Be Careful Who You Use for Tax Preparation: Ontario tax preparer sentenced to 4-years in jail

George Nkoke Nnane of Richmond Hill, Ontario, was sentenced in the Superior Court of Justice in Toronto to 4-years in jail for filing fraudulent tax returns, the CRA has reported.

A CRA investigation found that Nnane, the chief executive officer of Golden Capital Management Inc., a tax preparation business, prepared individual tax returns for the firm’s clients with false charitable donations credits, as well as fictitious business and rental losses.
The false claims enabled the firm’s clients to evade nearly $2 million in federal tax for the years 2009 to 2013, the release said.
The investigation also revealed that Golden Capital Management failed to report net income totaling about $500,000 on its corporate income tax returns for the same taxation years.
The firm failed to remit Goods and Services Tax (GST) / Harmonized Sales Tax (HST) totaling about $53,000 for the quarterly filing periods from 2009 to 2013.
Unfortunately, the view from the CRA is that each and every client of this tax preparer knew that their returns were being faked and thus are a willful accomplice to this fraud and thus will be re-assessed as a result.
Those re-assessments are likely (if not certainly) to include a 50% Gross Negligence penalty which is equal to 50% of the tax evaded, plus be accountable for the tax evaded. That is just the tip of the iceberg.
In its release, the CRA noted that taxpayers convicted of tax evasion face fines ranging from 50% to 200% of the evaded taxes and up to five years’ imprisonment.
If a taxpayer is convicted of fraud under Section 380 of the Criminal Code, an individual can face up to 14 years in jail, the release said.
For the five-year period from April 1, 2014, to March 31, 2019, the courts have convicted 25 tax preparers/promoters for tax evasion, resulting in a total of $2.5 million in fines and 38 years of jail time, the CRA said.

Bouclair Inc, its CEO and former VP charged by the CRA for Tax Evasion

The Canada Revenue Agency (CRA) is reporting that home-decor chain Bouclair Inc. its CEO, and former VP are scheduled to go to trial on tax-evasion charges in January 2021.

The CEO, Peter Goldberg, a Westmount, Quebec resident faces eight charges alleging he violated the Income Tax Act between 2009 and 2011. Bouclair Inc. is charged in the same case as their former VP, Erwin Fligel.

The charges were filed by the CRA in 2018 following an investigation where by the CRA alleges that the CEO and former VP willfully evaded payment of income taxes and made false statements when filing income tax returns for Bouclair Inc. and for Goldberg.

Fligel is charged with six charges while Bouclair has been charged with 4 charges. The charges do not specify the monetary figures involved.

During a hearing before Quebec Court Judge Jean-Jacques Gagné held at the Montreal courthouse on January 30th, 2020, both sides agreed to schedule a trial between Jan. 11-29, 2021.

In November, Bouclair Inc. announced it would file for bankruptcy as part of a plan to allow it to be acquired by a new investor group, Alston Investments Inc., which is also headed by Goldberg. At the time of the announcement the privately held company had 102 stores in Quebec, Ontario, Western and Atlantic Canada.

A liquidation order issued by a Quebec Superior Court judge on Nov. 15 indicated that Bouclair Inc. intended to close at least 29 of its stores.

Ontario Contractor Pleads Guilty to Tax Evasion

The Canada Revenue Agency (CRA) has reported that a Vaughan, Ontario based, general contractor has been fined for evading GST/HST.

The press release by the CRA announces that Gilles Larocque of Nobleton, Ontario pleaded guilty to tax evasion. He was sentenced in the Ontario Court of Justice in Newmarket and fined a total of $301,125.

Larocque pleaded guilty on January 7, 2020, in the Ontario Court of Justice in Newmarket, Ontario to two counts of failing to report income by not filing income tax returns, thereby committing tax evasion under the Income Tax Act.

He also pleaded guilty to two counts of failing to remit Goods and Services Tax / Harmonized Sales Tax (GST/HST) under the Excise Tax Act.

