If the CRA is after you, it can be really scary. Sometimes it seems that they have unlimited power and authority to come after you once they believe that you are not tax compliant. Many regular folks will spend thousands of dollars on lawyers in an effort to protect themselves against the CRA but what we want to explore is, is an income tax problem a legal problem?
In the Canadian Income Tax Act it sets out that it is illegal to evade your taxes. The Canada Revenue Agency considers tax evasion to be:
- Failing to declare income on a tax return
- Failing to file your income tax returns
Failing to declare income on a tax return could be on purpose or by accident. If you declare expenses on your income tax return that you are not entitled to, this is a failure to declare income. Not including cash you may have received is failing to declare income.
If the CRA does not yet know that you have failed to declare your income, your best bet it to make an application for tax amnesty under the Voluntary Disclosure Program. The Voluntary Disclosure Program enables a taxpayer to voluntarily disclose information that the Canada Revenue Agency does not already know about. If an application for tax amnesty is accepted under the Voluntary Disclosure Program, the taxpayer can avoid paying penalties and interest on their undeclared income altogether.
You may also file late tax returns under the voluntary disclosure program IF the Canada Revenue Agency has not yet contacted you about your income tax debt. You may think that failing to file your tax returns can buy you the much needed time to prepare to pay your tax debt. This could not be further from the truth.
At any time the CRA can file a notional assessment, which means they make an arbitrary assessment of how much money you earned and assess your income tax accordingly. You will also be assessed huge penalties and interest. The more time that passes the larger the penalties and interest will grow.
It is not income tax evasion to owe money to the Canada Revenue Agency. If your problem is that you are evading your taxes because you are worried how you are going to pay your tax debt in full, this doesn’t have to become a massive legal problem.
The moment you declare undeclared income or file your late returns, will be the moment you become tax compliant. While you will owe a tax debt to the CRA, you will no longer be a tax evader.
Now you don’t have a legal problem, you have a tax problem. There are many many solutions to a tax problem. These solutions could improve a direct repayment proposal/strategy, obtaining financing to deal with a tax debt, pursuing interest and penalty relief to reduce the size of your tax debt and more.
You don’t need to spend thousands and thousands of dollars on tax lawyers and chartered accountants – all you need to do is work with a company that specializes in helping people who have tax problems and the resources to resolve your specific type of tax problem.