Mark Feldstein & Associates

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.

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Dr. Jack Klundert, an optometrist in Windsor, Ontario was found guilty of one count of tax evasion in the Superior Court of Justice in Windsor on May 20th , 2010.  At the trial the jury heard that Dr. Klundert reported his professional income as nil on his 1993, 1994 and 1997 personal tax returns, when in fact he received $1.4 million in professional income.  Federal income taxes amounting to $348,000 were evaded by his failure to report this income.  Returns had not been filed for the 1995 and 1996 taxation years. 

Dr. Klundert maintained that he had a moral obligation to challenge the validity of the Income Tax Act.  His argument was that the government does not have the authority to collect income tax.  Fortunately for Dr. Klundert, he was in a financial position to take his challenge to court.    On two previous occasions Dr. Klundert was acquitted for the same offence.    Unfortunately, his third attempt was not successful.   Following his conviction Dr. Klundert  was fined $500,000 and given a one year jail sentence.

Failing to comply with the Income Tax Act has serious consequences.  As well as interest and penalty charges, there is the possibility of garnishment of wages and/or bank accounts, seizure of assets, criminal prosecution and court fines.

Upon conviction of tax evasion, taxpayers have to pay all taxes owing, plus interest and any penalties as assessed by the Canada Revenue Agency (CRA).  Where the case is one of gross negligence, the CRA can impose a penalty of up to 50% of the unpaid tax and improperly claimed benefit.  On indictment the court may fine the taxpayer  100% to 200% of the tax evaded and impose a jail sentence of  up to five years.

The Voluntary Disclosures Program allows individuals or corporations who are delinquent in filing tax returns or who have not reported all of their income to do so without the threat of penalty or prosecution, provided they take action prior to any investigation initiated against them by the CRA.  By voluntarily disclosing unreported income and filing outstanding tax returns the taxpayer may only be required to pay the taxes owing, plus interest.

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William Joseph McCarvell, a real estate agent in London, was fined a total of $16,000 after pleading guilty to 16 charges of failing to file personal and corporate tax returns by the required due dates.

McCarvell operated under the name Bill McCarvell Realty Inc. In June 2009, he was fined $8,000 for not filing his 2003 to 2006 personal income tax returns, as well as the 2001 to 2004 corporate returns. He was ordered him to file these eight outstanding returns with the Canada Revenue Agency (CRA) by September 30, 2009.

In November 2009, McCarvell pleaded guilty to not filing his 1999 to 2002 personal tax returns, as well as corporate tax returns for 1999, 2000, 2005 and 2006. He was fined an additional $8,000. A new compliance order required McCarvell to file these additional eight returns by February 1, 2010.

When convicted, in addition to court imposed fines, individuals or corporations are still obligated to file the tax return(s) and pay the full amount of taxes owing, plus interest, as well as any penalties assessed by the CRA.

If you have not filed returns, or have not reported all income, you may qualify for penalty and/or prosecution relief under the CRA’s Voluntary Disclosures Program (VDP) subject to certain conditions. One condition is that you must apply and make full disclosure before the Agency starts any action or investigation.

For more information on the Voluntary Disclosures Program contact Mark Feldstein & Associates. We specialize in taxation and accounting for Tax Amnesty. We can help.

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Joseph Cirillo, of Niagara Falls, pled guilty in October 2009 to seven counts of failing to file corporate income tax returns. He was fined $1,000 for each count. A CRA investigation showed that Cirillo failed to file corporate tax returns as the director of Done-Rite Paving Co Ltd and as the director of 1602013 Ontario Inc.

When individuals or corporations are convicted of failing to file tax returns, in addition to any fines imposed by the courts, they are still obligated to file the tax return and pay the full amount of taxes owing, plus interest, as well as any civil penalties that may be assessed by the Canada.

Individuals who have not filed returns for previous years, or who have not reported all of their income, can still voluntarily correct their tax affairs. They will not be penalized or prosecuted if they make a full disclosure before the Agency starts any action or investigation against them. These individuals may only have to pay the taxes owing, plus interest.

For information on the Voluntary Disclosures Program contact us and learn how Mark Feldstein & Associates can help you correct your tax affairs.

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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.

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Walter Pontiero General Contracting Ltd of King City, pleaded guilty on September 17, 2009 of GST evasion. There was a fine levied in the amount of $91,063 in the Ontario Court of Justice in Newmarket. The fine was 100 percent of the taxes evaded.

CRA’s investigation revealed that the company which is a subcontractor to homebuilders, filed GST returns for the periods July 31, 2002 to April 30, 2005, in which the total sales of the business were under reported by over $2.75 million dollars. Therefore, the company understated the GST it collected on sales by $198,238 and it understated its input tax credits by $107,174, resulting in $91,064 GST evaded.

Individuals or companies that have not filed their returns or have not reported all of their income, can apply under the voluntary disclosure program. CRA will not penalize or prosecute them if they make a full disclosure before CRA commences an action. If Mr. Walter Pontiero General Contracting Ltd applied under the VDP program there would be no penalties or prosecution but the taxes would have to be paid along with interest.

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Nester Raymond Pinga of Newmarket Ontario pleaded guilty in the Ontario Court of Justice on 14 charges of failing to file tax returns. He was fined $14,000. When individuals or corporations are convicted of failing to file returns, they still have to file the returns and pay the full of amount of taxes outstanding plus interest and any civil penalties that may be assessed by the Canada Revenue Agency. If Nester Raymond Pinga contacted CRA before CRA commenced an action under the voluntary disclosure program, there would be no penalties or prosecution only interest and taxes would be due.

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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.

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