A CRA investigation revealed that Larocque, who owned and operated a construction company in the Vaughan, Ontario area, provided general contracting work to clients that included dry walling, framing and ceiling tile installation for gas stations.

Larocque used several aliases and business names and charged clients for GST/HST, which he used for his personal expenses.

Larocque failed to report income in both 2013 and 2014 tax years and evaded a total of $180,401 in federal taxes.

He also failed to file GST/HST returns in both those years, totalling $120,724 in unremitted GST/HST.

The total amount of federal tax evaded and unremitted GST/HST for the years 2013 and 2014 was $301,125.

Charging GST/HST to clients and then keeping it for your own use is not only against the law, but it’s a pretty sketchy way to get another 13% of income. A common rule to avoid this from happening it to always make sure that you ask for a receive a receipt. The receipt pretty-much (but not always) ensures that the seller is reporting the GST/HST that they collect from you, and the income earned from your purchase.

 

 

Winnipeg insulation company to pay nearly $500K in fines and back taxes for tax evasion

The Canada Revenue Agency (CRA) has announced on their website that a Winnipeg-based insulation company has been fined after underreporting its taxable income by more than $1 million.

The CRA’s Investigators found irregularities in the books and records of Thermo Applicators Inc., such as, that the company’s president included personal expenses in the company’s books, including construction costs for a cabin near Kenora, Ont. and a vacation home in Mexico, as well as a fly-in fishing trip. None of these are eligible tax deductions.

Thermo pleaded guilty in Manitoba provincial court on May 21 to two counts of making false or deceptive statements in the 2009-14 tax years. The court found $1,139,000 million in taxable income went unreported, in addition to the claiming of ineligible expenses.

As a result, the company is being ordered to pay $190,142 in income tax and $47,611 of sales tax that should have been withheld. In addition to paying the taxes, the company was fined $237,753.

Once penalties and interest are added to the debt dating back to 2009 the balance will shoot up well over $500,000.

This conviction is a clear reminder that failing to declare income and claiming false expenses can be very costly should the CRA perform and audit and find it.

Keep good records, report all income and claim eligible expenses.

The Canada Revenue Agency (CRA) Knows Who Cheats on their Taxes!

Are you on the Canada Revenue Agencies radar?  How about on the CRA’s Audit Radar?  Have you been “flagged”?

Have you ever wondered how the Canada Revenue Agency (CRA) decides who to audit?  Are there red flags?  Or does the CRA know how you operate your business which makes you more or less likely to be audited?

Here is the answer that you might be looking for;

The CRA knows who Cheats on their Taxes!

Do you fit their profile?

Are you at risk?

First, some background.

While I was still working at the Canada Revenue Agency (CRA), we released the results of a study that was put together to profile what kind of person poses the most risk for the CRA’s collections and audit groups.

The CRA spent a lot of time going through the main accounts; personal tax, payroll, GST/HST, and Corporate Tax, and we looked at who filed on time, who filed late (and how late they filed), and who was regularly compliant, and who needed a follow up verification audit, and what the result of those audits were.

This study focused on Tax Compliance, specifically;

  • Percentage of Taxpayers who accurately reported income and expenses (95%)
  • Percentage of Taxpayers who file on time (93%)
  • Percentage of Taxpayers who made payments on time with their filing (91%).

When it comes to reporting compliance or honestly reporting all your income and/or expenses, this study found that males are more likely to underreport their tax owing than females.

The study also found that underreporting is highest among taxpayers aged 35 to 54 and lowest among taxpayers under 35.

Underreporting of tax was also lowest for taxpayers who are married and highest for those who are separated, with single taxpayers somewhere in between.

Not surprisingly, underreporting of tax is higher among taxpayers whose main source of income is either capital gains or self-employment income versus taxpayers whose main source of income is wages, where most of the tax is withheld at source by the employer.

So who is on the CRA’s radar?

