Mark Feldstein & Associates

William Ankomah of Brampton pleaded guilty to one count of fraud over $5,000 on October 16, 2009. He was sentenced to two years less a day house arrest to be served conditionally, and was fined $50,000.

CRA and the RCMP investigation revealed that Mr. Ankomah the operator of Tax Help Centre prepared false personal income tax returns on behalf of 23 of his clients. Mr. Ankomah charged a fee and overstated charitable donation receipts from various charities on his clients’ income tax returns. During the 2003 to 2006 tax years, Ankomah issued $331,716 in fraudulent charitable donation receipts, and in doing so, helped his clients claim over $134,124 in non-refundable tax credits.

Taxpayers that claim false receipts are subject to serious consequences. Taxpayers should understand that the charity has to be registered with CRA and that the donation receipt should equal the funds that were paid to the charity. For example, if you gave $500.00 to a charity and the charity gave you a receipt for $5,000, then you are participating in a fraud in order to obtain non-refundable tax credits. The taxpayer should have known that they are participating in a fraud. The taxpayer will owe the taxes due plus penalties and interest. In addition, if convicted, the court may fine an additional 200% of the tax evaded and sentence them up to a five year jail term. If the taxpayer applies under the voluntary disclosure program before CRA commences and investigation, then penalties and prosecution will be waived.

Mark Feldstein Personal Taxes charitable donations, fraud

Anthony Ho Shue of Markham Ontario pleaded guilty in the Ontario Court of Justice in Newmarket on September 22, 2009 on one charge of failing to keep proper books and records as required by the Income Tax Act. He was fined $16,000 and paid the amount immediately.

The Income tax Act requires that business owners keep proper books and records in order for CRA to properly calculate the taxes payable. CRA takes sloppy bookkeeping really serious. When an auditor reviews the books and records of a Company it is imperative that the books be in proper order.

If the books are a mess, the auditor will have no choice but to expand his work and look much further into the business. Inevitably, this causes a much higher reassessment. If the books are a complete disaster and the auditor cannot rely upon them, then CRA will do a net worth assessment based on the lifestyle of the tax payer.

The auditor will review personal bank accounts, credit card, mortgage payment etc. What the auditor cannot find in personal expenses, they will use statistics Canada numbers to estimate what certain items costs. For example, if CRA performs a net worth audit and cannot determine what a family consumes in groceries for a year, they will then use statistics Canada numbers to estimate what a family of a particular size consumes in food for a year. The onus will be on the taxpayer to prove CRA wrong.

Mark Feldstein Corporate Taxes

Julia Blanchard of St. Catharines was sentenced on September 16, 2009 on five counts of failing to file corporate income tax returns and one count of failing to file GST returns. She was fined $1,500 for each count for a total fine of $9,000. Julia Blanchard pleaded guilty to these charges on March 17, 2009.

CRA made several request for the missing tax returns before serving notice demanding that the returns be filed. Failure to comply with the requests resulted in charges being laid. All of the outstanding returns have now been filed. CRA takes delinquent filers very serious. It is always advisable to file all tax returns on time and stay off CRA’s radar.

Mark Feldstein Corporate Taxes, Tax Convictions CRA, criminal charges, Tax Evasion, Unclaimed Income

Walter Pontiero General Contracting Ltd of King City, pleaded guilty on September 17, 2009 of GST evasion. There was a fine levied in the amount of $91,063 in the Ontario Court of Justice in Newmarket. The fine was 100 percent of the taxes evaded.

CRA’s investigation revealed that the company which is a subcontractor to homebuilders, filed GST returns for the periods July 31, 2002 to April 30, 2005, in which the total sales of the business were under reported by over $2.75 million dollars. Therefore, the company understated the GST it collected on sales by $198,238 and it understated its input tax credits by $107,174, resulting in $91,064 GST evaded.

Individuals or companies that have not filed their returns or have not reported all of their income, can apply under the voluntary disclosure program. CRA will not penalize or prosecute them if they make a full disclosure before CRA commences an action. If Mr. Walter Pontiero General Contracting Ltd applied under the VDP program there would be no penalties or prosecution but the taxes would have to be paid along with interest.

Mark Feldstein Corporate Taxes, Tax Convictions criminal charges, Tax Evasion, Unclaimed Income

Nester Raymond Pinga of Newmarket Ontario pleaded guilty in the Ontario Court of Justice on 14 charges of failing to file tax returns. He was fined $14,000. When individuals or corporations are convicted of failing to file returns, they still have to file the returns and pay the full of amount of taxes outstanding plus interest and any civil penalties that may be assessed by the Canada Revenue Agency. If Nester Raymond Pinga contacted CRA before CRA commenced an action under the voluntary disclosure program, there would be no penalties or prosecution only interest and taxes would be due.

Mark Feldstein Tax Convictions criminal charges, Tax Evasion, Unclaimed Income

Roger Miller of St. Jacobs pleaded guilty in the Ontario Court of Justice in Kitchener on nine charges of failing to file tax returns. He was fined $9,000. When individuals are convicted of failing to file tax returns they are still obligated to file the returns and pay the amount of taxes owing, plus interest as well as any civil penalties that may be assessed by CRA. Mr. Miller operated a T-shirt business and was fined for not filing his 2003 to 2006 personal tax returns as well as five GST returns.

Individuals who have not filed returns for previous years or who have not reported all of their income can apply under the voluntary disclosure program and bring their tax affairs up to date. They will not be penalized or prosecuted if they make a complete and full disclosure before CRA starts an investigation. Taxes and interest will still have to be paid.

