Today, "O" is for offence. We've got 15 letters down, and 11 to go in our 26 letter tax race.
WHAT IS A TAX OFFENCE
Offence is a generic term used to refer to a lot of different contraventions of regulatory legislation in Canada which don't qualify as "crimes." Generally, you only find crimes in the Criminal Code or Controlled Drugs and Substances Act. So contraventions of the Income Tax Act are usually termed "offences."
It's important to distinguish between getting just a little too creative in your tax accounting which leads to you making statements in your tax return which the CRA won't accept but which don't amount to offences, and outright lies or obstruction which may potentially lead to offence charges against you. Make a few math errors, make an honest mistake about claiming a deduction you erroneously thought you were entitled to, have some bookkeeping errors leading to you claiming too much mileage on your vehicle? The CRA might administratively penalize you for any of these errors by charging you interest on the tax balance owing and assessing civil penalties. But it's unlikely any of these mistakes will lead to allegation of offences.
However for more blatant actions (or inactions) like "forgetting" to file tax returns for ten years, ignoring repeated information demand letters sent to you by the CRA, or understating your real income by $100,000 are all good ways to be accused by the CRA of offences. Since the Income Tax Act is a regulatory statute, you can be liable for most of its offences (other than tax evasion) even if you didn't wilfully intend to commit the offence.
YOU CAN BE CONVICTED OF MOST TAX OFFENCES WITHOUT INTENT
Thus it's a bit like speeding on the highway: you might not have intended to drive 40 km over the limit, but if you got a bit distracted and your foot got a little heavy on the gas, saying you didn't mean to speed isn't going to help you in court. Same with taxes: saying you didn't mean to forget about filing your tax returns and ignore all those demand letters the nice people at the CRA sent to you won't really help you when you're charged with an offence.
THE CRA HAS A HIGH CHARGING THRESHOLD FOR OFFENCES
The CRA tends to have a fairly high offence charging threshold. Meaning, they'd much rather go after you for more minor contraventions through administrative means by imposing administrative monetary penalties, rather than hauling you into court on offence charges. So not filing your returns for a year or two, or "forgetting" to report $10,000 in income on your return isn't likely to lead to you facing an "offence." But don't file for many years, or forget to report a few hundred thousand dollars on your return, and you might wind up with a court date.
CHARGING THRESHOLD LOWER WHERE AGGRAVATING FACTORS
Sometimes the CRA's charging threshold will be lowered if there are other aggravating features of tax misconduct. For instance, if your unreported income was derived from criminal activity, the CRA might charge you with an offence even if it's only a few thousand dollars that are unreported.
The message here is that the best way to avoid any allegations of tax offences is to avoid any hint of impropriety when filing your returns. I'm not suggesting that with sound accounting advice you shouldn't push the envelope in aggressively claiming deductions. Just be sure you can later defend those deductions when challenged, don't "forget" about any significant income, and make sure you file your returns on time, year after year, even if you can't afford to pay your full tax bill. The CRA always surprisingly accommodating in making payment arrangements, and the prescribed rate of compound interest remains a quite reasonable 5.1%.
Gordon S. Campbell is a tax lawyer practicing throughout Canada who has argued tax cases as high as the Supreme Court of Canada. Learn more at acmlawfirm.ca/taxlaw.