Last updated: April 24 2008
With the April 30 filing deadline just around the corner, now is a good time to review two essential questions with taxpayers:
It's important to stay on the right side of CRA, as the agency is empowered to impose a variety of punishments on taxpayers who fail to comply with the Income Tax Act. And of course, it's important to note at the outset that, under S. 18(1)(t) fines for charges levied under the Income Tax Act are not deductible. Here's what taxpayers and their advisors need to know:
Layers of Penalties Exist. Penalties are charged under S. 162 and 163 prior to the commencement of criminal prosecution proceedings, which are undertaken in cases where a taxpayer has intentionally participated in tax evasion. In such cases, the consequences of successful prosecution are covered under the charging sections of the Income Tax Act in S. 238 and 239, Offences and Punishment.
If a taxpayer is convicted of an offence under S. 238, the penalties under S. 162 and 163 may not be subsequently applied. However, if the penalties were assessed before the complaint gave rise to a conviction, both penalties and offences may be charged. It is therefore common practice for CRA to issue a reassessment notice with penalty charges assessed under S. 163 prior to prosecution proceedings.
Cost of Penalties. Common administrative penalties levied by CRA for non-compliance, excerpted from The Knowledge Bureau's EverGreen Explanatory Notes include the following:
Cost of Offences and Additional Punishment. Convictions under S. 238 and 239 result from criminal prosecution. The taxpayer must be found guilty beyond a reasonable doubt in order to be charged with these consequences. The taxpayer's advisors can also be found guilty and charged under these sections. Here are some of the consequences:
Remember, it is every taxpayer's legal right and duty to arrange financial affairs within the framework of the law to pay the least amount of taxes possible. But if your intent is to defraud, or if you are negligent, there can be a very steep price to pay.
Click on these links now for more information on the Knowledge Bureau's Tax Services Specialist programs or EverGreen Explanatory Notes.