Citation: 2013 TCC 1
Date: 20130103
Docket: 2012-963(IT)I
BETWEEN:
DENISE JACK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Rip C.J.
[1]
Denise Jack
appeals from an income tax assessment for 2009 in which she was assessed a
penalty pursuant to subsection 163(1) of the Income Tax Act ("Act"). The
facts are not in issue. Ms. Jack argues that the penalty ought to be
vacated since she exercised due diligence in preparing the tax returns. She
does not dispute the amount of income added to her declared income.
[2]
Ms. Jack is a
registered nurse, teacher and small business owner. She holds a Master's degree
in education. In 2008 she separated from her husband from whom she is now
divorced and moved from the Toronto area to Edmonton. Prior to 2008, her former
husband, a police officer, prepared and filed her income tax returns.
Ms. Jack simply signed the returns prepared by her former husband without
examining the returns or querying him on what he had prepared. The income tax
returns for 2003, 2005 and 2006 for example were prepared and filed in this
manner. In her income tax return for 2003, $2,498 of employment income from a
hospital was not reported, in her 2005 income tax return, amounts of employment
income of $1,697 and $27,471 from two hospitals and interest of $10 were not
reported and in her 2006 tax return, employment income of $515 and interest income
of $1,419 were not reported. She stated that during these years, she was fully
occupied in getting an education — she attended school for nine
consecutive years — and attending to her family that included two
children. She admitted that even when she arrived in Edmonton in 2008, she
"used to have bills stack up … that I never even used to open and look at
"because she was focused" on education.
[3]
Since she knew,
Ms. Jack said, that there were errors in prior tax returns and she had no
knowledge how to file a tax return, she "took all forms" to H&R
Block to prepare her 2008 tax return. She had earlier asked the tax authority
for assistance. And again there were amounts of income missing from the return:
$12,166 of employment income from a nursing home, $750 of employment income
from the Alberta Government and $12,417 of income form her registered
retirement savings plan which she withdrew from her RRSP in 2008.
[4]
Ms. Jack signed
the 2008 tax return prepared by H&R Block, a hard copy of which was
produced by the Crown. She "assume[s] she 'looked at it'", i.e. the
tax return. She understood that the income reported on the return for 2008 was
approximately what she had reported in previous years as at $100,000, she
stated, and, therefore, believed the information on the return was correct. In
fact, she reported $101,446.79 of income whereas she ought to have reported
$126,000 of income in 2008.
[5]
As a result of the
error incurred in the preparation of her 2008 tax return, Ms. Jack had her
2009 tax return prepared by Money Mart. She was well known at Money Mart,
since, as a result of break up of her marriage and move to Edmonton, she regularly attended at Money Mart to borrow money for her household expenses.
[6]
Ms. Jack testified
that after bringing all her documents to Money Mart to prepare her return, she
later returned to Money Mart to sign her return and pay for the preparation.
"And that's when they told me my file was mixed up with someone else's
file". Two weeks later she went back to Money Mart and signed "the
forms they gave me. And when I asked them for a copy, they said that they do
not give a copy of the income tax back to their clients." The evidence is
not clear when Ms. Jack attended at Money Mart for the purpose of
preparing her 2009 tax return. In her testimony, she believed these events took
place in April 2010.
[7]
According to the
respondent's file, Ms. Jack's tax return for 2009 was filed
electronically. What she appears to have signed was a single page authorization
for Money Mart to file her return electronically.
[8]
In fact, Ms. Jack
did not attend at Money Mart to sign any documentation respecting her 2009 tax
return before she received a letter, dated June 15, 2010, from Money Mart
advising that:
Once
we receive payment from you, we will file your tax return electronically with
the Canada Revenue Agency (CRA) using the EFILE system. The enclosed copy of
your Tax Return Summary is for your records.
and added payment of tax "must be paid on or
before April 30".
[9]
The Tax Return Summary
referred to in the Money Mart letter was not attached to the letter, according
to Ms. Jack, and she did not make any inquiries to Money Mart requesting a
copy of the Tax Return Summary. The Money Mart letter provided a telephone
number and email address if the client had any questions about his or her
income tax return.
[10]
M. Jack testified
that she never saw, and thus did not review, the information described on her
2009 tax return. The document, the Authorization Form given to her for
signature, was passed to her through a slot at the bottom of a security window.
She simply signed the document and returned it through the slot.
