Have Unfiled Tax? - What Canadian Need To Know
No one likes TaxMan, but no one can “ignore” them. You might know that failing to declare taxable income from any source, is a criminal offense punishable by jail time and huge financial penalties.
To get a tax accountant or tax lawyer, that depends on if you have completed your tax return of previous years.
If you are worried about filing your 2006 Canadian personal income tax return because of unfiled returns in previous years, you may qualify for the Voluntary Disclosure Program (VDP) also called Tax Amnesty, which eliminates penalties and prosecution and may result in a discounted interest rate. It is important not to file the back returns without making a VDP application, or you will be charged penalties and full interest.
According to the Canada Revenue Agency (the Canadian income tax department) in 2005-06, Canadian taxpayers were convicted in 293 cases of income tax evasion or fraud. Taxpayers had to pay close to $14.4 million in fines, and were sentenced to more than 33 years in jail. Even if someone else prepares the tax return, the taxpayer is responsible for all the information on the return. Stay away from return preparers who offer you false tax claims. This could include false charitable donations or false child care expense claims, or maybe even false business expenses or losses. If you have filed a false tax return, you can make a Voluntary Disclosure (Tax Amnesty Application) and avoid prosecution and penalties.
According to a recent press report by Ufile, 45% of Canadians find tax return preparation to be stressful.
The startling outcome of the report, however, was that 13% of all Canadians polled said they know someone who has not yet filed their tax return for the previous year.
Frankly, that’s a problem - and not for the TaxMan. Under sections 238(1) and 239(1) of the Canadian Income Tax Act, not filing a return, filing more than one year late if tax is due, or failing to declare taxable income from any source, is a criminal offense punishable by jail time and huge financial penalties.
Contrary to what you might think, if you don’t file your tax return, the Canada Revenue Agency doesn’t forget about you. In fact, you are never entirely “off the radar†. They prefer to monitor your financial behaviour over time, using identifiers like your SIN or date of birth to access data from your bank accounts, your credit card transactions, or your acquisition of property and other possessions. The longer they let you continue as a non-filer, the more revenue they can generate in penalties and daily interest on the tax you should have paid. And the longer the period of tax delinquency, the easier it is to establish a clear cut case for criminal tax evasion.
If you are convicted of criminal tax evasion, penalties can be as much as 250% of the tax owing, plus daily interest. A jail term of up to two years is also possible. And you will have a criminal record for the rest of your life.
This message is short and to the point: If you are a non-filer, you need to protect yourself against criminal prosecution by seeking legal protection immediately. Whatever you do, do NOT file your current year tax return, or any of your other outstanding tax returns, until an experienced tax lawyer has negotiated a tax amnesty settlement on your behalf.
There are some tips and info on Canadian Tax Returns below if you are interested in knowing more:
Employers are required to deduct and remit Canadian income taxes (as well as Canada Pension Plan and Employment Insurance premiums) from their employees. If they fail to do so they are subject to interest and penalties. If they hire workers as independent contractors the risk and liability is with the employer if the Canada Revenue Agency (the Canadian income tax department) determines that the worker is in fact an employee.
In Ceco Operations Ltd. (2006 TCC 256), the Tax Court of Canada applied the general anti avoidance rule (GAAR) to a partnership asset rollover. A sale of a business contemplated two years before the transactions was structured via a partnership with the purchaser in 1998. Ceco rolled business assets to the partnership under subsection 97(2) for cash and a partnership interest. The purchaser injected cash equal to the value of Ceco’s partnership interest and the partnership used the cash to invest in preferred shares of a company; that company and Ceco were owned indirectly by the same holding companies. The court said that the series of transactions was a patent abuse of subsection 97(2) and that GAAR applied to deny the partnership asset rollover.
In the Canadian Income Tax decision Anchor Pointe Energy Ltd. (2006 TCC 424), the Tax Court of Canada concluded that the reverse onus (that requires the taxpayer to disprove Canada Revenue Agency’s assumed facts) did not apply to facts assumed by the minister subsequent to the expiration of the reassessment period. The court concluded that the normal-course rules relating to the reverse onus of proof do not apply where the Minister of Revenue first raises the factual assumptions at the confirmation stage. The Minister has the onus of proof for such assumptions of fact.