The prime candidates for the CRA to audit, or perform a desk review of expenses, are the separated or divorced males between the ages of 35-54 years old.

Do you fall into that category?

If so, know that the CRA is keeping one eye on you and the other on what you report and when it is reported.

Contact us at inTAXicating, and let us help you ensure that you remain compliant, and ensure that you have the knowledge necessary to organize your records so that you can quickly and easily get through a CRA audit.

EXAMPLE:

Here is an example of a case where the CRA used the criteria identified earlier to quickly descend on a taxpayer who fell behind in his filing and remitting duties.

Case: Tax Cheat?  Or Disorganized Business Owner?

I was approached by a business owner who ran very loosely with his books and records.  He kept a box of receipts and while most of the business receipts made the box, many got lost along the way.  Additionally, this business owner charged business expenses on his personal credit card, and personal expenses on his business card.  He travelled quite a lot for work, and he posted a lot of content on social media, but he failed to keep a thorough and accurate log documenting his personal versus business travel.

Additionally, because he was always on the go, had no time to review the details of the tax side of his business.  He had money in his business bank account, then he knew he was earning money.  At year-end, he would bring his half-completed records and his shoebox to his accountant for the preparation of his returns.

In June he would receive a refund.

A series of events, however, changed his life forever.

  1. His accountant began to get busy
  2. As a result, he was late getting payroll figures, and was late making the payroll remittance
  3. Then the GST/HST numbers were delayed, so that filing was late
  4. His personal tax filings were delayed
  5. His business tax filing was delayed.
  6. His business made money.
  7. While all of this was going on – he continued to send his info to the CA, and pay the CA’s invoices.  He would get the odd notice from the CRA and send it to his accountant to “take care of”.

This is very typical and a common occurence.

What he didn’t know was that everything was not okay.

One day a CRA field officer showed up to discuss his non-compliance and to arrange a payroll audit because the company was 6-months behind on remittances.  There was also a balance owing to the CRA of over $35,000.

Shocked, he contacted his CA who said that she would look into it, that it was going to take some time and she felt the CRA was completely wrong.

Convinced that the accountant was right, the business owner went back to work, and the accountant was going to find the error and fix the problem.

Only problem that he didn’t know was that there was no “error”.  The balance owing to the CRA was legitimate.  By filing late over that 6-month period, the accountant had amassed a significant balance due to late filing penalties and the balance was jumping by leaps and bounds as a result of the 10% interest the CRA charges on outstanding balances (compounding daily).

Then one day he received a call from one of his main suppliers who was concenred because not only did he cheque bounce, but there was a CRA officer there earlier in the day asking questions.

He contacted his accountant.

She appeared stunned and said that she would call the CRA and fix it.

She was just buying time.

A week later, the garnishment was still on the account, interest was accruing, and the accountant was telling stories of the CRA being unfair, and mean, and not listening or returning calls.

Frustrated and panicked that he might have to close his business without a bank account, he contacted his CA and asked for his books and records.

She refused.  Realizing that this was the end of the relationship with her client, she told him that she had done a lot of work with the CRA and she demanded payment before she would give up his information.

He refused to pay – how could he?  He had no access to his bank account and the CRA had taken all of his funds.

In fact, it took him 8-months and a small claims court date for this process to resolve itself.  She took him to court for unpaid work, and thankfully, the judge was wise to this CA and her practices and awarded the client his books and records in return for payment of the work actually completed, not the entire invoice.

The damage was done.  The business was also close to being done.

The CRA doesn’t care about the reasons why someone becomes non-compliant – they look at the business, the owner, and then set their course to fix it.

The fact that this business owner fit the category did not help him at all, as the CRA quickly and aggressively went after every asset that he had, raised assessments for the missing payroll and GST/HST figures, and sent Requirements to Pay to his business bank account, contacted his receivables (clients) and quickly moved to raise director’s liability so they could go after his personal assets.

Conclusion

Running a business is difficult.

Running a business without a business bank account is also difficult.

