies.  Fraudulent personal income tax returns were prepared for 178 prison inmates during the 1999 to 2007 taxation years.  A total of $704,684 income tax refunds were claimed in the aforementioned tax returns.  Bannon also filed fraudulent GST returns under the names of 295 individuals, many of whom were prison inmates, claiming $1.1 million in refunds.  While no refunds were issued for the claims made on the personal income tax returns, $90,217 in refunds were issued for the GST refunds and cheques  totaling $58,217 were cashed.

In his position as the “tax guy” in the prison, Bannon let it be known that he could prepare and file returns for his fellow inmates.  He procured the inmates’ personal information, including name, social insurance number, date of birth and address, however, his “clients” were unaware that he was changing the addresses on the returns to post office boxes that he controlled.

Mark Feldstein Tax Convictions fraud, GST

A former employee of the Canada Revenue Agency (CRA), Lynne Paisley appeared in the Ontario Court of Justice in Hamilton on April 8, 2010.  Ms. Paisley pleaded guilty to one count of illegally obtaining benefit payments to which she was not entitled.  On August 26, 2010 the Court sentenced Paisley to serve 45 days in jail and pay a fine of $22,891, the fine representing 50% of the federal income tax benefits received under fraudulent circumstances.  A grace period of two years was given for payment of the fine.

Ms. Paisley willfully, and with full knowledge, submitted fabricated documents claiming two fictitious children which entitled her to Canada Child Tax Benefits (CCTB) for the extra children she claimed.  In reality Paisley is responsible for the care of four children however, the documentation submitted claimed two additional, fictitious children.  Further, she listed her marital status as “single”, when in fact she was in a common law relationship.  As a result of the fraudulent claims, Ms. Paisley received an increased amount in payments of CCTB, Universal Child Care Benefits (UCCB) and Goods and Services Tax Credit (GSTC).  The total amount of benefits and credits received by Ms. Paisley from July 2005 to September 2008 was $45,782.

The CRA reviewed Ms. Paisley’s file in 2008 and subsequently requested verification of marital status as well as information regarding the children under her care.  On September 8, 2008 Paisley submitted falsified documentation from various sources, including her doctor, her landlord, schools and a day care centre which supported the fictitious existence of two additional children. 

Ms. Paisley acted with full knowledge, as she had been an employee in the Canada Child Tax Benefits Compliance Section.  In her position with the CRA she was responsible for verification of entitlement to the CCTB benefits.  

Mark Feldstein Tax Convictions Child Tax Benefits, fraud, GST, Universal Child Care Benefits

 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.

Mark Feldstein Corporate Taxes, Tax Convictions failure to file, GST, Tax Evasion

A fine of $4,000 was levied in the Ontario Court of Justice in Guelph on September 10, 2010 against John Davies of Elora, Ontario after Mr. Davies pleaded guilty to four counts of failing to file tax returns.  A grace period of 15 months was given for payment of the fine.  In addition to filing the outstanding returns, all taxes and interest owing, Canada Revenue Agency (CRA) penalties and Court fines had to be paid. 

A self employed trucker who hauls scrap metal, Davies neglected to file his personal tax returns for 2003 to 2005.  He also failed to file the annual Goods and Services Tax Return for the 2003 taxation year.  Mr. Davies filed all delinquent returns prior to pleading guilty.

Had Mr. Davies known about the Canada Revenue Agency’s Voluntary Disclosure Program he might have been able to avoid CRA penalties and prosecution.  Under this Program, if the CRA has not initiated compliance action the taxpayer can submit all unremitted tax returns and claim previously undisclosed income.  As a result of filing and/or reporting under the Program, the taxpayer may only be required to pay the taxes and interest owing.

Mark Feldstein Tax Convictions failure to file, Tax Evasion

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.

Mark Feldstein Corporate Taxes, Tax Convictions charitable donations, investment schemes, London, Tax Evasion

Mr. Steven Herring of London, Ontario faced seven counts of failing to file tax returns in the Ontario Court of Justice in London this past August.  On August 27, 2010 Mr. Herring pleaded guilty to all seven counts and was fined a total of $7,000.  The sole director of 1666155 Ontario Inc., which operates Jimmies Flowers, Mr. Herring did not file corporate tax returns for 2005 to 2008.  He also failed to file three quarterly GST returns in 2008 and 2009.  All outstanding returns were filed when the Canada Revenue Agency (CRA) filed charges against the company.

Once convicted of failing to file returns, individuals and/or corporations must file all outstanding returns and pay all taxes, interest, penalties assessed by the Canada Revenue Agency (CRA) and Court fines.

In order to avoid an audit or investigation by the CRA why not file delinquent returns and report previously undisclosed income under the Voluntary Disclosure Program?  Provided the CRA has not taken action or initiated an investigation, the taxpayer is eligible for this Program, which makes it possible that only the taxes and interest owing will have to be paid.

Mark Feldstein Tax Convictions CRA, failure to file, GST, London

Committing fraud through Canada Revenue Agency (CRA) employment resulted in a severe judgment against Erica Forde. On September 1, 2010 Ms. Forde appeared in the Ontario Court of Justice in Toronto and pleaded guilty to one count of fraud over $5,000. The $20,000 fine levied by the Court was paid immediately. As part of the Court’s judgment, Forde received a conditional sentence including 12 months house arrest. She was also required to perform 100 hours of community service.

From May 2000 to December 2008 Ms. Forde was employed as a telephone agent with the CRA. She abused her position, fabricating tax returns by accessing individual taxpayer accounts maintained by the CRA. A total of 178 personal income tax returns were prepared and filed, using the personal information of 57 taxpayers, 39 of whom were deceased. Based on these returns GST credits and provincial tax credits in the amount of $85,654 where issued and deposited into bank accounts under the control of Ms. Forde.

Despite the CRA’s monitoring mechanisms, it is clear that during the period in question one employee was able to commit fraud. Fortunately, this particular fraud was discovered and a severe penalty was imposed.

Mark Feldstein Tax Convictions CRA, criminal charges, fraud, Toronto

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.

Mark Feldstein Corporate Taxes, Tax Convictions failure to file

Erica Forde, an employee of the Canada Revenue Agency (CRA), appeared in the Ontario Court of Justice in Toronto on September 1, 2010 to face a charge of fraud.  Ms. Forde pleaded guilty to one count of fraud over $5,000.  In addition to a fine of $20,000, which was paid immediately, the Court also sentenced Ms. Forde to twelve months house arrest and ordered her to perform 100 hours of community service.

A telephone agent with the CRA from May 2000 to December 2008, Ms. Forde accessed  individual taxpayer accounts which were maintained by the CRA.  Using the personal information of 57 taxpayers, of which 39 were deceased, she prepared and filed 178 personal income tax returns.  Based on the information in these tax returns the CRA issued GST credits and provincial tax credits in the amount of $85,654.  These funds were deposited into bank accounts which were controlled by Forde.

While the CRA has measures in place to prevent fraud by their employees, it is clear that the system was not perfect during the period mentioned above.

Mark Feldstein Tax Convictions CRA, criminal charges, Toronto