Mark Feldstein & Associates

Responding to a charge of making false or deceptive statements to obtain credits to which he and his spouse were not entitled, Tarek Sheltami pleaded guilty in the Ontario Court of Justice in Ottawa on February 11, 2010.  On August 9, 2010 he was fined $52,085 and given a 90-day conditional sentence.  The amount of the fine is equal to the fraudulent benefits Mr. Sheltami  obtained, including Canada Child Tax Benefits (CCTB), Universal Child Care Benefits (UCCB) and Goods and Services Tax Credit (GSTC).

The Sheltami family’s residency status was falsely reported on their 2005, 2006 and 2007 income tax returns.  Based on the information provided in the tax returns, the family received  CCTB of $41,859, UCCB of $6,500 and GSTC of $3,726.  To quality for these benefits the taxpayer’s children must reside in Canada.  With the exception of the months of December 2005 to May 2006, the Sheltami family did not reside in Canada for the taxation years in question.  The fraudulent claim was discovered during an investigation by the Canada Revenue Agency (CRA).

It is possible to correct tax affairs through the CRA’s Voluntary Disclosure Program (VDP).  As long as the CRA has not taken action or initiated an investigation, taxpayers can file outstanding tax returns and report previously undisclosed income.  In VDP cases it is possible to avoid CRA penalties and/or prosecution.  The taxpayer may 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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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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On July 28, 2010 in the Ontario Court of Justice in Sudbury, 979055 Ontario Limited, operating as Walden Welding pleaded guilty to one count of tax evasion.  The Court levied a fine of $160,000 which represented 200% of the federal taxes that would have been evaded.  In addition to the fine, all taxes and interest owing, as well as civil penalties assessed by the Canada Revenue Agency (CRA) had to be paid.

Walden Welding  provides welding, fabrication and installation services.  It is jointly owned by Marlon and Judith Adams, who each own 50% of the company’s shares.  During a CRA investigation of the company, it was discovered that personal expenditures, such as home and cottage renovations, personal trips and other large personal purchases, had been claimed as business expenses by the company in the 2004 to 2007 taxation years.  This resulted in the company’s taxable income being under-reported by $483,182 and as a consequence federal taxes totaling $80,517 were evaded.  A civil reassessment, including taxes owed, interest and penalties, in the amount of $142,505 was received by the corporation and was subsequently paid in full.

As noted above, following conviction all taxes, interest, civil penalties and court fines must be paid when individuals or corporations are convicted of tax evasion.   Where gross negligence has occurred the CRA can assess a penalty of up to 50% of unpaid taxes or improperly claimed benefits.  As well, on summary conviction, the Court may levy a fine of 50% to 200% of the tax evaded and impose a jail sentence of up to two years.

In order to avoid CRA penalties and prosecution, undisclosed income can be reported and delinquent returns can be filed under the Voluntary Disclosure Program.  However, eligibility for the Voluntary Disclosure Program is limited.  As soon as the CRA begins an action or investigation against the taxpayer, the Voluntary Disclosure Program is no longer available.

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It doesn’t pay to let the filing of GST returns lapse – it costs – a lot!  During the period of January 1, 1997 to March 31, 2008, Paul Heaslip, sometimes operating business as Third Wave Communications and Third Wave Corporate Communications & Graphic Design, failed to file several GST returns.  He  appeared in the Ontario Court of Justice in Newmarket on July 20, 2010 and at that time he pleaded guilty to ten counts of failing to file GST returns.  The Court levied a fine of $1,000 per count, resulting in a total fine of $10.000.  In addition to court fines, Mr. Heaslip was required to file all outstanding GST returns and pay all interest and taxes owing, as well as all civil penalties assessed by the Canada Revenue Agency.

Canada Revenue Agency has a Program which allows the taxpayer to correct their tax affairs.  Provided the taxpayer has not been contacted by the Canada Revenue Agency, delinquent returns can be filed and previously undisclosed income can be reported under the Voluntary Disclosure Program.  However, once the CRA initiates an action or investigation against the taxpayer, the Program is no longer available to that individual.

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Perhaps you haven’t gotten around to filing those annual GST/HST returns.  You might not want to delay any longer.

Christopher Hewgill of Barrie, Ontario postponed filing corporate GST/HST returns for the 1993 to 1999 taxation years and as a result was fined $7,000 in the Ontario Court of Justice in Barrie in July, 2010.  In addition to the fine, the taxes and interest owed, Mr. Hewgill was required to file the delinquent returns and pay the penalties imposed by the Canada Revenue Agency (CRA).

Want to avoid CRA penalties and charges?  If eligible, you can file outstanding tax returns and/or report previously undisclosed income under the Voluntary Disclosure Program.  If you have not been contacted by the CRA, if they have not initiated an action or investigation against you, then you are eligible for the Program.  Rather than paying penalties and court fines, you may only have to pay the taxes and interest owing.

