Penalties for Missing the 2013 Income Tax Deadline

Missed the 2013 tax deadline to file your 2012 tax returns? Then you should read this blog as it will give you a high level overview of penalties and interest that you could be facing once you file. 

First time offender

The late filing penalty for taxes owed for 2012 will be subject to a 5% penalty based on the amount outstanding. In addition, the offender will be subject to a 1% penalty per month for up to 12 months. 

Previous offenders

If you were charged a penalty for late filing in any of the 3 years preceding the 2012 tax year, CRA may apply a 10% penalty based on the amount of the tax debt and up to 2% per month for up to 20 months. Furthermore, if you fail to declare income in 2012 and you also failed to report income in the preceding 3 tax years, you could also be subject to an additional 10% penalty.

In addition to the above penalties, interest is also charged on both the tax debt and the penalties, retroactively. The current interest rate is 5% but because the CRA compound interest (interest charged upon interest) daily it very quickly adds up.

If CRA believes that you have made a false statement on a tax return or alleges gross negligence (which they do all the time), you may be subject to a steep fine, plus a penalty of up to 50% of your tax debt.

Not filing your tax return is tax evasion. Failing to declare income is tax evasion. Claiming false expenses is tax evasion.  In all cases you could also be criminally prosecuted.

It is not illegal to owe money to CRA. It is illegal to not file.

Many people fail to file tax returns or declare income because they are afraid that they will have a large tax debt that they will not be able to pay. It is always better to get your returns filed or the undeclared income declared rather than waiting for CRA to catch up with you.

Now that you are really thinking about getting that income declared, useprograms like the Voluntary Disclosure Program (VDP) that will enable you to come clean on unreported income or past due returns and avoid penalties and interest altogether.

Even if you don’t qualify for VDP, you can still take advantage of a Notice of Objection to object to a penalty or Taxpayer Relief if there were special, qualifying circumstances that led to your tax problem. A tax problem can be very scary, but you will be much better off taking a deep breath and dealing with it.

A professional who focusses on protecting taxpayers who are at fault or who simply owe money they cannot pay will get you the best solution possible without shooting holes in your feet.  One wrong step in any of these complex processes can get you into serious trouble.

For more information about what you can do to resolve a tax problem and deal with penalties and interest please visit www.taxsolutionscanada.com or call 1-888-868-1400.

Average People Do Get Prosecuted by CRA!

When you hear advertisements telling you that if you are behind filing tax returns or have undeclared income that you could be subject to criminal prosecution, know that this is not just a scare tactic. It is very real.  In fact, average Canadians are prosecuted every month by CRA. Some receive fines while others are even sentenced to jail time. Here is a quick review of some of the individuals and businesses prosecuted by CRA in October 2013. 

1.      A professional engineer in Thunder Bay, Ontario, was convicted in October of tax evasion. CRA’s investigation found that this taxpayer had failed to report income on his 2005-2009 tax returns. He was fined more than $84,000, representing 100% of the total taxes evaded and sentenced to 5 months of house arrest. He still has to pay the taxes and the interest and the civil penalties.

2.      In Kamloops, British Columbia, a man was convicted of tax evasion for failing to file his 2002 and 2003 personal income tax returns. He was fined $5,000 and sentenced to 60 days in jail to be served on weekends.

3.    In Prince Edward Island, a university professor was convicted of tax evasion for failing to report income received in 2009 and 2010.  The taxpayer was fined $30,212 which has to be repaid within 12 months or he could be sentenced to serve up to a year in jail.
 

4.      A Brampton, Ontario couple was convicted of tax evasion in October for failing to file corporate and individual tax returns. They were fined over $13,000 collectively.

5.      In London, Ontario, a chartered accountant and former executive of a tool and moulding company was convicted of tax evasion. He was fined over $80,000 in addition to penalties and interest for failing to report income and benefits received from a former employer. 

6.      In Guelph, a construction worker was convicted of tax evasion and fined $3,000 for failing to file his 2009, 2010 and 2011 personal income tax returns.

As you can see, it is quite common for people to fall behind filing tax returns or to fail to report income (sometimes they know, sometimes they don’t, sometimes they simply received bad advice from an accountant). It is also quite common for CRA to pursue a criminal conviction that includes fines and even jail time in addition to the penalties and interest that will be assed once a debt is determined.

 

It is far better to get to CRA before they get to you because there are programs that can be used by a professional acting for you so that you can avoid penalties and prosecution entirely. 

For more information about what you can do if you are behind filing tax returns or have undeclared income please visit www.taxsolutionscanada.com or call 1-888-868-1400.

