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Last updated: June 12 2014
Evelyn Jacks: Ostriches Aren’t Smart; Tax Penalties Are Expensive
Well it's that time of the year again. . .tax audit season. The ostrich approach is one way to cope, but not the smartest.
Rather, getting your head out of the sand and taking one more look at the validity of the claims on the tax returns you prepared – for yourself and your clients – is really important before submission to the glorious cottage season. The alternative approach, in fact, could ruin many sunsets to come.
The onus of proof is on the taxpayer to show that all the information on a tax return is properly reported – all the income is reported from all sources, including barter transactions; all the deductions are matched to income-earning potential; documentation is available to back up those numbers and all tax credits – refundable and non-refundable alike – are properly claimed (no hiding that common-law relationships, for example).
However, when there is potential fraud, in addition to late filing and gross negligence penalties, criminal prosecution can be pursued by CRA. The onus of proof Is on CRA to show your willful intent, but both taxpayers and their professional advisors can also be found guilty and charged. . .and the consequences are expensive, as shown in the chart below.
|
Offence |
Punishment |
|---|---|
|
Failure to make or file a return as required. |
A fine of not less than $1,000 and not more than $25,000 or both fine and imprisonment for a term not exceeding 12 months. |
|
Tax evasion, including making of false, deceptive statements in a return, certificate, statement or answer, destroying, altering, mutilating, books or records, or otherwise willfully evading tax or fraudulently claiming refunds or credits. |
A fine of not less than 50% and not more than 200% of the amount of tax sought to be evaded or both the fine and imprisonment of not more than two years. |
|
Prosecution on indictment: any person charged tax evasion may be prosecuted at the election of the Attorney General of Canada to a further penalty—in addition to any other penalty. |
A fine of not less than 100% and not more than 200% of the amount of tax sought to be evaded or credits sought to be obtained. |
|
Communication of confidential information by government official. |
A fine of not more than $5,000 or imprisonment of up to 12 months or both. |
|
Communication of taxpayer’s SIN. |
A fine of not more than $5,000 or imprisonment of up to 12 months or both. |
It’s Your Money. Your Life. Filing accurate tax returns on time is one sure-fire way to preserve wealth in the family. And, in contrast to the economic and political black swans we cannot do much about, avoiding tax penalties is completely within our control.
Evelyn Jacks is president of Knowledge Bureau and author of 51 books on tax and personal wealth management. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management” Follow Evelyn on Twitter at @EvelynJacks.