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Every conviction of failure to file a tax return has a price.  In Ontario courts that price is $1,000 for each return not filed, as Andreas Christopoulos discovered.  Mr. Christopoulos, formerly of Sarnia, Ontario, did not file personal tax returns for 1999, 2000 and 2001.  He also failed to file two monthly 2000 GST returns for Bill’s International Pizza or Pizzaland, a business he operated in Sarnia during the period in question.  As a result of not filing the returns, the Canada Revenue Agency (CRA) laid charges against Mr. Christopoulos.  He appeared in the Ontario Court of Justice in Sarnia on July 16, 2010.  At that time he pleaded guilty to five counts of failing to file tax returns and was subsequently convicted and fined $1,000 per count for a total fine of $5,000.

Once convicted, in addition to paying all taxes and interest owing, all CRA penalties and all court fines, the taxpayer must also file all delinquent returns.  This scenario can be avoided by filing outstanding returns and declaring previously undisclosed income under the Voluntary Disclosure Program.  All taxpayers are eligible for this Program, as long as the Canada Revenue Agency has not initiated an action or investigation against them.

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Raymond Stephen Lepage of Richmond, Ontario appeared in the Ontario Court of Justice in Ottawa on July 22, 2010.  Mr. Lepage pleaded guilty to one count of tax evasion.  He evaded a total of $438,655 in federal taxes by under-reporting his income for the 2002, 2003, 2004 and 2006 taxation years.  The Court levied a fine of $75,000, this amount being 75% of the federal taxes Mr. Lepage evaded.  The Court allowed him fourteen days to pay the fine.  Additionally, he had to pay all taxes and interest owing, as well as the penalties imposed by the Canada Revenue Agency (CRA).

During a CRA investigation it became apparent that there was a discrepancy between Mr. Lepage’s personal living expenses and the income reported on his tax returns.  As a commissioned sales agent employed by the same company for over 10 years, Mr. Lepage received a summary compensation letter detailing his commission income at the end of each tax year.  As a result of understating his gross revenue earned as a commission sales agent in 2002, 2003 and 2004, $56,100 in federal income tax was evaded.  After the CRA initiated an investigation, Mr. Lepage filed his 2006 tax return.  By not filing this tax return $43,900 of federal income tax was evaded.  Mr. Lepage’s cooperation with the CRA resulted in an expeditious resolution of the CRA investigation.

CRA penalties and charges can be avoided by filing delinquent tax returns and/or reporting undisclosed income under the Voluntary Disclosure Program.  This is only possible if the taxpayer has not already been contacted by the CRA.  Once the CRA has initiated an action or investigation against the taxpayer, eligibility for the Voluntary Disclosure Program is no longer available.

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Every conviction of failure to file a tax return has a price. In Ontario courts that price is $1,000 for each return not filed, as Andreas Christopoulos discovered. Mr. Christopoulos, formerly of Sarnia, Ontario, did not file personal tax returns for 1999, 2000 and 2001. He also failed to file two monthly 2000 GST returns for Bill’s International Pizza or Pizzaland, a business he operated in Sarnia during the period in question. As a result of not filing the returns, the Canada Revenue Agency (CRA) laid charges against Mr. Christopoulos. He appeared in the Ontario Court of Justice in Sarnia on July 16, 2010. At that time he pleaded guilty to five counts of failing to file tax returns and was subsequently convicted and fined $1,000 per count for a total fine of $5,000.

Once convicted, in addition to paying all taxes and interest owing, all CRA penalties and all court fines, the taxpayer must also file all delinquent returns. This scenario can be avoided by filing outstanding returns and declaring previously undisclosed income under the Voluntary Disclosure Program. All taxpayers are eligible for this Program, as long as the Canada Revenue Agency has not initiated an action or investigation against them.

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There is a high price to be paid for making false statements on tax documentation. This past January Burrows Lumber Inc. of Winnipeg made false statements on their 2001 to 2004 T4 information returns. The company pleaded guilty to the charge and the Court imposed a fine of $175,076 – no small amount!

During the 2001 to 2004 taxation years, Burrows Lumber Inc. recorded the home address of one of their senior employees as Calgary. The employee was in fact a resident of Manitoba during the years in question, however, he paid federal and provincial taxes as if he were a resident of Alberta. The provincial taxes in Manitoba were much higher than those of Alberta during the four year period. In consequence the amount of provincial tax paid was $350,154 less than the amount of tax that should have been paid.

In order to correct the employee’s tax account, all outstanding taxes, interest and penalties were paid. The $175,076 fine levied by the Court is 50% of the taxes not paid by the employee due to the false statements prepared by the Company. Again, the cost is high when false statements are made on tax documentation!

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