Fred S. of Woodbridge, Ont., pleaded guilty in Ontario Court of Justice on January 26 to one count of income tax evasion. He was fined $20,000, which is in addition to any taxes and interest owed, as well as any civil penalties that may be assessed by the Canada Revenue Agency (CRA).

A CRA investigation revealed that Fred S.—working as a carpenter in the construction industry—received separate payments as both an employee and a subcontractor from his employer. As a sub, he submitted handwritten invoices under the name of a corporation that had been dissolved at the time. The cheques received in the corporation’s name were deposited into Fred S.’s bank account. He failed to include $47,741 on his 2002 and $57,133 on his 2003 income tax returns, thereby evading $17,455 in federal taxes.

CRA says individuals who have not filed returns for previous years, or who have not reported all of their income, can still voluntarily correct their tax affairs. They will not be penalized or prosecuted when they make a full disclosure before the agency starts any action or investigation against them. These individuals may only have to pay the taxes owing, plus interest.

CLICK HERE for more information on the Voluntary Disclosures Program (VDP).

The agency says it wants publicity on convictions “to maintain public confidence in the integrity of the self-assessment system, and to increase compliance with the law through the deterrent effect of media coverage”.

Note: when individuals or corporations are convicted of tax evasion, they have to pay the full amount of tax owing (plus interest) and any penalties CRA assesses. In cases of gross negligence, the Income Tax Act and Excise Tax Act allow CRA to assess a penalty of up to 50% of the unpaid tax or the improperly claimed benefit. In addition, the court may, on summary conviction, fine them 50% to 200% of the tax evaded, and sentence them to a jail term of up to two years.