Category Archives: Tax Penalties

CRA tax penalties

Understanding Tax Evasion vs. Tax Avoidance

Understanding Tax evasion vs. Tax Avoidance

Tax Evasion is illegal; it is the evasion of taxes by taxpayers including individuals and businesses such as corporations. Under tax evasion taxpayers intentionally misrepresent the true income or tax owing status to the tax authorities to reduce their tax liability. Such act may include false tax filing, such as report less income, profits or gains than actual or inflating expenses or deductions.  The extent of tax evasion is measured in the amount of unreported income, which is the difference between the reported income and the actual income.

Tax avoidance, on the other hand, is not illegal. It is when taxpayers use tax laws to reduce tax liability. Both tax evasion and avoidance are tax noncompliance in different degree, as they cover activities that intend to play with the tax system, although such classification of tax avoidance is disputable, given that avoidance is not illegal.

Canada Revenue Agency CRA Response to Tax Evasion

The degree of tax evasion depends on several factors, such as the amount of income an individual or a corporation has. Normally, when the amounts involved are minimal, the efforts to evade income tax decline. The extent of evasion also depends on the CRA’s tax administration effectiveness.

CRA has been improving its technology, procedure and staff training to combat tax evasion. CRA also adopted various means to reduce tax evasion and increase the level of tax enforcement. Tax auditors are required to identify tax evaders, collect the taxes interest and penalties and often those evaders become published on mass media or CRA website so they can become examples for their fellow Canadian taxpayers to comply with the tax rules.

 

Level of Tax Evasion and Punishment

Just like many other countries, Canadian tax authority considers tax evasion a crime, and the guilty party is liable to fines and/or imprisonment.  Dishonestly misreporting income in a Canadian tax return is not necessarily considered a crime. It is also a reality that the extent of evasion depends on the severity of punishment for evasion. As long as you have undeclared income you could face penalties or prosecution for tax evasion. The Canadian Income Tax Act Section 238 and 239 set out details on tax evasion and the penalties for tax evasion in Canada.

The offenders who are guilty under section 239 of the Income Tax Act will be subject to a fine of up to double the amount of the tax that was evaded and/or imprisonment for a term not exceeding two years.

Income tax evasion can lead to criminal charge and it is a serious act. It should be avoided at all costs. If you have been hiding for years from the CRA for unreported or under reported income, you may want to consider cleaning up your tax problems voluntarily. With experienced tax professionals’ help, your damage will be greatly reduced. The worst nightmare happens when after many years of hiding, all of sudden CRA starts investigation. You could lose everything overnight. Take risk free action immediately before it is too late. Contact Tax 911 Now, the experienced tax professionals for a private, confidential, free no obligation consultation! Call 1-877-918-2991 today!

CRA Tax Penalites

 

Filing taxes late: There’s a high cost


Thousands of Canadians file their taxes late. Be prepared to pay hefty penalties and to lose some government benefits if you do.

Millions of Canadians filed their tax returns before the April 30th deadline, but there are thousands that end up filing late, or not filing at all.

If you do not owe money, there is no late filing penalty. You will still be able to file later and still receive your tax refund. However, if you owe money and file late for whatever reason, you will end up triggering penalty fees, face interest payments and become ineligible for certain government benefits.

Here are few things to know if you’ve filed your taxes late:

Interest and penalties
There are two different kinds of penalties levied by the the Canada Revenue Agency (CRA).

There are late filing penalties when you owe taxes and don’t file your return on time. The penalty is 5 per cent of the amount owed, plus an additional 1 per cent of the balance owing for each month that your return is late – to a maximum of 12 months.

For example, if you owe $2,500 and file six months late, you will be charged 11 per cent – or $275.
On top of the late filing penalty, you will also be charged interest on any amount owed. Interest is compounded daily, and interest rates can change every 3 months.

If you filed a late return this year, and you were also charged a late-filing penalty in one of the previous three years, your late-filing penalties will double. The CRA will charge a penalty of 10 per cent of the taxes you owe, plus an additional two per cent for each full month that your return is late, up to a maximum of 20 months.

News Source: theStar.com

CRA’s Hefty Late Filing Penalties

First time late filing penalty: if you owe tax and do not file your return on time, CRA will charge you a late-filing penalty. The penalty is 5% of your tax balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months. In another word, if you have late tax unfiled, for the very first year, you will have 17% of tax owing for the penalties alone.

Repeating late filing penalty: if the late filing is a re-occurring event within three years, then the penalties become nearly tripled. The late-filing penalty becomes 10% of your tax balance owing, plus 2% of your tax balance owing for each full month that your return is late, to a maximum of 20 months. That is a late filing penalty of 50% of your tax owing.

The Compounded Daily Interests

In addition to the late filing penalties, CRA charges much higher interest than banks on your tax balance and penalties. The interest is compounded DAILY. Use rule of thumb, if assumed interest is 7%, which is not abnormal for CRA for many years, then tax owing doubles in about ten years. When the interest is compounded daily, the interest keeps running when you sleep.

