Fraudulent Tax Preparers and the Penalties - By: Molly Wider

A recent IRS release about fraudulent tax preparers should have Canadians being weary as well. Since 2009, 19 Canadian tax preparers have been assessed nearly $1.7 million in third-party penalties with audits of 15 additional tax preparers still under way. These tax preparers have been identified by the Canada Revenue Agency as a group that is a more likely risk of tax non-compliance, which means they overstate credits and deductions, understate earnings and often charge more for their services or attempt to skim additional money from clients. If caught, not only does the tax preparer receive harsh penalties, so do their clients, usually in the form of fraud and interest penalties if there is money owing for the taxation year.

In the conviction section of the CRA's website, the legal department states: "When individuals are convicted of tax evasion they must still repay the full amount of taxes owing, any amounts fraudulently obtained, plus interest and any civil penalties that may be assessed by the CRA. If convicted, the court may fine them up to 200% of the federal tax evaded or false refunds claimed and sentence them to a jail term of up to two years.

Schemes involving false or inflated charitable donation receipts and tax preparer fraud are both being investigated as part of Project Trident, a CRA-wide enforcement project that helps protect the tax base by prosecuting key players in fraudulent tax schemes and reassessing related tax returns. Project Trident targets three types of fraud: identity theft, charities related fraud, and tax preparer fraud."

For more information on CRA's Project Trident, visit http://www.cra.gc.ca/projecttrident.

Canada Revenue Agency warns that if you are going to use a tax preparer, to be careful in who you chose as well as accepting any tax breaks or proposals to reduce your taxes that may seem to good to be true. There are many fraudulent tax preparers looking for easy target clients. This is a handful of the more recent convictions against fraudulent tax preparers.

On March 10 2010, Allain Maltais of Lachine, Quebec plead guilty to multiple charges of tax evasion including 100 counts of tax evasion under the Income Tax Act for claiming or obtaining $286,255 in false income tax refunds. He originally faced 159 counts. France Desjardins was convicted in January on 13 counts for her part in the Maltais scheme and was sentenced to 3 months in jail and fined close to $36,000. Francine Laforest also plead guilty to tax evasion for her part. Rosaire Michaud has been charged with 171 counts of tax evasion under the Income Tax Act and 145 counts under the Tax Rebate Discounting Act for claiming or obtaining $491,905 in false income tax refunds.

If you are using a tax preparer this season and would like to check them out, a more detailed list by province can be found by clicking on CRA's website at: http://www.cra-arc.gc.ca/nwsrm/cnvctns/menu-eng.htmlt.

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