Charged with a Tax Crime – or Afraid You Might Be?

Corporate Tax Planning

Have you been charged with tax evasion or are you worried you might be? Have you received a requirement to file, a summons related to unfiled tax returns, or is it possible that any of this may occur in your situation? Don’t worry because Barrett Tax Law is here to help.

First let’s look at the definition of tax evasion in the Income Tax Act. The first thing to note is that tax avoidance is not illegal, rather, only tax evasion. It is a subtle, but very serious difference. Tax avoidance is the act of planning your affairs in the most efficient tax manner; i.e. paying the least amount of taxes LEGALLY possible. Tax evasion is specifically defined in Section 239 of the Income Tax Act, which states that every person who has:

  • “Made, or participated in, assented to or acquiesced in the making of, false or deceptive statements in a return, certificate, statement or answer filed or made as required by or under this Act or a regulation, (essentially lying to the Canada Revenue Agency “CRA”);
  • To evade payment of a tax imposed by this Act, destroyed, altered, mutilated, secreted or otherwise disposed of the records or books of account of a taxpayer, (falsifying documentation);
  • Made, or assented to or acquiesced in the making of, false or deceptive entries, or omitted, or assented to or acquiesced in the omission, to enter a material particular, in records or books of account of a taxpayer, (falsifying books and records);
  • Willfully, in any manner, evaded or attempted to evade compliance with this Act or payment of taxes imposed by this Act; or
  • Conspired with any person to commit an offence described in paragraphs 239(1)(a) to 239(1)(d).”

Contrary to popular belief, the Canada Revenue Agency can and does prosecute regular Canadian taxpayers for tax evasion and tax fraud. If you have done any of the above, falsifying documentation, lying on your returns, or falsifying records then there is a very real possibility you will be charged with tax evasion.

If you are found guilty of tax evasion you may be subject to a fine up to double the amount of the tax that was to be evaded and/or imprisonment for up to 2 years.

If you are found guilty of not filing tax returns after being summoned to appear in front of a judge, Section 238 of the Income Tax Act provides a fine of anywhere between $1,000 and $25,000 and up to one year of imprisonment.

As you have read, the penalty for tax evasion is very serious. Not many people are aware that they may go to prison for lying to the CRA, or for simply not filing taxes. But this is not only a possibility, but it occurs quite regularly. In fact the CRA publishes a list every year to discourage others from attempting risky or illegal tax strategies. This is not a list you want to be on.

Here at Barrett Tax Law we can assist if you have been charged with tax evasion, or if you think you may be in a position to be charged. We can assist you in filing previously unfiled returns, or correcting errors made on prior returns. We can also help decipher your accountant’s work on your tax returns to determine whether your accountant is using the most efficient tax avoidance strategies or if it has crossed into evasion.

Simply put, no one wants to find themselves in the position where they are charged or going to be charged with tax evasion. Do not think that you are alone; Barrett Tax Law is here to help. Give us a call or complete the form on our website and see what we can do for you.