The CRA Wants You To Beware Of Tax Schemes — Here Are Tips On How To Spot Them

It's that time of year again in Canada...tax season! The Canada Revenu Agency (CRA) wants you to beware of tax schemes that promise to reduce your taxes and are sharing tips and warning signs on how to spot them.

According to the CRA, tax schemes are "plans and arrangements that attempt to deceive taxpayers by promising to reduce the taxes they owe, either through large deductions, or through promising tax free income."

Scammers, or as the CRA call them, "promoters" will attempt to promote or sell schemes that break the rules of Canadian tax laws. They will often times make false statements to assist clients in cheating the tax system, all while benefiting financially themselves, says the Canada Revenue Agency.

As Canadians enter tax season, the CRA reminds the public to be cautious of tax schemes, and have pointed out the following common elements to look out for:

• "They are positioned as financial products or business opportunities."
• "They are advertised (internet, social media, newspapers, fliers sent to households)."
• "There is often a sales pitch (free info session, paid seminar, webinars)."
• "They promise tax savings which often include large returns on small investments."
• "A portion of the anticipated tax refund is the promoter's fee."
• "They seem "too good to be true."

The CRA also shared the general profile of a tax promoter, which includes individuals or corporations who are very personable, charming, deliver polished presentations, provide letters from certain professionals, or go as far as discouraging you to seek a second opinion or to speak with the CRA directly.

So, what can you do to help protect yourself? The CRA offers the following tips:

• "Be informed about who you are dealing with at tax time and what their qualifications are."
• "Stay away from tax preparers who offer you false tax claims such as charitable donations, child care expense claims, or even business expenses or losses. It is not worth the risk. There are serious consequences to you."
• "If you don’t understand your return, don’t be shy about asking questions."
• "Make sure the tax preparer gives you a copy of your return for your records."
• "Never sign a blank tax form."
• "Generally, if it sounds too good to be true, it probably is."

As the CRA states, it is important to remember that "if someone else prepares your tax return, you are responsible for all the information on the return." And anyone who chooses to participate in tax schemes, including those who promote them can face serious consequences including "penalties, court fines, and even jail time."

The Canada Revenue Agency said that they continue to identify and shut down tax schemes and are "actively going after promoters to ensure greater fairness in the tax system."

So, when filing your taxes this year, beware of the signs, and remember. If it's too good to be true, it probably is.

Full information provided by the CRA on recognizing tax schemes can be found here.

This article's cover image was used for illustrative purposes only.