Tax avoidance, tax evasion. . .do you know which is legal and which is a criminal offence? Many people are cavalier about their legal obligation to keep records for the taxman, according to Evelyn Jacks, President of The Knowledge Bureau and author of a new “how to book” for tax filers called Essential Tax Facts, her 35th.

According to Jacks, it is tax avoidance that is legal—the arranging of your affairs within the framework of the law to pay the least taxes possible. However, tax evasion is a criminal offence.

“Tax evasion is the act of making false or deceptive statements in a return, or even an answer filed or verbally given to the Canada Revenue Agency, with the intent to willfully evade the payment of your taxes,” says Jacks. “You’ll also be caught if you willfully make deceptive entries or omissions in your books. A person who destroys alters, mutilates, or otherwise willfully disposes of the records or books of account to evade the payment of tax is also asking for prosecution.”

Prime candidates for extra scrutiny are those who carry on a business, claim discretionary deductions like moving or child care expenses or credits like medical or tuition and education credits. All tax filers must keep records and books of account for at least six years after the end of the taxation year to which those records relate. However, CRA has the right to demand, that records be kept longer, if it suspects fraud. If books and records are inadequate the penalties can be steep:

• a fine of not less than $1,000 and not more than $25,000
• both a fine and imprisonment for up to 12 months

Guilty tax evaders, however, face criminal prosecution that can result in fines of not less than 50% and not more than 200% of the amount of tax sought to be evaded or both the fine and imprisonment of not more than 2 years . . . that’s in addition to administrative penalties and interest levied by CRA.

The moral? File on time, make it audit proof, and be sure you claim all legitimate deductions and credits available under the law to your maximum advantage.

For more information and to obtain a copy of Essential Tax Facts by Evelyn Jacks, call toll free 1-866-953-4769 or visit Evelyn’s website: www.knowledgebureau.com.