What if you do not file a return, you pay late, or are charged with tax evasion?

Region: Ontario Answer # 178


Normally, if you do not file a tax return and are required to, or if you make false statements in completing your tax return, or if you leave out important information so that you under report your income, the Income Tax Act imposes penalties. In circumstances of willful fraud or tax evasion you may be criminally prosecuted.

Penalties for filing taxes late or paying too little

Under the law you are required to file your tax return and pay all taxes owing by April 30 of the following year. If you do not file a return, and are required to pay taxes, you will be assessed a penalty of 5% of the amount owing plus 1% for each month it is past due, up-to 12 months. You will also be charged compound daily interest on any outstanding tax. If you cannot afford to pay the entire amount you owe at once, you may be able to arrange a payment plan with Canada Revenue Agency (CRA). If you are found to owe more than you calculated, you can usually appeal this decision.

Penalties for tax evasion and fraud

If you have not filed a tax return, you could be charged with a summary offence under the Income Tax Act. If you are found guilty, the penalties can include substantial fines and a prison sentence. If however, you are charged with tax evasion, for example, because you misrepresented or misled CRA, you could face a fine of up-to 200% of the total amount of taxes evaded plus interest and penalties, and up-to five years in jail.

Particularly serious offences can trigger a criminal case. The procedure and rules of the criminal law and the Criminal Code of Canada apply to tax evasion. Therefore, a conviction for tax evasion will result in a criminal record. Your non-payment will also be recorded with credit bureaus. Further, CRA has the authority to seize your assets, wages, RSPs etc. until the taxes, penalties and interest are paid. Visit the Canada Revenue website on Tax Evasion for more info.


Voluntary Disclosures Program

In an effort to collect taxes owed and avoid the time and expense of prosecuting people, CRA has set up the Voluntary Disclosures Program (VDP). The Program allows people to disclose any information that is not accurate, not complete, or that was not reported on previous tax returns, without having to pay a penalty or face prosecution. However, the individual will still be responsible for paying the tax owing plus interest. In some cases, CRA may grant partial relief of the interest owing.

For information on how to file an income tax return, visit the Personal Income Tax page on the Canada Revenue Agency website. For general information, contact Canada Revenue Agency.

For legal advice and assistance with tax planning, a CRA tax dispute, or other tax issues, contact Tax Chambers LLP

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