Mark Feldstein & Associates

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!

Mark Feldstein Corporate Taxes, Tax Convictions Tax Evasion, tax penalties

The sole Director and shareholder of Gold Seal Homes (K-W) Inc., Mr. Dumitru Lazar, appeared in the Ontario Court of Justice in Kitchener on June 16, 2010, at which time Mr. Lazar pleaded guilty to four counts of tax evasion.  Mr. Lazar was fined a sum of $75,280, which represented 50% of the federal taxes evaded.  Gold Seal Homes was fined $29,717.  Mr. Lazar and Gold Seal Homes will be required to pay not only the court fines, but also any civil penalties levied by the Canada Revenue Agency (CRA), as well as taxes and interest owing.

During an investigation by the CRA it became evident that Mr. Lazar built and sold 15 houses, but only reported the sale of one house.  In failing to report the sale of all 15 houses, income totaling $474,599 was not reported, resulting in evasion of federal income tax in the amount of $113,934.  Mr. Lazar also neglected to report GST totaling $36,626 for the 2001 and 2002 taxation years.

In addition to the above, it was learned that Gold Seal Homes paid $107,849 for non-deductible expenses related to construction of Mr. Lazar’s personal residence, having been directed to do so by Mr. Lazar, who alone has signing authority for Gold Seal’s bank account.  The Company did not report and remit GST totaling $39,735 for the 2002 to 2005 taxation years and underreported its income by $107,849, thereby evading income tax in the amount of $19,698.  Mr. Lazar was responsible for the information provided in Gold Seal’s tax returns. 

CRA penalties and charges can be avoided.  Provided the CRA has not initiated an action or investigation, the taxpayer is eligible for the Voluntary Disclosures Program.  Under this Program delinquent tax returns can be filed and previously undisclosed income can be reported.  By entering the Voluntary Dislosures Program, the taxpayer may only be required to pay the taxes owing, plus interest.

Mark Feldstein Corporate Taxes, Personal Taxes, Tax Convictions GST, Kitchener, Tax Evasion, tax penalties, Unclaimed Income

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.

Mark Feldstein Personal Taxes, Tax Convictions criminal charges, Tax Evasion, tax penalties, Unclaimed Income, Voluntary Disclosure, Windsor

Mr. Daniel Brown pleaded guilty to two counts of tax evasion in the Ontario Court of Justice in Kitchener this past May.  As well as paying the outstanding taxes, interest and any civil penalties determined by the Canada Revenue Agency (CRA), Mr. Brown must now also pay a fine in the amount of $27,010.

The failure to report income in the amount of $226,185 on his personal income tax returns for the 2005 and 2006 taxation years was deliberate.  The federal income tax Mr. Brown tried to avoid paying amounted to $23,800.  There was also an attempt to avoid paying $15,034 in GST for the same period.

The tax evasion was discovered when the CRA carried out a routine audit of an electrical contractor based in Kitchener.  The electrical contractor received 308 invoices from Brown and paid him by money order, bank draft or cash.  In spite of the fact that the invoices included GST of $15,034, Brown did not file GST returns for 2005 and 2006.

While a conviction of tax evasion carries a fine, the taxpayer must still pay the taxes owing, plus interest and any penalties assessed by the CRA.  The CRA is allowed to assess a penalty of up to 50% of the unpaid tax or the improperly claimed benefit in cases of gross negligence.  A fine of 50% to 200% of the tax evaded can be imposed by the Court on summary conviction.  The court may also sentence those  convicted of tax evasion to a jail term of up to two years.

The Voluntary Disclosures Program allows individuals and/or corporations who have outstanding tax returns or who have neglected to report all of their income to correct their tax situation.  Provided the returns are filed and the income is reported prior to the CRA initiating action, the taxpayer will not be penalized or prosecuted.  It is possible that the taxpayer will only be required to pay the taxes owing, plus interest.

Mark Feldstein Corporate Taxes, Personal Taxes Tax Evasion, tax penalties, Voluntary Disclosure

Marie Philp appeared in the Ontario Court of Justice in Owen Sound, to answer to charges of failure to file tax returns. She was charged with four counts of failure to file and was fined $1,000 for each count, resulting in a total fine of $4,000. Upon charges being laid Ms. Philp filed the outstanding tax returns.

Upon conviction of a charge of failure to file tax returns the taxpayer is required to file all outstanding returns, pay the fines imposed, the taxes and interest owing and any civil penalties determined by the Canada Revenue Agency (CRA).

There is a program available wherein a taxpayer can avoid penalty or prosecution by the CRA. Under the Voluntary Disclosures Program an individual or corporation can file outstanding tax returns and/or report previously unreported income and may only have to pay the taxes owing, plus interest. However, the returns must be filed and the income reported prior to any action or investigation by the CRA.

