The Canada Revenue Agency (CRA) has recently discovered a tax scheme that targets newcomers to Canada. This scheme tells newcomers which benefit and credit payments they may claim for periods of time before they arrived in Canada. If you or someone you know is new to Canada, it’s important to be cautious. Promoters offering tax schemes could include tax representatives, tax preparers, or consultants.
As tax-filing season has started, please beware of tax schemes that promise to reduce your taxes through benefit and credit payments that you are not entitled to. If it seems too good to be true, it probably is!
What are tax schemes?
Tax schemes are plans or arrangements that go against the Canadian tax laws. Individuals and organizations that promote these arrangements are often referred to as “promoters.” Promoters try to encourage people to participate in the schemes by promising to reduce their taxes, or offer the opportunity to receive benefit and credit payments they are not entitled to.
What is a benefit scheme?
Newcomers to Canada can apply for benefit and credit payments to help with the cost of living as soon as they arrive. You could qualify for payments like the GST/HST credit and the Canada Carbon Rebate (CCR) if you reside in a relevant province. You may also be entitled to the Canada workers benefit (CWB), Canada child benefit (CCB), and other provincial/territorial benefits, depending on your residency status and personal situation.
Promoters may claim that newcomers can access benefit and credit payments for periods of time before they arrived in Canada. This is incorrect. Benefit and credit payments from the Government of Canada can only be claimed for periods of time after arriving in Canada and according to certain eligibility requirements. Newcomers do not need to file a Canadian tax return for the years before they lived in Canada.
In benefit schemes, promoters target newcomers with the promise of securing them a tax refund, while taking a percentage of the refund for their service. The promoter will file an income tax and benefit return for the tax year the person arrived in Canada, but also for many years before. This results in multiple tax returns filed, generating refunds that the newcomer is not entitled to.
Your actions may have serious consequences
Through increased audits of promoters, and strengthened communication with taxpayers, the CRA continues to shut down tax schemes.
If you participate in a tax scheme, you could face serious consequences. If you receive payments you are not eligible for, you will have to repay the money. You may also receive penalties, court fines, and possibly even jail time. The same consequences apply to those who promote the schemes.
You are responsible for making sure that your tax return is accurate and that you have documents to support your claims, even if you pay someone to do your taxes for you.
How can you protect yourself?
The CRA encourages everyone to seek an independent, second opinion from a reputable tax professional on important tax matters.
Check out benefits, credits, and taxes for newcomers and the benefits finder for more information on benefit and credit payments.
Report a tax scheme
People who avoid or evade taxes take resources away from social programs that benefit all people in Canada. If you suspect tax evasion, you can report suspected tax or benefit cheating in Canada or by contacting the Informant Leads Centre at 1-866-809-6841. The CRA will act to protect your identity or you can provide information anonymously.
The Voluntary Disclosures Program (VDP) grants relief on a case-by-case basis to taxpayers and registrants who voluntarily come forward to fix errors or omissions in their tax filings before the CRA knows or contacts them about it. If your application is accepted, you may be granted relief from penalty and partial interest. To verify if you may be eligible for the program, visit who is eligible.
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