Filing taxes appropriately and on time is important. In severe cases, failure to do so may be considered tax evasion which is a criminal offense.
However, it is not illegal to have tax debt. Many individuals don’t file their taxes, leave income out of returns, or claim more expenses than they are entitled to because they are afraid to face their tax debt.
This has major consequences because not only will tax debt balloon with penalties and retroactive interest, you could even be prosecuted. Here are cases where average business owners faced charges for tax evasion:
- A B.C. land developer was charged and fined more than $23,000.00 for failing to report income on a land development.
- A B.C. businessman and lawyer received a 22-month conditional sentence with 8 months of house arrest after failing to report over 1 million dollars in income over a 4-year period.
- A B.C. business owner was sentenced to a 9-month conditional sentence and 30 hours of community service as well as fines over $50,000 for failing to report $159,000 in income over a 3-year period.
As you can see, prosecution for tax evasion can happen and the consequences can be severe.
Even though some tax mistakes can lead to tax debt, there are many options available to reorganize your finances. If you don’t have the money to make payments, there are solutions that offer you protection from the CRA and the ability to repay over a reasonable period.
One of the best types of financial professionals to consult is a Licensed Insolvency Trustee. A Licensed Insolvency Trustee can help you create a plan for your tax debts and provide some protection against enforcement actions by CRA such as wage garnishments, frozen accounts, and more.