What You Need to Do Now is to stop procrasnating, start taking actions. You can not afford to wait any longer!

What We Can Do to Help You

To control your damage right away, we will do a quick, sometimes, on the spot assessment, if you have unfiled taxes for years and you do not owe taxes. Then we will quickly help you to reconstruct all the financial information and locate all your missing pieces of tax information to report your tax returns properly.

If we determine that you have unfiled back taxes and large tax debts owing for many years and thus the interests and late filing penalties are alarmingly high. Then we may need to help you to file under the Voluntary Disclosure Program or Tax Amnesty immediately to avoid the risk of being caught by CRA and thus lose the opportunity to file under the protective Voluntary Disclosure Program to reduce the severe damage. The penalties alone may force you into bankruptcy.

Why You Should Work with Tax 911 Now

Unlike these accountants or the tax filers with seasonal appearance in the malls, we can not only fix your back tax problem, we can also help you to negotiate with CRA for the matters before and after the filing.

Before the filing, we can help you to file Tax Amnesty program to completely remove your penalties and/or some of the interests.

After the tax filing, if CRA challenge you or audit you, we have the expertise to represent you and fight for you on the returns;

If the tax bill is too high, then we can negotiate a tax relief for you to reduce the tax penalties and interest, or we can help you to negotiate an affordable payment plan so no legal collection actions will be taken against you by CRA.

We are different because we can provide much more comprehensive services to protect you in many aspects and all stages of your tax dealing with CRA.

Our Unlimited Free Consultation & Service Guarantee

To begin with, we offer RISK FREE no obligation initial consultation just to help you to understand the depth and complexity of your tax problems. We will also provide you the recommended steps to take to fix your tax problems. Then it is completely up to you to decide what to do from there.

If you do decide to engage us to fix your tax problems, we will provide price match guarantee within the entire tax negotiation industry.

CRA Tax Penalties to Individuals and Businesses

Late-filing tax penalties for individuals, self-employed and corporations

If you or your corporation owe tax and do not file your return on time, CRA will charge a late-filing tax penalties. The tax penalties are 5% of your balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months, or the total of 17% tax penalties.

If CRA charged a late-filing tax penalties for any of your preceding three years, your current late-filing penalties will be 10% of your current year balance owing, plus 2% of your current year balance owing for each full month that your return is late, to a maximum of 20 months or the total tax penalties of 50%.

Repeated failure to report income penalty

If you fail to report an amount on your personal or business return in any year and you also failed to report an amount on your return for any of the preceding three years, you may have to pay a federal and provincial/territorial repeated failure to report income penalty.

The federal and provincial/territorial tax penalties are each 10% (or combined 20%) of the amount that you failed to report for repeat failure of reporting income.

False statements or omissions penalty

You may have to pay a penalty if CRA believes that you, knowingly or under circumstances amounting to gross negligence, have made a false statement or omission.

The tax penalties are 50% of the understatement of tax and/or the overstatement of credits related to the false statement or omission.

Late Filing Tax Penalties: Consequences of Not Filing Past-Due Returns

If you fail to file a tax return, the CRA has the ability to paralyze you financially by charge you big tax penalties and interests. CRA often use aggressive legal actions to collect the tax debts. Those legal actions Include bank freeze, income garnishment, etc.

Over the last several years, the CRA has improved its database of income transactions and increased its ability to identify people who have not filed taxes. If you have unfiled returns, you rise to the top of the list of people the CRA wants to target to collect revenue.

But if you wait for the CRA to find you, the cost of additional tax penalties grows exponentially. And if the CRA seeks you out before you have filed past-due returns, the likelihood of punishment escalates.

What Should You Do to Reduce Tax Penalties

The worst thing you can do is to ignore or to avoid the tax problems. Act now to control and repair the damage before your life is ruined. Contact Tax 911 Now at 1-877-918-2991 for a confidential free consultation today!

Our services are offered across Canada in the cities of:

  • Toronto
  • Markham
  • Vancouver
  • Calgary

Unfiled Tax Returns to CRA

There are more and more people experiencing problems of unfiled tax returns. It is understandable that there are many priorities in people’s lives and thus sometimes it is becoming increasingly difficult for taxpayers to catch up with their tax filing obligations.

The CRA, however, views your situation differently, not in sympathy perspective as CRA is, by its nature, a tax revenue agency and thus CRA views your Unfiled Tax Returns to CRA to be not in compliance with income tax act and thus this behavior merits some financial or legal punishment.

To be in compliance, you must have all your Unfiled Tax Returns filed. This means you won’t get any relief from CRA collection actions such as income garnishment or bank levy, until you complete and file all tax returns. So the sooner you file all your back taxes, the sooner the CRA will be willing to negotiate with you.

