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

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 tax 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.  Personal and business tax issues are vast and complicated. If you are charged with tax evasion or tax fraud, you should consult a lawyer immediately. To get help, call a lawyer now.

Tax invasion and tax fraud also include:

  • falsifying records and claims
  • purposely not reporting income
  • inflating expenses
  • claiming a fraudulent refund or benefit

Tax evasion is an offence under section 239 of the Income Tax Act and section 327 of the Excise Tax Act.

If 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.

Tax fraud is an offence under section 380 of the Criminal Code and involves using deceit, falsehoods and any other fraudulent means to defraud a person or the public of money or anything else of value.

Particularly serious offences can trigger a criminal investigation. If convicted of a tax crime, consequences can include:

  • CRA seizing your assets, wages, RSPs etc. until the taxes, penalties and interest owed are paid
  • non-payment will be recorded with credit bureaus
  • a criminal record
  • possible jail time
  • large fines imposed by the courts

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.

Get help

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

Personal and business tax issues are vast and complicated. It is very important to consider the tax consequences of gifts and inheritances before you give away your belongings. To get help, call a lawyer now.

Tax Chambers Tax Law Ontario All Topics Sept 2017Tax Chambers Tax Law Ontario All Topics Sept 2017


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