Mark Feldstein Personal Taxes, Tax Convictions tax penalties, Unclaimed Income

Soda Trading International Inc. of Guelph, Ontario was charged with two counts of failing to file corporate tax returns.  Stephen McDonald, one of the company’s corporate officers, pleaded guilty  to failing to file corporate returns for 2005 and 2006 and was fined $1,000 for each count.  Once charges were laid by the Canada Revenue Agency (CRA), the company filed the outstanding tax returns.

As well as paying the fine imposed, taxpayers and corporations are required to file the outstanding tax returns, pay all taxes owing, plus interest and pay any civil penalties determined by the CRA.

In order to avoid penalty or prosecution, individuals and corporations can file outstanding tax returns and declare previously unreported income under the CRA’s Voluntary Disclosures Program, if they do so before the Agency commences any action or investigation against them.  By voluntarily disclosing the above noted information, penalty and/or prosecution by the CRA may be circumvented.

Mark Feldstein Corporate Taxes, Tax Convictions Tax Evasion, tax penalties, Voluntary Disclosure

On April 8, 2010, Antonio Amaral of Hamilton, Ontario pleaded guilty to two counts each of Income Tax evasion and GST evasion. He willfully evaded paying personal income tax in the amount of $23,709 and GST in the amount of $27,158. He was given two years to pay a fine of $38,152, the fine being in addition to any taxes and interest owed, as well as any civil penalties that may be assessed by the CRA.

A cross reference check of Statement of Contract Payment Forms submitted by contractors who had hired Mr Amaral for masonry services determined that he had not declared this income on his personal Income Tax Returns. Furthermore, a search of Mr. Amaral’s residence, revealed that he deliberately failed to report income from his masonry business; Active Masonry on his personal income tax returns for 2005 and 2006. According to invoices discovered during the search Mr. Amaral had unreported income of $39,771 for 2005 and $84,125 for 2006.

Active Masonry began operating and was registered for GST in January 2003. However, the 2003, 2004 and 2005 personal income tax returns filed by Mr Amaral reported business income from a cleaning business “Azores General Cleaning” with no mention of a masonry business. Mr. Amaral reported the masonry business on his 2006 return but the income earned was significantly understated. Additionally, Mr Amaral failed to report and remit GST for Active Masonry, thereby evading $4,792 in GST for the period ending in 2005, and $22,366 in 2006.

When individuals or corporations are convicted of tax evasion, they have to pay the full amount of tax owing, plus interest compounded daily and penalties the CRA assesses. In cases of gross negligence, the Income Tax Act and Excise Tax Act allow the CRA to assess a penalty of up to 50%. In addition, on summary conviction there can be an additional penalty of up to 200% of the tax evaded. The court can also levy a jail sentence for up to two years.

Individuals who have not reported all of their income or are behind in filing their returns can apply under the voluntary disclosure program to correct their tax problem. There will be no penalty or prosecution if they make a full disclosure before the Canada Revenue Agency starts any action or investigation against them. The individual will still be required to pay taxes owing plus interest.

Mark Feldstein Corporate Taxes, Personal Taxes, Tax Convictions Tax Evasion, tax penalties

Robert Sproats, of Brampton, pled guilty in October 2009 to two counts of failing to file tax returns. He was fined $2,000. A Canada Revenue Agency (CRA) investigation showed that Sproats failed to file his 2007 personal income tax return and as Director of Deborah Thomson School of Dance & Fitness Inc., failed to file the company’s 2007 corporate tax return.

Anyone who does not file a personal, corporate, or GST/HST return as required is guilty of an offence. On conviction, they are subject to a fine of between $1,000 and $25,000, or both the fine and imprisonment for up to 12 months, for each count. CRA says that 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 penalties assessed by the CRA.

Individuals who have not filed returns, or who have not reported all their income, may qualify for penalty relief under the Voluntary Disclosures Program (VDP). “They will not be penalized or prosecuted if they make a full disclosure before the Agency starts any action or investigation against them,” says CRA in a news release. “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.

Mark Feldstein Corporate Taxes, Personal Taxes Tax Evasion, tax penalties

The Canada Revenue Agency announced on October 23rd that only 50 Canadian Ebay merchants have come forward to pay their back taxes since July 2009.

The Revenue Minister gave Ebay sellers one last chance to pay the taxes without penalties and prosecution. Ebay has announced that it has sent thousands of names to the CRA. CRA has announced that it has begun launching audits of Ebay sellers. CRA is looking at sellers that have sales of at least 20,000 and had 24 sales transactions in one year or made more than 100,000 in a year regardless of the number of transactions.

It is evident that Ebay sellers are not taking CRA seriously in these matters.

CRA has hired many new auditors including many experienced individuals from the Ontario Minister of Finance. Once CRA has commenced an audit it is too late. There will be extensive penalties, interest and possible criminal charges.

Time is quickly running out for Ebay sellers.

I have done several voluntary disclosures for Ebay sellers. These individuals can relax now knowing that they have come clean and that there will be no penalties and prosecution.

Mark Feldstein Corporate Taxes, Personal Taxes, Tax Amnesty ebay seller, tax penalties, 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