[11]
On July 6, 2010,
Ms. Jack received a notice of assessment for 2009. The assessment appears
to have agreed with the information on her tax return.
[12]
Then, in November 2010,
Ms. Jack said she received a letter from the Canada Revenue Agency
("CRA") informing her that her T4 from University of Alberta was
missing from her 2009 tax return and that they would be adding $60,991 of
employment income she received from the university in 2009 to her declared
income. A penalty would also be assessed. She stated that since she had
borrowed money at Money Mart, Money Mart knew that she was a teacher employed
by the University and suggested Money Mart ought to have had this knowledge
when preparing her tax return. She was silent as to whether Money Mart may have
lost her T4 form, however.
[13]
By notice dated
January 17, 2011, Ms. Jack was reassessed for 2009 and, in
reassessing, the Minister of National Revenue included the amount of $60,991 in
her income and imposed a penalty of $6,068.52, being 10 percent of the
income she failed to report, net of deductions, pursuant to
subsection 163(1) of the Act.
[14]
It was at this point or
when she received the letter in November 2010 — the date is not
clear — that Ms. Jack got in touch with Money Mart. "Ivan",
a manager of the local Money Mart, and Catherine from its head office, told her
to contact the CRA and ask them for permission to refile her 2009 tax return
which Money Mart would prepare without cost. Ms. Jack made the request,
which was denied.
[15]
At the conclusion of
her evidence, Ms. Jack acknowledged that her dates were "mixed
up" but declared that the incidents related by her are correct.
[16]
Ms. Jack had a lot
of problems in the preparation of her tax returns, no matter who prepared them
for her, her former husband, H&R Block or Money Mart. It appears from the
evidence before me that even during trial Ms. Jack had no idea what papers
or forms she may have given to H&R Block and Money Mart to assist in the
preparation of her 2008 and 2009 tax returns, respectively. Also, she never
made even a cautionary perusal of her respective tax returns for 2008 and 2009
to at least find comfort that the returns were in order.
[17]
With respect to her
2008 tax return, she testified that the reported income of $101,447 was not
unusual since her income "is usually about a hundred to $103,000".
She could not recall if she checked to see if she reported income from all the
places she worked in 2008. In any event, in 2003 and 2005, her declared incomes
were $64,400 and $40,395, respectively; her revised incomes were $66,858 and
$69,573, respectively. There is no evidence of what Ms. Jack's incomes
were for 2006 and 2007, in particular, whether they approximated $100,000, as
she claimed at trial. It is not that I question Ms. Jack's
credibility — I do not. It is that I question her memory of her
recollection of events. I do not suggest that there was any attempt on her part
to mislead. It would appear from the evidence before me that reporting income
of over $100,000 for a year prior to 2008 was not routine and that
Ms. Jack ought to have paid more attention in the numbers entered on her
tax return for 2008.
[18]
The failure to report
income of $60,000 in 2009 is quite serious and while Ms. Jack states she
has "learned from my mistakes" and is trying not to have mistakes made
again, the Minister has led evidence to justify the establishment of the
penalty. Ms. Jack relied wholly on Money Mart to prepare the tax returns.
She did not make even a cursory review of the information on the return,
notwithstanding her previous difficulties. Whether she even verified that she
gave Money Mart all necessary forms, including the T4 form from the University of Alberta, could not be confirmed. And when Money Mart's letter of
June 15, 2010 stated a tax return summary being enclosed, she did not go
back to Money Mart to obtain the return. She had occasions to review the
information prepared for her by Money Mart but for some reason, did not do so.
[19]
Ms. Jack did not
exercise a reasonable degree of due diligence in the filing of her 2009 tax
return or of her 2008 tax return. The amount of income that Ms. Jack
failed to report, $60,000, was not an insignificant amount that the failure of
which, as in Symonds v. R., 2001 TCC 274, would be innocent.
[20]
There is a difference
between innocent and careless. I have no doubt Ms. Jack's failure to
report $60,000 was not deliberate but it was due to her reckless or careless
disregard of her obligation to report all of her income in a tax return for an
appropriate year.
[21]
The magnitude of the
omission in relation to her income is significant. Ms. Jack squandered her
opportunities to detect the error. She is intelligent, she has a university
education. Quite simply, she was negligent in attending to her tax affairs.
[22]
The appeal is
dismissed.
Signed at Ottawa, Canada, this 3rd day of January 2013.
"Gerald J. Rip"
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