People often ask “does the CRA actually prosecute people for tax evasion.” Scarily, it happens all the time and convictions are actually posted on the CRA website.
Here is a great example of a man who owned a viable business and let his tax problem get out of control, resulting in the CRA prosecuting him for tax evasion.
In December of 2012 an Ontario businessman was fined $116,000 for tax evasion. The fine represented 75% of the taxes evaded. In addition to having to pay this massive fine the taxpayer’s company was ordered to pay back taxes, interest and civil penalties totaling more than $800,000.
The taxpayer was in the lumber business and the prosecution ensued as a result of an investigation that had taken place with respect to the taxpayer’s 2005 and 2006 tax years. The debt arose because the taxpayer had deducted expenses he had incurred building a home on his company’s tax returns.
This is an extreme example of something that happens all the time with self-employed individuals. It can be very tempting to write off personal expenses like travel or work on your home on your business’s tax returns, but doing so can result in severe consequences. In Canada in 2013, 43 taxpayers have already been convicted of tax related offences – and these are the cases that made it through tax court.
The more likely scenario that occurs and what thousands of taxpayers face is that the CRA will simply levy interest and penalties so massive to penalize you for non- compliance that they do not always prosecute as well. They can then leverage enforcement remedies like wage garnishments, freezing your bank accounts, placing liens on property and more… This is often easier for the CRA because they don’t need to go to court or to have a court order to take these enforcement actions against you.
But you cannot gamble with your freedom and turn a tax/money problem into a criminal record and jail time. We all know that CRA will prosecute all different types of tax offenders just to keep the pressure on taxpayers to comply.
If you know that you filed a return with the CRA where you were aggressive in calling personal expenses business deductions you can ask us to help you take the CRA carrot and avoid their very big stick (and having to look over your shoulder for years to come). Come clean with the CRA as soon as you can and avoid penalties and prosecution. This pathway is only available to taxpayers who have not been contacted by the CRA about the tax year(s) in question.
If you are in a situation where you have income you would like to declare or the CRA has assessed you and you have a huge tax debt, you can recover but you will need a plan. Seeking professional consultation with a company specializing in helping taxpayers deal with tax problems is the essential start. As we have written elsewhere, this is dangerous ground when you go to the CRA to confess to your offences and ask for forgiveness and understanding. We have sadly seen too many well intentioned taxpayers make matters worse only because they or their accountants are not experienced in this particular field. The faster you commit to dealing with your tax problem, the faster you can put it behind you.
If you have a tax problem and you need help, please contact Tax Solutions Canada at 1-888-868-1400 or visit www.taxsolutionscanada.com.