On March 26th, The Globe and Mail reported that the RCMP announced that they had charged 6 Ontario residents with crimes related to a scheme where those accused had convinced thousands of Canadians to participate in a fraudulent investment scheme.
Here is how it worked:
It is alleged that all the way back to 2004, investors thought that they were legally purchasing business losses that could later be used to reduce their taxable income.
Well, not only were investors defrauded of millions – CRA was too because they issued millions of dollars in tax refunds illegitimately.
What is interesting about this article is that in this instance the RCMP have gone after the companies who advised their clients essentially to commit fraud.
What about the folks who cashed refunds issued by CRA as a result of these transactions?
Here is what we see take place when individuals have received refunds they were not entitled to:
- CRA re-assessed the past return
- Penalties are assessed – if CRA believes that there has been gross negligence (which is often the case with tax and investment schemes/shelters) these penalties could be up to 50% of the tax debt
- Interest is assessed retroactively to the date that the refund was issued on both the tax debt and the penalties – compounded daily
- You could be prosecuted depending on how you manage your problem
- CRA will proceed to collect the money from you
What can you do if this has happened or you anticipate something like this happening in the future?
Time is not on your side. The more time that passes, the larger the penalties and interest grow. Resolving the problem before CRA does (or worse the Department of Justice sends the RCMP to come after you) has major advantages. Here are two things that you may be able to do:
- Get to them before they get to you – if CRA has not yet re-assessed you and you are certain that you have been involved in a charity/tax scheme, speak to a tax professional about making a Voluntary Disclosure application. This is not something you should try to do yourself – it is an official process that only works if done right the first time. If you qualify and are accepted, CRA will allow you to refile your return and at the minimum avoid penalties and prosecution.
- File an objection – if CRA has already assessed you and even if you agree that you owe the tax you can still object to the penalties. Especially in the case of gross negligence penalties (that can add up to 50% of the taxes with interest accumulating on this as well). This is also a very time sensitive process because you must make your objection within 90 days of being re-assessed. If the 90 days has passed you may apply for an extension to file your objection up to 1 year after the 90 days. If your objection is accepted (even partly) you can potentially save thousands of dollars in penalties and the interest that would have been assessed on the penalties.
According to The Globe and Mail article, the 6 people facing charges are:
1. Vincent (Vince) Villanti, 66, of Whitby
2. Shane Davidson Smith, 46, of Peterborough
3. David Prentice, 52, of Oakville
4. Ravendra (Ravi) Chaudhary, 65, of Toronto
5. Andrew Lloyd, 42, of Pickering
6. Joe Loschiavo, 49, of Toronto.
Police allege the companies used by the accused to run the scheme included Integrated Business Concepts, Synergy Group 2000, Cason Global Wealth Association and IBCA 2009. Police say the investigation is ongoing and further arrests and charges are possible. Click here for the full article.
If you have been caught up in a tax scheme and need help dealing with CRA you can also find out more information by filling out the contact form or calling 1-888-868-1400.