Mark Feldstein Corporate Taxes, Tax Convictions Unclaimed Income

Joseph Berardi of Lakefield Ontario pled guilty in the Ontario Court of Justice in Peterborough on one count of income tax evasion. Mr. Berardi was fined $173,907 which represents 100% of the taxes due. The fine is in addition to any taxes and interest owed, as well as any civil penalties that may be assessed by CRA.

CRA’s investigation revealed that Mr. Berardi neglected to disclose the rental income that his company earned and that he appropriated the funds in the 2001 to 2003 tax years. The total unreported income amounted to $642,221 over the three years and thus attempted to avoid paying $173,907 in taxes.

In cases of gross negligence, CRA can assess a penalty of 50% of the unpaid tax. In addition, the court may on summary conviction charge a fine in the amount of 50% to 200% of the tax evaded and impose a jail sentence of up to two years. Consequently, the total penalties on tax evasion can reach up to 250%.

If Mr. Berardi applied under the voluntary disclosure program before CRA began their investigation, then he would have had to pay the taxes and interest and would avoid prosecution and penalties.

Mark Feldstein Corporate Taxes, Tax Convictions Tax Evasion, Unclaimed Income

Panagiotis Tourikis of Toronto pled guilty on August 31, 2009 on three counts of failing to remit GST. There was a $72,000 fine from the Ontario Court of Justice in Toronto. The fine is in addition to taxes and interest due.

CRA investigated Mr. Tourikis and discovered that he failed to remit $140,616 in GST that was charged and collected during the years 2002 to 2004. The GST was charged and collected on worm sales made to several wholesalers in Ontario.

If Mr. Tourikis applied under the voluntary disclosure program before CRA began their investigation, there would be no penalties or prosecution. There would only be interest and taxes due.

If an individual or a corporation is convicted of tax evasion, they have to pay the full amount of tax owing, plus interest, and any penalties that is assessed by CRA. If there is a gross negligence penalty, the Income Tax Act and Excise Tax Act allow CRA to assess an additional 50% penalty of the unpaid tax. In addition, the court on summary conviction could fine them 50% to 200% of the tax evaded and sentence them to jail for up to two years.

Mark Feldstein Corporate Taxes, GST Tax Evasion

Websites around the world are getting new computerized visitors among the google and yahoo web spiders. Tax authorities are cracking down on suspected tax cheats through sophisticated web crawling programs to monitor transactions on auction sites, and track operators of online shops, poker and adult entertainment sites along with many other websites. The Xenon program (a reference to the super-bright auto headlights that light up dark places) originated in the Netherland in 2004 by the Dutch equivalent of the IRS. Since then, it has been expanded and enhanced by an international group of tax authorities in Austria, Denmark, Britain and Canada.

Xenon is primarily a spider that downloads a web page, then traverses its links and downloads those as well, ad infinitum. In this respect, the spider can create huge datasets of web material. It is not clear how effective Xenon has been in generating tax leads. CRA confirmed participation in the use of the Xenon software.

Xenon is smart about link selection and context and uses a slow search paradigm. Google might hit thousands of websites in a second. With the Xenon program, it may take minutes, hours or even days to do a slow search. The slow search prevents the crawler from creating excessive traffic on a website, or drawing attention in the sites’ server logs. The spider can also be configured and trained to look at particular economic niches. This would be useful for compiling lists of businesses in industries that traditionally have high rates of non-filing. For example, weight control yields a tremendous volume of hits which in turn would provide CRA a list of companies that sell services or products.

Xenon’s extraction module interfaces with national databases containing information like street and city names. The software will use the data to automatically identify mailing addresses and other identity information present on the websites it has crawled. The program then matches in bulk to national tax records. If you are on the web including Facebook, Twitter, Linkedin or any other sites with your name listed it maybe possible, with the Xenon software, for CRA to find you.

If you are in an industry that historically has been offside with GST, CRA can use the software to locate you. For example, some physiotherapists charge GST while others do not (excluding billings to OHIP). All CRA has to do is use the spider program to develop a database of physiotherapists across the country and compare the results to GST and tax filings. CRA’s lead will come right from the physiotherapists own website. In other words, they will use your own website against you. It requires nothing more for them to use certain key words to compile a list of individual and companies that may be offside.

I am anticipating with newer versions of Spider, CRA will have the ability to easily find non-filers wherever they are. If CRA finds an individual or a company that has not filed, the penalties can be excessive. Why wait until CRA finds you first. By applying under the voluntary disclosure program before a CRA investigation begins, then there will be no penalties or prosecution. The taxpayer would only be responsible for the income taxes and the interest.

Mark Feldstein Corporate Taxes, Personal Taxes fraud

The Canada Revenue Agency announced on October 23rd that only 50 Canadian Ebay merchants have come forward to pay their back taxes since July 2009.

The Revenue Minister gave Ebay sellers one last chance to pay the taxes without penalties and prosecution. Ebay has announced that it has sent thousands of names to the CRA. CRA has announced that it has begun launching audits of Ebay sellers. CRA is looking at sellers that have sales of at least 20,000 and had 24 sales transactions in one year or made more than 100,000 in a year regardless of the number of transactions.

It is evident that Ebay sellers are not taking CRA seriously in these matters.

CRA has hired many new auditors including many experienced individuals from the Ontario Minister of Finance. Once CRA has commenced an audit it is too late. There will be extensive penalties, interest and possible criminal charges.

Time is quickly running out for Ebay sellers.

I have done several voluntary disclosures for Ebay sellers. These individuals can relax now knowing that they have come clean and that there will be no penalties and prosecution.

Mark Feldstein Corporate Taxes, Personal Taxes, Tax Amnesty ebay seller, tax penalties, Unclaimed Income