Do you think the CRA is just a book keeping department of the federal government that quickly processes tax returns? If so, then you’ll be surprised to learn that the CRA has far reaching powers that can do a lot of damage to your bottom line if you don’t follow Canada’s tax rules. If you want to really understand what the CRA can and can’t do, tax specialist and author Paul DioGuardi helps us bust some myths.
1. Nobody ever goes to jail for not filing a tax return. It’s just a scare tactic to get people to pay up.
FACT: People go to jail. Sentences are a maximum of two years for each summary conviction, and up to five years for each conviction or indictment. Typically, you face a different charge for each tax year involved and for each breach of the Income Tax Act, which can result in multiple convictions and multiple jail sentences to be served consecutively. It can add to a substantial amount of jail time.
2. If the CRA hasn’t questioned your return for four years, you got away with it.
FACT: If there is evidence of fraud or misrepresentation of income, the CRA can come after you at any time for any tax year.
3. If you transfer your assets into your spouse’s name, the CRA won’t be able to take anything.
FACT: If the transfer of assets is made after there is tax owing, your spouse will share your responsibility for paying the tax, up to the fair market value of the assets he or she received from you.
4. The CRA can’t order your bank to provide records of your financial transactions without your permission.
FACT: The Income Tax Act gives the Agency the power to require information about you from any source it chooses. Banks and credit card companies, among others, are required by law to provide records of your transactions if so requested by the CRA. There is no requirement to inform you or seek your permission.
5. The CRA has to notify you that a lien has been registered against your home or other property.
FACT: When collecting tax—and especially if there’s a concern that you may sell or mortgage your property in an attempt to avoid paying taxes—the CRA has the power to seize assets and register a lien against real property without notifying you.
6. The CRA isn’t interested in having people call and volunteer information about possible tax evaders.
FACT: The CRA encourages people to report tax evaders by calling their local tax services office. Reports can be made anonymously.
7. The CRA keeps secret the names and sentencing details of convicted tax evaders.
FACT: The CRA makes this information public. The Agency issues press releases detailing the names and offences of convicted tax evaders. These can be found in the media room on the CRA website under “Convictions”. The stories are often picked up by newspapers and radio newsrooms and reported publicly.
The bottom line? Be sure to file your taxes annually, keep to the schedule and if you’re not confident about filling in your own tax return, seek out a good tax accountant who can help keep you and your tax filings accurate and up to date. For a couple of hundred dollars, you can save yourself countless sleepless nights if things go awry.
These myths first appeared on page five of “The Taxman Is Watching” by Paul and Philippe DioGuardi and has been republished with permission.
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