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
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
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
The Home Buyers Plan “HBP” is a Canada Revenue Agency “CRA” tax program that allows for certain individuals to withdraw money from their RRSP without penalty in order to buy or build a home.
In order to be eligible for this program, you must be a first-time home buyer or using the withdrawal to buy or build a home for a disabled related individual.
If you do own the home before the withdrawal, it cannot be for more than 30 days. And if the home is not yet purchased or built, you have until October of the year after the withdrawal to have the home bought or built.
This home MUST be used as a primary residence and NOT a rental property. If the CRA finds that you have withdrawn from your RRSP to purchase a rental property, they will add the withdrawal to your income and you will pay additional taxes as if the HBP were income.
It is not enough to have a pre-authorized mortgage to use the HBP. A written agreement must be in place that details the purchase offer or a contract with a builder or contractor.
Mark Feldstein Personal Taxes, Tax Incentives & Shelters CRA, HBP, Home Buyers Plan, RRSP
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
Julia Blanchard of St. Catharines was sentenced on September 16, 2009 on five counts of failing to file corporate income tax returns and one count of failing to file GST returns. She was fined $1,500 for each count for a total fine of $9,000. Julia Blanchard pleaded guilty to these charges on March 17, 2009.
CRA made several request for the missing tax returns before serving notice demanding that the returns be filed. Failure to comply with the requests resulted in charges being laid. All of the outstanding returns have now been filed. CRA takes delinquent filers very serious. It is always advisable to file all tax returns on time and stay off CRA’s radar.
Mark Feldstein Corporate Taxes, Tax Convictions CRA, criminal charges, Tax Evasion, Unclaimed Income
In September 2009, eBay Canada received a court authorized requirement from the Canada Revenue Agency. Ebay must now release the account information and sales data of Canadian eBay members that meet the following conditions:
- Sales of more than $20,000 and at least 24 sales transactions in any of the calendar years 2006, 2007 or 2008, (irrespective of membership in eBay’s PowerSeller program); OR
- Sales of more than $100,000 in any of the calendar years 2006, 2007 and or 2008, regardless of the number of sales transactions.
If the seller meets the above conditions, then the following information will be handed over to CRA:
- full name,
- user id,
- mailing address,
- billing address,
- telephone number,
- fax number,
- email address, and
- the selling prices of the items.
This is the second court order that eBay has received from the Canada Revenue Agency. In November 2008, after lengthy litigation with CRA, eBay was required to hand over the information of members who held PowerSeller status in 2004 and 2005.
CRA announced on July 30, 2009 that they will aggressively audit Ebay sellers commencing September 2009. If CRA has not commenced an audit on an Ebay seller, then they can apply under the voluntary disclosure program to bring their taxes up to date without criminal prosecution or penalties.
If a voluntary disclosure has not been done and CRA commences an audit, there can be severe penalties, prosecution and interest charges. Time is quickly running out for Ebay sellers who have not done a voluntary disclosure to properly reflect their taxes.
In my office we have already commenced doing voluntary disclosures for Ebay sellers. Once a voluntary disclosure is made, the taxpayer has 90 days to amend their returns and properly reflect their Ebay sales. I usually prepare the voluntary disclosure in my first meeting with my clients and send it immediately to CRA. From this point on, the taxpayer is protected from penalties and prosecution. My clients usually will have peace of mind from the moment I send the disclosure to CRA. Most people tell me that they have not been able to sleep at night for years knowing what they were doing was illegal.
Mark Feldstein Corporate Taxes, Personal Taxes, Tax Amnesty CRA, criminal charges, ebay seller, tax penalties, Unclaimed Income
Swiss banking giant UBS AG has agreed to turn over details of 4,450 Swiss bank accounts suspected of holding undeclared assets to the IRS.
The deal will provide the IRS with thousands of long-sought account names. UBS has an estimated 52,000 accounts of US customers. The 4,450 accounts being provided to the agency were the ones most suspected of containing undeclared assets.
Revenue Minister Jean-Pierre Blackburn asked Finance Minister Jim Flaherty to consider legal changes that would make it easier to investigate tax-avoidance cases in the same way the United States does.
If you have a foreign bank account that earns income and you have not reflected this on your tax returns you can be subject to criminal prosecution, penalties and interest. CRA has an agreement with the IRS to share information.
If you apply under the voluntary disclosure program to CRA before they initiate an audit, then criminal prosecution and penalties will be waived.
Mark Feldstein Corporate Taxes, Personal Taxes CRA, foreign income, Unclaimed Income
Canadians must report all of their worldwide income. Individuals working in industries where cash transactions are prevalent must take extra care that all of their income is reported accurately. The books and records of the business must be immaculate and reflect their income.
If the books and records are inaccurate and sloppy, then CRA can undertake a net worth audit and will examine the life style of the taxpayer and their family. The CRA auditor will reconcile the income reported on the income tax returns for the family to the standard of living in the household. If CRA cannot find all of the personal expenses then they will use statistics Canada averages for a family of a particular size. For example, if a family of five pays cash for their groceries during the year, then CRA will determine what a family of five consumes a year in groceries.
Years ago, I had a client that was audited and CRA used the net worth audit technique on them. CRA even estimated the consumption of family alcohol and cigarettes. In my discussions with CRA, I informed them that my client did not drink or smoke. Consequently, these numbers were dropped in their audit calculations.
When CRA completes a net worth audit, the onus is on the taxpayer to prove them wrong. If the taxpayer disagrees with the findings on the audit, they can go to the Tax Court of Canada to dispute the audit findings. The problem is that the taxpayers has to prove their lifestyle expenses and if they cannot, then they will not be successful in court and the process will be very expensive.
It is imperative to keep copies of personal expenditures if you are in a cash business, because if CRA performs a net worth audit it will usually be very expensive for the taxpayer. CRA will take the difference between the income that they calculated for the family based on lifestyle and they will deduct this from the income reported on the personal income tax returns. The difference will be taxable and subject to severe penalties and interest charges. Therefore it is important that if you are in a cash business that you maintain excellent books and records.
If you are in a cash business and have not declared all of your income, then you can apply under the voluntary disclosure program to avoid penalties and prosecution. This program is only available before CRA commences an audit investigation.
Visit my website for more information or assistance on the voluntary disclosure program.
Mark Feldstein Corporate Taxes, Tax Amnesty CRA, net worth audit, Unclaimed Income