Everybody Must Pay Taxes – But Why Pay Penalties?

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Listen .. trust your HART …

If you don’t have the money to pay your income taxes, you should still make an effort to file your income tax return ON TIME. This way, it’s only a “collection issue” and you will only be subject to interest on the arrears balances owing. If you file late or after the due date (April 30th for most individuals and June 15th for self-employed individuals), you will have to pay a flat percentage penalty of the balance you owe plus a flat percentage penalty of the balance owing is added for every month you are late. If you’re not only late, but there was a request from Canada Revenue Agency to file your tax return .. generally these penalty rates are doubled!

Some guy once said “The difference between tax avoidance and tax evasion is the thickness of a prison wall.”. There are legal ways to minimize your income tax bill with planning and advice of your professional accountant or income tax preparer .. but keep in mind that there are also laws in place to prevent the avoidance of income taxes. Now, evasion – is much worse than being a deadbeat, because in addition to the penalties and interest that you will be charged (if caught) .. it’s also a criminal offense.

So, if times are tough and you do not have the money to pay for your income taxes owing, you should NEVER CONSIDER to avoid or reduce your balance due by omitting income that you earned (e.g. “cash under the table for certain jobs and but not reporting it”). Believe me .. there are ways to prove that you might have earned money and not report it.

And what do you do if the collector comes a’ calling?

Most tax collectors are human beings, and they are just doing their job, like you would be doing your job. Granted, some are not human beings and may appear to have been spawned directly out of hell .. but, generally most of them are nice people just trying to do their job well – which, is to collect the money you owe to the government.

Here are some simple tips to make your life easier when a tax collector calls you:

* Answer the phone – Always. They will only get more annoyed if you avoid talking to them.
* Be Polite – Always. It doesn’t matter if you are talking to the nicest person or the meanest person from the tax collector’s office, but there is a good chance that your telephone conversation is being monitored .. don’t make it worse than it really is – that being that you owe money.
* Don’t make promises that you cannot keep – You have to pay your debts, but if it will take 6 months or longer, let your tax collector know this – don’t promise payments that you know you will never make. Don’t promise payment over the next million years either. They are trying to collect the balance due. Be reasonable .. how soon can you pay it?
* Same Year Rule – From experience, most collectors that I’ve dealt with like to clear your slate before December 31.
* Yes they are serious – when they want you to sell your house, get a loan, borrow money from your family and friends to pay off a debt .. so don’t laugh! Seriously, they don’t want to own your house or sell off your goods, but it is quite easy for them to initiate this action – and the tax collector has nothing to lose – only you.
* Make your payments! Once a settlement is reached .. tax collectors prefer to receive post dated cheques and if you offer these to them before they ask you, it might look better for you. Make sure these post dated cheques clear. Keep in touch with your tax collector. If you are going to be late with a payment, call your collector first – before they call you – to warn and to advise when it is okay to cash your cheque.

I hope those tips helped you. Would you want someone screaming and swearing at you while you were talking to them on the phone? Of course not. You shouldn’t do that for any other people, even if they work with the government!

The best way to deal with the government is to be compliant and file all the necessary returns on time, and try to pay off your income tax debt before they call you. It’s sometimes good just to pay AT LEAST SOMETHING every month or every two weeks just to show that you want to pay off your debt, than waiting for a lump sum payment that might never be made, because they don’t know if you are out working twice as hard to be able to pay off last year’s debt – they just see another possible deadbeat – who hasn’t paid their bill yet.

I wrote this article, because of the following, which I received in my email InBox today ..

“Alert” by Canada Revenue Agency

Subject: Media room
The following is now available on the CRA Web site:

Alert: Tax evasion has consequences!


Paying the taxes you owe is not only your responsibility – it’s the law.

The Canada Revenue Agency (CRA) uses many tools to identify those who fail to file an income tax return, register their business account, or provide the CRA with complete and accurate information.

The CRA has the authority under the Income Tax Act and the Excise Tax Act to use a number of tools to get delinquent filers to comply, including civil and criminal prosecution that can lead to fines, penalties, and even jail.

Don’t let it happen to you!

If the CRA suspects that you failed to meet some or all of your tax obligations, it may decide to conduct an audit. Once this audit is completed, and if an adjustment is required, the CRA will send you a Notice of Reassessment. If you do not pay any amount owed, plus applicable interests and penalties, CRA collections officers will take action to collect it and any interest and penalties that apply.

If you do not file the required returns and statements, the CRA can also seek a court order for you to comply. Alternatively, the CRA can recommend to the Department of Justice that you be prosecuted for failing to file the required returns and statements.

On summary conviction, the court may fine you 50% to 200% of the tax evaded and sentence you to a jail term of up to two years. When proceeding by indictment, the court may fine you 100% to 200% of the tax evaded and sentence you to a jail term of up to five years.

In cases of gross negligence, the Income Tax Act and Excise Tax Act allow the CRA to also assess a penalty of up to 50% of the unpaid tax or the improperly claimed benefit.

The CRA publicizes court convictions to maintain confidence in the integrity of the self-assessment system and as a deterrent to increase compliance with the law. The information released to the media comes only from court records and not from confidential information held by the CRA.

If you wish to come forward and correct previously omitted or erroneous information, you can do so through the CRA’s Voluntary Disclosures Program. If you make a full disclosure before any compliance action or investigation is started, you may only have to pay the taxes owing plus interest.

For more information, visit www.cra.gc.ca or call 1-800-959-8281 (toll free).


This document is also available for download in .pdf format.


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