Beware of schemes that promise large tax deductions or tax-free income

The Canada Revenue Agency (CRA) is advising Canadians to steer clear of tax schemes this tax season.

What are tax schemes?

Tax schemes are plans and arrangements that try to deceive taxpayers by promising to reduce the tax they owe, for example, through large deductions, increased rebates or promises of tax-free income. Tax schemes can include illegitimate ways of convincing people to pay less tax or to increase their claims for credits and benefits.

Be careful. Here are some common elements of tax schemes:

• They deduct a promoter’s fee from an anticipated tax refund
• They are positioned as financial products or business opportunities
• They may be advertised (on the web, or in social media, newspapers or fliers sent to households)
• There is often a sales pitch (free information session, paid seminar, webinars)
• They promise tax savings, and often include large returns on small investments

A good rule of thumb: If something sounds too good to be true, it most likely is.

Consequences of participating in a scheme

As a participant in a tax scheme, you could be assessed penalties and interest in addition to repaying any amount you wrongly received.

Individuals who are involved with the promotion or preparation of inaccurate or false tax returns may be subject to third-party penalties, as well as criminal prosecution if the activities undertaken constitute tax evasion.

If a promoter or a participant is convicted of tax evasion, they must pay the full amount of tax owing, plus any interest and any civil penalties assessed by the CRA. In addition, the courts may order fines  up to 200% of the taxes evaded and impose a jail term of up to five years. The CRA shares information about individuals, corporations and trusts convicted of tax evasion. For additional information, please refer to the following pages: The CRA's criminal investigations process and Enforcement notifications.

What can you do to protect yourself and other taxpayers from tax schemes?

• Get professional, independent advice when needed, especially if a deal seems too good to be true
• If in doubt, get a second opinion before claiming an amount on your income tax and benefit return
• If you participated willingly in a scheme, come to us to correct your tax affairs through our Voluntary Disclosures Program, before we come to you
• Help ensure tax fairness for all Canadians by reporting a lead to the CRA

For more information on tax schemes, please visit canada.ca/tax-schemes.

Contacts

For general inquiries:
Canada Revenue Agency
1-800-959-8281

For reporters:
Media Relations
Canada Revenue Agency
613-948-8366
cra-arc.media@cra-arc.gc.ca

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