TAX TIP Businesses: Watch out for Canada Emergency Wage Subsidy tax schemes

Sunday, 20 June 2021 05:33.PM

The Canada Revenue Agency (CRA) is providing Canadian businesses with important information to protect their business from tax schemes where individuals, including some promoters, tax representatives and tax preparers may be falsely submitting or inflating Canada Emergency Wage Subsidy (CEWS) claims.

What is CEWS?

Eligible employers who have seen a drop in their qualifying revenue over the specified period can receive a subsidy to compensate their employees.

What are tax schemes?

Tax schemes are plans and arrangements that try to deceive taxpayers by promising to reduce the taxes they owe or increase the benefits they receive. For example, schemes may promise large deductions or tax-free income. Schemes can include other creative ways to convince people they could pay less tax or be entitled to benefits, like CEWS, for which they are not eligible.

Some tax preparers, promoters and tax representatives are introducing their clients to tax schemes that artificially inflate or falsify eligibility criteria for the CEWS in order to increase the value of the subsidy. In exchange for their services, they may charge a flat fee or a percentage of the return.

Know your representative(s)

Representatives are individuals you authorize to help you or your business manage your tax information and they play an important role in Canada's tax system. An authorized representative may be able to view, get information about, and update some or all of your tax information.

It is important to know who your representatives are and to which information they have access. Be proactive and make sure that the eligible representatives you have on file with the CRA are current, and remove representatives that are not by using My Account, My Business Account, or Represent a client.

If you have authorized a representative to manage your tax information, you are still responsible for the information they submit. You are responsible for any mistakes or omissions, as well as any exaggeration or fraudulent claims your representative(s) submits to the CRA.

What can I do as a business owner to avoid tax schemes?

As a business owner, you are responsible for making sure the information you submit to the CRA is correct, whether or not you personally completed and submitted the documents.

If you made an honest mistake on your CEWS application, you can make amendments to your claim even after you apply.

The CRA encourages all Canadians to seek an independent second opinion from a reputable tax professional on important tax matters, or consult Canada.ca

Businesses who meet the eligibility criteria are fully entitled to the CEWS and all its benefits; however, exaggerating or misrepresenting aspects of the business to receive larger government subsidies is prohibited and, if discovered, may result in serious consequences.

If you applied for the CEWS under false or exaggerated pretenses, you will have to repay the amount for which you were not entitled, and you may face serious consequences, including interest, penalties, court fines, and even jail time. This also applies to those individuals who promote these schemes. Remember: It's your responsibility to keep documentation to support any claim you make.

Participating in tax schemes is a crime. If you suspect someone of promoting or participating in an abusive tax scheme, you can report it online at canada.ca/taxes-leads or by calling the National Leads Centre at 1-866-809-6841. The CRA will take steps to protect your identity or you can provide information anonymously.

The CRA continues to encourage taxpayers to come forward and correct their tax affairs through the Voluntary Disclosures Program.

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

SOURCE: Canada Revenue Agency