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For the week of October 24, 2012



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► Step one: set your goals, says David Christianson

► Economic update: Dispelling global uncertainty

► Evelyn Jacks: New relationship? Beware of tax consequences

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Poll Question: Should governments increase taxes on investment income dividends and capital gains to increase revenues and meet their responsibilities?

DISTINGUISHED PRACTICES: Tips for Real Wealth Managers™: Broader interpretation of transfer pricing

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Tax Tips: How the CRA is helping small business

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Voluntary disclosure could keep you out of jail


March 28, 2012

If you have not been totally forthcoming with Canada Revenue Agency (CRA), you should take advantage of the CRA's Voluntary Disclosures Program (VDP) and set the record straight. The CRA is making it very clear it will not tolerate taxpayers shirking their responsibilities.

Take, for example, tax advisor Christopher Patterson of Toronto. According to the CRA, Patterson was selling false charitable donation receipts to clients. When he prepared their tax returns, he duly claimed those charitable donations as deductions on line 144 of the income tax return. For the 2004 to 2008 taxation years, he claimed more than $1 million in false charitable donation deductions, reducing the amount of taxes payable by his clients. Overall, unwarranted refunds totaling $313,992 were issued to Patterson's clients.

Patterson has pleaded guilty to fraud and received an 18-month conditional sentence and 200 hours of community service; he is also prevented from preparing or filing tax returns for anyone but himself.

Tax protestors in Saskatchewan may have received even harsher punishments. (Tax protestors commonly use the "natural person” argument to claim that they are not legally required to pay taxes, a claim the CRA does not accept.) Douglas Amell was sentenced to 16 months in jail and fined $189,796 for tax evasion. Heidi Keyzer was sentenced to five months in jail and fined $33,106, and Robert Amell was sentenced to three months and fined $20,334. The offences occurred during the taxation years 2003 to 2006.The fines represent 100% of the taxes sought to be evaded and benefits received.

But you may avoid these penalties if you make a valid disclosure. A valid disclosure meets four conditions: it must be voluntary, complete, involve the application or potential application of a penalty, and generally include information that is more than one year overdue. You must complete form RC199, Taxpayer Agreement – Voluntary Disclosures Program. If the CRA accepts the disclosure as valid, you may only have to pay the taxes or charges owing, plus interest.

Greer Jacks is updating jurisprudence in the EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.