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How the CRA Catches Tax Cheats

The Canadian Government has put hundreds of millions of dollars into the Canada Revenue Agency to catch tax cheats. Professional Accountant Toronto has noticed the effect of this. One of the ways the CRA catches tax cheats is through a net worth audit. The CRA, on a net worth audit, does its own investigation into a taxpayer’s income. This is where a Professional Accountant Toronto is valuable.

When the CRA gets all your financial data from others, including banks, and then uses estimates and assumptions to guess at how much income you really made, a Professional Accountant Toronto can ensure that they don’t make wrong assumptions or use problematic methods. Unlike other areas of life, you as taxpayer have the burden of proving the CRA wrong. The CRA can make assumptions, even without proof. These assumptions in a net worth audit often prove difficult to disprove after the fact. This leaves taxpayers who have not kept proper records, who live beyond their obvious means, or otherwise appear healthier than the CRA thinks they can legitimately be at risk.

This particularly affects wealthy immigrants from cultures that like cash and who bring wealth from their home country to Canada. If, on a net worth audit, the CRA assumed this money and wealth to be taxable income, the taxpayer and a Professional Accountant Toronto have an expensive, uphill battle to fight the assessment. The best method, short of keeping full records and declaring all amounts, is to get a Professional Accountant Toronto on board as soon as you know you face a net worth audit. Prevention is always cheaper and more effective than after the fact cures.

How the CRA Catches Tax Cheats FAQs

How can a person cheat on their taxes in Canada?

Taxpayers can cheat on their taxes in Canada by:

  • Making deceptive or false records and documents
  • Falsely claiming tax credits and benefits
  • Not remitting proper source deductions
  • Making a fake business to reduce taxes and claim losses
  • Not filing tax returns when necessary
  • Taking cash “under the table”.
  • Making false tax deductions and expenses
  • Not declaring all income
  • Making a charity and earning from non-charitable activities

Using the Canada Emergency Student Benefit (CESB) or Canada Emergency Response Benefit (CERB),

but you don’t meet the criteria Organizations and businesses can also cheat on their taxes in Canada by:

  • Misusing the Canada Emergency Rent Subsidy (CERS)
  • Misusing the Canada Recovery Hiring Program (CRHP)
  • Misusing the Canada Emergency Wage Subsidy (CEWS)

Using the Canada Recovery Caregiving Benefit (CRCB), the Canada Recovery Sickness Benefit (CRSB), or the Canada Recovery Benefit (CRB) but don’t meet the eligibility criteria.

What happens if you cheat on your taxes in Canada?

When taxpayers are found guilty of tax evasion, they should still repay the total amount of taxes owing, plus civil penalties and interest. In addition to that, the court can charge you about 200% of the taxes evaded and impose a five-year imprisonment term. CRA can seize your wages, assets, and more until you pay the interest, penalties, and taxes.

Can I go to jail for cheating on my taxes?

In most cases, the CRA is more interested in collecting the money you owe than seeing people end up in jail. For that reason, the CRA has implemented high-interest charges and penalties on an outstanding tax debt. If you use the Voluntary Disclosures Program, the CRA may not charge fines, and you’ll only be expected to pay the amount you owe plus interest. However, it only applies to individuals who the CRA has not yet contacted.

pro-tip

Pro Tip

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.

Testimonial

Sam Faris reduced the significant unreported income based on net worth audit to be nil. Sam’s approach in fighting these types of complex audits is unique and sophisticated. He found countless mistakes made by the auditor which were rectified when Sam appealed the audit decision. Instead of owing significant amount of taxes, Sam reduced it to zero. I highly recommend to hire Sam for this type of audits and any CRA problem.”

E.M., Ottawa
pro-tip

Pro Tip

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.