Does the Canada Revenue Agency take enforcement action?

You bet they do!  This blog will follow some of the recent enforcement actions that CRA has been involved with to illustrate the old adage that  “people will try anything”.   As the Canadian tax system is based on self-assessment, the CRA does undertake regular review of tax returns to monitor compliance with tax laws.

Recent statistics released by CRA demonstrate how much enforcement activity is undertaken in a given year.  For the 2008-2009 period the CRA undertook 374,000 audits or reviews in Canada and demanded 787,000 tax returns from individuals and corporations who had failed to report their income by filing a return, generating $2.3 billion dollars.  Don’t be a late or non-filer.  The odds are against you and it will cost much more in the long run.  If you don’t have the cash to pay your current tax liabilities consider lower cost alternatives such as arranging a line of credit.  In some cases CRA will also negotiate extended payment terms for taxes due so long as you report in good faith.  If you need help to sort out your situation this is preferable to getting further and further behind.  Fees you pay to an accountant for assistance may also be tax deductible to you in the year they are paid, lessening the “pain” behind this expense.  See the whole article here:

http://www.cra-arc.gc.ca/nwsrm/rlss/2010/m05/nr100520-eng.html

Phony donations – April, 2010 – Three people in Victoria have been charged with selling inflated donation receipts at  10-17% of their face value to a total alleged value of $7.6 million in the name of a former registered charity.  More than 450 people allegedly purchased receipts.  This type of fraud is particulalry worrisome as it undermines the position of genuine charitable organizations that rely on donations to keep their services available for the community.

CRA has launched “Project Trident” in an effort to crack down on these types of charitable frauds.  To read more please see the news release at http://www.cra-arc.gc.ca/nwsrm/cnvctns/bc/bc100408-eng.html

As the CRA points out it is always possible for taxpayers to avoid facing charges themselves by using the voluntary disclosure program, so long as enforcement action has not already been initiated.

Unreported income – Tax evasion – May, 2010 – A Victoria businessman has been convicted and fined for tax evasion as a result of failing to report income from rental properties and laundry services.  The result is a fine of $40,000 in addition to back taxes and interest of $74, 150 and six months community service.  You can see the full story here:  http://www.cra-arc.gc.ca/nwsrm/cnvctns/bc/bc100527-eng.html

Pianist Tax fraud – March, 2010 – A Richmond based pianist was recently fined $43,468 and given an 18 month sentence for various fraudulent claims including failure to report rental income, failure to report performance income and for claiming credits for his overseas parents as dependents http://www.cra-arc.gc.ca/nwsrm/cnvctns/bc/bc100322-eng.html

In addition to the fine and additional sentencing, the taxpayer must also repay the entire amount of tax due plus interest.

Garlic Rose Cafe conviction – June, 2010 – A Victoria business man has been convicted of tax evasion and fined $497,730 for taxes and GST not reported.  The court found that the owner had not reported $829,134 in revenue from morning and afternoon shifts and instead deposited the monies received in personal bank accounts.  A conditional sentence of 24 months less a day was also handed down.  The full news release is available here: http://www.cra-arc.gc.ca/nwsrm/cnvctns/bc/bc100611-eng.html

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Disclaimer

Information contained within this blog or on this website, either expressly or by reference, does not constitute professional advice and is designed strictly for general information purposes. As individual circumstances vary widely anyone seeking assistance with either their accounting or tax situation are strongly encouraged to seek appropriate professional advice.

2 thoughts on “Does the Canada Revenue Agency take enforcement action?

  1. James Gustafson Post author

    The CRA policy with respect to leads provided by the public for suspected non-compliant individuals or businesses as well as the appropriate office to contact for your region of the country is laid out here:
    http://www.cra-arc.gc.ca/gncy/nvstgtns/lds-eng.html

    My understanding is that all leads will be evaluated and acted upon to the extent the information provided is credible. For example if someone is reported for having failed to file a tax return for many years and CRA can confirm this from their own records then there is a high probability enforcement action will be taken once it has been brought to their attention.

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