Remember Mississauga’s veteran and long-serving Mayor McCallion whose son who was the recent centre of controversy with respect to business dealings that led to a conflict of interest hearing against Mayor McCallion? While the conflict of interest allegations were later dismissed, Mayor McCallion’s son has managed to make the news again – only this time for an alleged problem that is all too common in Canada today – failing to file income tax returns.
Failing to file tax returns is far more common than you may think. Some folks get very busy, don’t think they will owe and so they don’t prioritize the filing of returns. Others fear that they will have to pay a large amount to CRA, which they cannot afford, so they think if they do not file their taxes it will buy them the time to come up with the money. Still others just find tax filing overwhelming – all the paper they do not understand or have misplaced…. There are a number of reasons people don’t file and some are deeply psychological.
In the case of Hazel McCallion’s son, a real estate agent, he allegedly failed to file tax returns for 9 years, leading to at least 50 charges by CRA. Late filing can quickly become the crime of tax evasion and common people are prosecuted regularly by CRA.
While we cannot speak specifically to Mr. McCallion’s case, which has yet to make its way through the courts, the real estate industry and real estate agents are certainly one group commonly targeted by CRA. It is an industry that alternates between feast or famine – yet the agent’s personal expenses just go on every day. Also, it is an industry where one can incur substantial tax deductible expenses.
Getting behind with filing tax returns can have a snowball effect and as each year passes the idea of filing those late returns and facing the massive tax debt (and penalties) that may ensue becomes a scarier prospect.
The good news is that you can get caught up without all the pain of penalties and interest. Often with reasonable repayment terms and no criminal prosecution and public humiliation.
Has the CRA requested that you file returns for the tax year(s) in question? If yes, proceed to the next paragraph. If they have not yet contacted you to file, you may be able to file your late tax returns under the Voluntary Disclosure Program. You will have only one shot to make a successful application under this program and cannot afford to make a mistake with this. CRA can agree to accept your late returns and not assess penalties, interest or prosecute you for tax evasion.
If they have demanded that you file, then you must file. If you do not, CRA will likely at some point either notionally assess you (estimate what you earned and will owe and assess you for taxes based on these estimates) or prosecute you for tax evasion. It is not illegal to owe money to CRA. It is illegal to fail to file your returns. If notionally assessed, refile your returns to ensure that the tax year in question is reflecting accurate numbers. Once you file your late returns you will later receive an assessment from CRA. Once you receive your assessment, pay attention to penalties and interest that are charged and the types of penalties. Even if you filed your return voluntarily you can still file an Objection to CRA’s assessment of penalties. In the case of gross negligence penalties, CRA can assess them but we have had a lot of success in having them reduced or removed through an Objection because once the Objection has been filed it is the burden of CRA to prove gross negligence which is difficult for them to do when they are trying to argue with experience greater than their own – please see an expert in this field – and preferably someone who has worked at CRA in a senior role.
Even if you are fighting penalties – once you have an idea of what you will owe the next thing to do is look at strategies to deal with the tax debt. This may mean pursuing financing to pay the debt, making a payment plan with CRA or exploring other legal options to come to an arrangement that you can live with and that CRA will accept. Also, make sure that you are exploring other avenues to mitigate penalties and interest, such as the taxpayer relief program. We never advise trying to directly negotiate with CRA – this is best left to experienced tax professionals.
In the case of Mayor McCallion’s son – the consequences for the late filing could be a maximum fine of $25,000.00 and 12 months in jail for EACH count filed by the Minister.
For more about late filing and dealing with penalties and interest, please contact Tax Solutions Canada today at 1-888-868-1400.