Running a business without a bank account, after the CRA notified your clients that you owe considerable amounts of tax money is next to impossible.

What killed this business was a combination of bad accounting, bad advice, lies, deception and some really bad luck.

The reality is that many, many businesses and individuals have this experience on a daily basis.  It is next to impossible for the CRA to determine if the information being told to them is legitimate or a made up story – but when the owner of the business is a perfect fit for commiting tax fraud – the CRA takes notice.

Could this have been fixed?  Of course.

If you owe money to the CRA, or if you have fallen behind on compliance, or if you suspect that your tax advisor is giving you bad advice, contact us now.  At inTAXicating, we’ll look at the facts, and help you run your business while we work on solving the problem.

Visit our website @ www.intaxicating.ca.

Send us an email to: Info@intaxicating.ca

 

 

Former Calgary man sentenced to 11 years in jail and fined $550,892 for tax evasion and fraud

The Canada Revenue Agency (CRA) announced that James Harvey Cameron, a former resident of Calgary, has been sentenced to 11 years in jail and fined $550,892 after defrauding investors of over $2.5 million through a deceptive investment scheme. The judge also ordered Cameron, 66, to pay restitution of $1,831,700 to his victims.

If Mr. Cameron fails to pay his fine in six months he will have to serve an additional four years in jail for default.

From 2002-2006, Cameron operated a fraudulent RRSP scheme which promised a 2% monthly return to individual investors. The scheme raised just under $8 million, but only paid out a total of $882,000 to investors.  Cameron misappropriated the funds to support his luxurious lifestyle, including buying property, cars, a horse, and a $75,000 cruise in the Bahamas. He also transferred funds offshore to Barbados.

A Canada Revenue Agency (CRA) investigation proved that Cameron diverted $3.9 million of the investors’ funds for his own use and failed to report this as income on his tax returns, evading $1,132,882 in taxes.

“I have no doubt whatsoever that [Cameron] executed a deceptive investment scheme with subjective knowledge of the prohibited act and consequences,” said presiding judge, Justice P.R. Jeffrey, in his written reasons for convicting Cameron. “The CRA acted towards him with considerable patience, forbearance and fairness.  He was given ample opportunity to provide to CRA any plausible alternate explanation for what occurred, yet did not.”

Justice Jeffrey commented in his sentencing report: “The $1,831,700 I have ordered payable in restitution should be subtracted from his [Cameron] total taxable income… therefore I find his taxable income to have been $2,118,817.”

Cameron was convicted of tax evasion under the Income Tax Act and fraud under the Criminal Code.

Sentencing took place today at the Court of Queen’s Bench in Calgary.

You can report suspected tax evasion to the CRA by visiting https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/informant-leads-program.html or by calling the National Leads Centre at 1-866-809-6841.

All case-specific information in this news release was obtained from the court records.

Did you know that between April 1, 2012, and March 31, 2017, total domestic and offshore related criminal investigations have resulted in 408 convictions involving $122 million in federal tax evaded and court sentences totaling approximately $44 million in court fines and 3,103 months in jail?

CRA Announces Conviction: Seeking Victim Impact Statements by April 20th.

The Canada Revenue Agency (CRA) has announced that James Harvey Cameron, from Calgary, was criminally convicted on March 28th of creating and operating a fraudulent RRSP scheme.

According to court documents, from 2002 to 2006, Cameron was the master-mind behind a fraudulent RRSP scheme through which he diverted $2.5 million of investors’ funds for his own use. He also failed to report the money as taxable income, evading federal taxes totalling $673,871.

The CRA considers these offenses serious, and the courts found Cameron guilty of tax evasion and fraud.

A date for a sentencing hearing has yet to be set, but is likely to take place between April 24 and May 12, 2017.

The CRA is encouraging victims of Cameron’s fraud who wish to appear at the sentencing hearing to seek restitution or make a victim impact statement to contact the Public Prosecution Service of Canada at 403-299-3978 by April 20th.