We often hear about individuals in the US being prosecuted for tax evasion and being sentenced to hefty jail terms. Not filing tax returns and not declaring income is a crime in the USA – but is it in Canada? Do people actually go to jail in Canada for tax evasion? Yes.
In Mid-July, The Toronto Star reported on a Brampton businessman, Najam Mahmood, who has been sentenced to a one year jail sentence, coupled with a $687,000 fine payable over ten years. This sentencing comes about after Mahmood was charged with eight counts of income tax evasion and failing to submit goods and services taxes.
Mahmood ran a business teaching other individuals about currency trading and making money – but in the process failed to collect GST or file taxes. According to Canada Revenue Agency investigators, the total income not reported was approximately $1.5 million.
Mahmood’s sentence is just one example of the many CRA convictions for tax evasion that occur each year in Canada. Whether as a result of questionable accounting, deliberate evasion, or because of a lack of knowledge regarding what reporting is required, not filing tax returns correctly (leaving out some or all of the income you earned) can lead to a jail term, fine, or both.
What can you do if you know that you have not reported income or have reported it incorrectly? Well, the worst thing that you can do is ignore it – this will often only make the problem worse. The CRA employs hundreds of investigative agents to uncover mistakes or find those individuals not filing tax returns – they will eventually find you (and the longer you wait, the greater the consequences – both monetary and non-monetary). A smart alternative is to speak with an organization experienced with dealing with these types of tax problems.
What types of help are we talking about? In this situation, where you know that you have misreported, underreported, or failed to report entirely, a great program that may be available to you is the Voluntary Disclosure Program. Through the Voluntary Disclosure Program, the CRA gives you the opportunity to amend past filings and file late returns and can decrease (and in some cases eliminate) the penalties for incorrect reporting. You are still required to pay the tax debt that accrues, but relief from late filing penalties can be a significant benefit.
The Voluntary Disclosure Program can be incredibly valuable – but you have to meet certain criteria and you only have one shot. You have to get it right and with the potential consequences you cannot afford to learn on the fly. This is why it is best to have assistance from someone who knows the process well. Our advice – don’t try it on your own. If you are unsuccessful with the application, you will have alerted the CRA to your problem and will have no recourse for relief. If you know that you have a tax problem as a result of not filing tax returns correctly (or at all), speak with a representative from an organization that can get you the help you need.
For more information about the Voluntary Disclosure Program please contact Tax Solutions Canada today by calling 1-888-868-1400.