Canadian income tax shelters are now being sold for the 2006 taxation year. Be sure you understand the risks, both business and tax, before making any decision to invest in a tax sheltered investment or charitable donation gifting arrangement.
In the case of Smith v. The Queen the Supreme Court of British Columbia upheld a conviction of failing to file Canadian Income tax returns on the part of Mr. Smith who was self employed as a consultant to the tax protestor community.
The Federal Court – Trial Division conducted a judicial review of a denial of a Voluntary Disclosure in the recent case of 334156 Alberta Ltd. v The Queen. The court found that the Canada Revenue Agency (the Canadian income tax department) was justified in denying the application since they had contacted the taxpayer to file the outstanding returns.
Canadian residents are taxable in Canada on their world income. This includes income or capital gains earned offshore, such as through the rental or sale of a foreign property such as a vacation condominium in the Caribbean or elsewhere. Failure to report such income is tax evasion and is punishable by a fine or even a jail term.
Unclaimed allowable business investment losses (ABILs) are not included in the newly enacted extended 20-year carryforward period for non-capital losses for Canadian Income Tax purposes. ABILs retain their 10-year carryforward period and become net capital losses thereafter.
A taxpayer who uses public transit should be sure to maintain proper documentation to claim the new transit-pass tax credit on his or her 2006 personal Canadian income tax return. The credit applies to monthly or longer passes for transit.
When computing Canadian income tax students can deduct moving expenses from the taxable amount of scholarships, bursaries or research grants that they receive, or against employment or business income, so moving expense receipts should be kept.
The Tax Court of Canada decided in the recent case of JACQUES MARCHESSAULT v. HER MAJESTY THE QUEEN that the Canadian income tax liability on income earned during the year prior to the making of a proposal under the Bankruptcy and Insolvency Act is subject to the terms of the proposal and the income tax would therefore not have to be fully paid.
The decision of the Tax Court of Canada in the case of Carrier v The Queen confirms that a Notice of Objection that was not filed on time due to an accountant being busy during tax season will not be accepted late.
If you acquire a depreciable asset for business purposes you can claim tax depreciation, called capital cost allowance for Canadian income tax purposes. The rate depends on the type of asset. In the year of acquisition only 50% of the normal depreciation can be claimed.
Canadian taxpayers need to have transfer pricing documentation in place to support their inter-company transfer prices and this documentation must adequately address the contributions of the parties, in particular the Canadian entity. The CRA (the Canadian income tax department) indicated that deficiencies have resulted in penalties being applied.
If you sell shares of a business and part of the proceeds is based on future results, this is called an “earn out†and it must be structured properly so as to enjoy favourable Canadian income tax treatment.
Income from a foreign pension plan received while a resident of Canada is taxable in Canada irrespective of where it was earned. If you have failed to report such income you can avoid penalties by making a voluntary disclosure (tax amnesty application).
The recent Federal Court of Appeal judicial review decision in Jerry Ross v. Canada Customs and Revenue Agency found that the financial hardship of a taxpayer must be properly evaluated by the Canada Revenue Agency (the Canadian income tax department) in making a “fairness†determination to cancel income tax interest and penalties.
The deadline for self-employed taxpayers to file their T1 Canadian income tax returns for 2005 is June 15. If you missed the deadline, and are behind in filing other years, do not file your returns without making a voluntary disclosure (tax amnesty application) in order to avoid penalties and reduce interest.
Reference: Top 10 Tax TIDBIDS
Tags: tax lawyer, tax consultant, canadian tax lawyer, tax attorney, unfiled tax solution, tax filing, canadian tax, tax amnesty application, income tax return
March 14th, 2008 at 11:06 am
I havnt paid my taxes since around2000 after i missed a couple years i was lost and didnt know what to do and let it go …Its driven me nuts and I have lost a lot of sleep over it and had alot of nervous days, nights,weeks….I havnt been able to tell a sole not freinds nor family.Bad luck has built up around me and spent the last two years injured with little work in between..What do I do?????????