There are many different consequences that can result from not filing tax returns.  These consequences range from a small penalty to jail time.  And when the CRA decides to pursue criminal prosecution, they have a success rate of close to 100%.

And where they see fit, the CRA recommends that the prosecutors take on cases for tax evasion or failure to file, both of which result a permanent criminal record (unless a pardon is granted) but also fines of up to $25,000 for every count of failure to file an information return. Of course, the most serious of all the consequences could be imprisonment and having a permanent public record on the CRA’s website.

Some mistakenly believe that if they cannot afford to pay the tax bill then they should not file.  This couldn’t be further from the truth.

There is absolutely no excuse for not filing.

Remember, it is illegal not to file.  It is NOT illegal not to pay.

But First, the Reminders

Taxpayers don’t just wake up one morning to find that they have been criminally charged for not filing.  The CRA is very careful to follow the correct procedure, and that procedure involves plenty of warning.

Typically, taxpayers will start to receive letter mail and phone calls from the CRA, requesting that they file certain tax returns within a certain time period.  Over time these letters may either become sterner and then the requests become demands, or these letters may cease altogether and the CRA may go ahead and file arbitrary assessments (more about that below). In those cases where the requests become demands, those demands culminate (in every case I have ever seen) with a personal visit by the CRA to the taxpayer during which the CRA advises the taxpayer that they will be subject to prosecution if they do not comply and provide returns by a certain date. Only then does the CRA proceed with the prosecution, and this process takes months in most cases.

In those cases where the CRA does not pursue prosecution they often process arbitrary (or notional) assessments against the taxpayer. What this means is that the CRA creates notices of assessment based on certain information that they have. In the case of a business the CRA will make a guess about the taxable income (usually based on previous returns) and they will process this without the benefit of any deductions. The idea is that the taxpayer is supposed to be taken by surprise when they see the assessments, and thus coaxed into providing the CRA with the actual numbers in the form of a properly filed tax return.  Once the return is filed, subject to the CRA’s right to audit, the new numbers override the old ones and a notice of reassessment is issued.

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