CRA Trusts a Mobster? Mobster Owing $1.5M Sent Rebate Cheque for Almost $400K

While the CRA is busy running down average hardworking Canadians, mobsters appear to be getting cheques. The CRA, particularly the office in Montreal, has come under close scrutiny in the last few months after news of an odd rebate cheque surfaced. Why is this an issue – rebate cheques are, after all, distributed on a daily basis? Because the recipient was Nicolo Rizzuto - not an unknown name, especially within the Quebec underground.  

When the cheque was made out in September 2007, Rizzuto was in jail (arrested and charged with extortion, bookmaking and drug smuggling in one of the biggest police crackdowns on Mafia related activity in Canadian history) and, as a recent CBC News report explained, “Court records show that at the time, he also owed the tax department $1.55 million, which the Canada Revenue Agency tried to collect by getting a tax lien on his home.” 

When this glaring slip was noticed by a veteran investigator within CRA, more than a few individuals raised eyebrows. The cheque was subsequently returned by the family, but it has left many questioning how this cheque made its way past the numerous controls at CRA and into the mail in the first place. 

An internal investigation into this situation and the claims of corruption has since been launched, and a number of CRA employees have been fired - some of these individuals have also been charged by the RCMP with crimes including tax fraud, extortion and breach of trust.

So this begs the question, if the system is corrupt enough to let an almost $400K rebate cheque be issued to someone with a $1.5M tax debt, what measures are in place to ensure that that same organization is on the ball (or dare we say trustworthy) when it comes to the average person’s taxes? And how can you trust CRA promises made to you when you think or know that money is owed. CRA agents have a reputation for duplicity when it comes to extracting money owed, so why voluntarily open yourself up to tax problems? 

Sure, the likelihood of dealing with a corrupt CRA agent is not so high for the average Canadian, but does this mean that you shouldn’t do everything to protect yourself from CRA incompetence? If you know that there are mistakes in past filings, or if you have failed to file past returns, an audit may be in your future. And likely CRA audit and collection team’s agents will contact you in an attempt to discover any inconsistencies or incorrect accounts. If this happens, never just hand over the information being requested (this will not make the “nice agent” your friend - they are the collector using collector strategy to collect from you). It is highly advisable that you contact a professional organization with the specific expertise to help keep CRA hands off of your information and manage the process to avoid enforcement action. There are a number of different programs offered to help individuals with tax debts, but things need to be done correctly the first time to avoid rejection or further intrusive investigations. 

For more about how to protect yourself from the CRA please contact Tax Solutions Canada by calling 1-888-868-1400.

The Summer was Tough for Those CRA Considered to be Tax Evaders

Tax evasion in Canada, or the practice of not reporting or underreporting income in order to avoid paying taxes, is a serious crime, and can carry with it steep fines and sometimes even a lengthy jail term. But getting prosecuted for tax evasion seems pretty unlikely, right? Wrong! Take a look at this short list of some of the many convictions that took place over the summer.

1.      Gary R. Campbell, of Hilton Beach, Ontario, pleaded guilty to four counts of failing to file his 2007 to 2010 personal income tax returns and 22 counts of failing to file corporate tax returns for several businesses from 2004 to 2010. This resulted in a combined fine of $26,000.

2.      Victoria Bailey, of Sault Ste. Marie, Ontario, pleaded guilty to three counts of failing to file corporate income tax returns from 2008 to 2010 and was fined $2,000 per count.

3.      Sam D’Ambrosio, of Brampton, Ontario, pleaded guilty to three counts of failing to file a personal income tax return. He was fined $1,000 per count for a total fine of $3,000.

4.      Elliot Fromstein, of Keswick, Ontario, pleaded guilty to 25 counts of failing to file corporate income tax and GST returns for various businesses from 2003 to 2010. This resulted in a fine totaling $25,000 ($1,000 per count).

5.      Marc Richard, of Timmins, Ontario, pleaded guilty to 12 counts of failing to file personal and corporate tax returns for a number of different businesses from 2007 to 2010. He was fined $1,000 per count, for a total of $12,000.

Know you’ve underreported or not reported all of the income you earned in a given year? As these examples highlight, CRA has the will and the way to find out. Just because you haven’t avoided claiming on an ‘Al Capone’ type level, doesn’t mean that you are safe from prosecution. Our best advice? Take advantage of the Voluntary Disclosure Program, a program offered by CRA to give taxpayers the chance to disclose fully any tax errors on past returns. If accepted, you are safe from prosecution and penalties and are only required to repay the initial tax debt.

Don’t wait for CRA to catch up with you. Owing money to the government is not a crime, but failing to file your income tax returns is. Protect yourself from the fines and penalties that all too often hit average citizens hard. Use the Voluntary Disclosure Program to get things straightened out.

For more information about the Voluntary Disclosure Program please contact Tax Solutions Canada today by calling 1-888-868-1400.