File Your Past Tax Returns

It is very important to understand that filing your tax return each year will save you out of CRA trouble. If you have unfiled tax returns for few years, it is to your best interests to file them as soon as possible.

Knowingly not filing your tax return is illegal. However, CRA understands that people make mistakes and thus they give you a limited time window to file over due tax returns to correct the wrong.

CRA Notifies Your Unfiled Tax Returns

The CRA may send you a demand to file for the current year tax unfiled; CRA may also wait for few years and then send you the demand to file letter. You need to keep in mind that CRA will eventually find you and if they do, you will have to face the late filing tax penalties and accumulated interests starting from the date when the tax is due.

Consequences of Not Filing Past-Due Returns

If you do not cooperate with CRA and ignore the demand to file notice, CRA may just take some harsh legal action against you, such as lock up your bank, garnish your income, bank levy, etc.

When a Mistake Becomes a Crime

With the advance of the technology, CRA has enhanced its database to identify people who have unfiled tax return problems for years. If you have unfiled returns, you are automatically on the list of most wanted people for tax collection. If you can act before CRA gets to you, you have a better chance of resolving your tax problems without going thorough the pain of legal action and embarrassment.

The CRA has a wide range of punishment available that they can impose on persons who don’t file returns. Intentionally not filing, or filing a false return, is a crime. It is critical to take action to resolve your unfiled return problems before a simple mistake becomes a crime.

Most Common Excuse for Unfiled Tax Returns – I Can’t Afford to Pay the Tax Owing

Many people do not file the tax for their personal reasons, such as divorce, sickness, etc. Unfortunately, affordability is not a sound one. The reason is simple. The longer you wait to file, the more you will end up paying. It is like spinning in a vicious cycle.

Dealing with over due tax returns immediately is important if not critical. Wait for too long, then it becomes a much serious matter that cause legal actions. If you file tax and can not afford to pay, there are many options available to you such as negotiate a payment plan or tax relief. So stop making excuses, take action to clear up your back taxes.

It is important that you try to promptly deal with filing past-due tax returns. The stress you have can be removed if you just get professional help. We specialize in such tax problem solutions. We are here to help you when you need the most.

CRA’s Hefty Late Filing Penalties

First time late filing penalty: if you owe tax and do not file your return on time, CRA will charge you a late-filing penalty. The penalty is 5% of your tax balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months. In another word, if you have late tax unfiled, for the very first year, you will have 17% of tax owing for the penalties alone.

Repeating late filing penalty: if the late filing is a re-occurring event within three years, then the penalties become nearly tripled. The late-filing penalty becomes 10% of your tax balance owing, plus 2% of your tax balance owing for each full month that your return is late, to a maximum of 20 months. That is a late filing penalty of 50% of your tax owing.


The Compounded Daily Interests

In addition to the late filing penalties, CRA charges much higher interest than banks on your tax balance and penalties. The interest is compounded DAILY. Use rule of thumb, if assumed interest is 7%, which is not abnormal for CRA for many years, then tax owing doubles in about ten years. When the interest is compounded daily, the interest keeps running when you sleep.

What You Need to Do Now is to stop procrasnating, start taking actions. You can not afford to wait any longer!

What We Can Do to Help You

To control your damage right away, we will do a quick, sometimes, on the spot assessment, if you have unfiled tax returns for years and you do not owe taxes. Then we will quickly help you to reconstruct all the financial information and locate all your missing pieces of tax information to report your tax returns properly.

If we determine that you have unfiled tax returns and large tax debts owing for many years and thus the interests and late filing penalties are alarmingly high. Then we may need to help you to file under the Voluntary Disclosure Program or Tax Amnesty immediately to avoid the risk of being caught by CRA and thus lose the opportunity to file under the protective Voluntary Disclosure Program to reduce the severe damage. The penalties alone may force you into bankruptcy.

Why You Should Work with Tax 911 Now

Unlike these accountants or the tax filers with seasonal appearance in the malls, we can not only fix your unfiled tax return problem, we can also help you to negotiate with CRA for the matters before and after the filing.

Before the filing, we can help you to file Tax Amnesty program to completely remove your penalties and/or some of the interests.

After the tax filing, if CRA challenge you or audit you, we have the expertise to represent you and fight for you on the returns;

If the tax bill is too high, then we can negotiate a tax relief for you to reduce the tax penalties and interest, or we can help you to negotiate an affordable payment plan so no legal collection actions will be taken against you by CRA.

We are different because we can provide much more comprehensive services to protect you in many aspects and all stages of your tax dealing with CRA.

Our Unlimited Free Consultation & Service Guarantee

To begin with, we offer RISK FREE no obligation initial consultation just to help you to understand the depth and complexity of your tax problems. We will also provide you the recommended steps to take to fix your tax problems. Then it is completely up to you to decide what to do from there.

If you do decide to engage us to fix your tax problems, we will provide price match guarantee within the entire tax negotiation industry.