How Not To Defraud The Taxman

Have you ever watched Jay Leno’s bit on the world’s stupidest criminals? Like the woman who stole $56 worth of merchandise from the store, then fled, leaving her mother and the merchandise behind?

Well, the accounting community is not immune to such criminal underachievers. In a recent case, two taxpayers were reassessed when they were accused of purchasing donation receipts at a discount. Unfortunately, they were working with a fraudster who kept proper records!

The practice is not uncommon. An unscrupulous charitable organization might essentially issue a false donation receipt in exchange for a discounted amount of cash, while the taxpayer benefits from a donation tax credit worth more than the price he paid for the receipt.

In this particular case, the receipts were sold through an “accountant” facilitating the deal. (I use this term loosely, as nowhere in the case do they mention a professional designation) For a fee of 10% of the face value of the receipt, the accountant would sell these tax credits to his clients. The scheme was easily uncovered, however, when the CRA seized his records. They found invoices made out to taxpayers for tax preparation work, showing the tax return preparation fee, the face value of the charitable receipt and a fee equal to 10% of that amount. They also found pre-signed blank donation receipts from various charities that were involved in the scheme.

Needless to say, the taxpayers, who tried to claim that they made their donations using cash or furniture, were unsuccessful in their appeal.

As for the accountant, he plead guilty to selling false charitable donation receipts for the 2002 through 2005 taxation years to clients to enable them to fraudulently reduce their income tax payable. He admitted that he provided false donation receipts with a total face amount of over $39 million during that period.

This case illustrates that we accountants should stick to counting beans. Our compulsion to keep proper records will always prevent us from becoming truly successful scofflaws. !

Leave a Reply

Your email address will not be published. Required fields are marked *