Helping two friends with their taxes was not the same as promoting a scheme

The situation

'Can they really fine me for helping a friend with paperwork?' Radu asked us, sliding a letter across the table that assessed him a civil penalty running into the tens of thousands of dollars. He was not an accountant. He was a paramedic who had moved to Canada two years earlier, filed his own first return with some difficulty, and then, because he had figured out the process, spent an evening looking over the returns of two colleagues from his station who were filing for the first time themselves.

One of those colleagues was Elena, a firefighter who had claimed a set of expenses and credits Radu had seen mentioned online and passed along as things worth checking. The other was Sofia, who worked alongside them and had filed a similar return using some of the same claims after talking to Elena. When the tax authority later reviewed both returns and disallowed several of the claims, it did not stop at reassessing Elena and Sofia. It also issued Radu a penalty aimed at people who plan, promote, or sell a tax arrangement they know or should know is false.

The amount at stake for Radu personally sat in the range of a year's take-home pay, a penalty designed for professional promoters of abusive tax schemes, not for a colleague who had spent one evening looking over two friends' paperwork with no training, no fee, and no claim to expertise. He had never prepared a return for anyone else before, had no bookkeeping or accounting background, and had no way of knowing, when he mentioned a couple of credits over coffee, that the conversation could end up costing him a year's income. Radu had not prepared the returns. He had not filed them. He had mentioned a few credits he had come across and suggested his colleagues look into whether they applied.

What made the situation harder was that Elena and Sofia's own positions were not identical to Radu's or to each other's. Elena had claimed more aggressively than what Radu had actually suggested, and Sofia had followed Elena's lead rather than Radu's directly. The three of them had a shared interest in getting the reassessments themselves reduced, but their accounts of who told whom what did not line up perfectly, and Radu needed his own defence to stand regardless of how the other two accounts settled.

The complication

The third-party penalty provisions in the Income Tax Act exist to punish people who knowingly, or in circumstances amounting to gross negligence, make false statements on someone else's behalf, or who plan or promote an arrangement they know is likely to result in a false claim. The provisions are aimed squarely at tax preparers, promoters, and advisors, people acting in a professional or quasi-professional capacity, not at a friend or colleague passing along a suggestion.

The tax authority's position was that Radu had, in substance, acted as an informal preparer for two returns, that the claims involved were ones he had specifically pointed his colleagues toward, and that this was enough to bring him within the penalty regardless of whether he was paid or held himself out as a professional. That reading of the provisions, if accepted, would have swept in an enormous amount of ordinary behaviour, coworkers talking about deductions, family members comparing notes, anyone who has ever told a friend which credits to look into.

The complication was proving the boundary in Radu's specific case, not the boundary in the abstract. He had, in fact, mentioned specific credits to Elena. He had, in fact, looked at a printed copy of Sofia's return before she filed it and told her it looked fine. Those were real facts that made his position harder to argue than a flat denial of any involvement would have been. The penalty regime does not require a fee or a formal engagement to apply; it asks what the person actually did and what they knew or should have known.

The three files were also, awkwardly, connected. If Elena's or Sofia's returns were shown to involve knowingly false claims, that fact would be used to argue Radu should have known the claims were problematic too, since he had discussed them with both. Their interests in minimizing their own reassessments did not always point toward the version of events that best protected Radu, and we had to build his defence in a way that did not depend on the other two files landing exactly where we wanted. That meant treating Radu's file as though it might one day be judged entirely on its own, with no assumption that Elena's or Sofia's outcome would come out favourably or that either of them would describe events the same way twice.

What we did

1. Interviewed Radu in detail about exactly what he said to each colleague, reconstructing the conversations as precisely as memory allowed, because the penalty turns on his actual conduct and knowledge, not on what Elena or Sofia later claimed he had told them. Building the timeline before looking at anything else meant later evidence could be tested against his account rather than shaping it after the fact.
2. Established the limits of what Radu actually reviewed, distinguishing between mentioning a credit existed, which he had done, and vouching for its correctness or preparing the calculation, which he had not done, since that distinction sits at the core of what separates informal help from the kind of third-party involvement the penalty provision targets. Drawing that line precisely, rather than in general terms, gave the submission its central argument.
3. Gathered text messages between Radu and both colleagues from around the time the returns were filed, which showed Radu's actual language, phrases like 'you should look into this' rather than instructions or assurances, undercutting the theory that he had promoted a specific arrangement. Because the messages were sent before any dispute existed, they carried far more weight than anyone's memory of the same conversations.
4. Reviewed Elena's and Sofia's actual claims against what Radu had mentioned, and found that Elena had gone well beyond anything Radu suggested, adding claims of her own after researching further online, which weakened the argument that Radu's suggestions were the operative cause of the false claims on either return. That gap between what he said and what she filed became a central plank of the defence.
5. Prepared a written submission distinguishing the third-party penalty's actual target, professional promoters and preparers acting with the requisite knowledge, from a colleague passing along general information, supported by the absence of any fee, any repeated pattern, or any specialized claim to expertise on Radu's part. Framing the argument around the provision's real purpose, rather than a bare denial, gave the reviewing officer a principled basis to withdraw the penalty.
6. Coordinated, without merging, with the counsel handling Elena's and Sofia's reassessments, sharing only what was necessary to keep the three narratives from contradicting each other on points that did not actually matter to any of the three outcomes. Keeping the files separate, while still comparing notes, avoided a mismatch in the record that could have undermined all three at once.
7. Responded formally to the tax authority's penalty notice, requesting a review on the basis that the statutory threshold for third-party involvement had not been met, and setting out the text message evidence, the interview record, and the comparison of Radu's suggestions against the actual filed claims as the primary support for that position. We asked specifically for a review by an officer who had not been involved in Elena's or Sofia's files, to keep the assessment of Radu's own conduct from being coloured by the separate findings against them.

The outcome

The tax authority withdrew the penalty against Radu in full after reviewing the submission, the interview record, and the underlying text messages. The reviewing officer accepted that mentioning a credit existed, without preparing the claim or vouching for its accuracy, did not amount to the kind of promotion or knowing false statement the provision was designed to capture. Radu owed nothing beyond his own return, which had never been in question, and the file closed without any further correspondence once the withdrawal was confirmed in writing.

Elena's and Sofia's reassessments proceeded separately on their own facts, and both ended up owing back taxes on the disallowed claims, a result Radu was not responsible for and one his case did not affect either way. The clean separation between his conduct and theirs, which had been the hardest part of the case to establish given how closely the three files were intertwined, turned out to be exactly what protected him once the distinction was documented clearly rather than simply asserted.

Radu said afterward that the case had made him considerably more careful about what he says to coworkers during tax season, even in casual conversation. The penalty he faced was real and serious while it lasted, both in the dollar amount and in what a formal finding of promoting a false claim could have meant for a newcomer still building a life in Canada, and its removal was not a foregone conclusion. A slightly different set of messages, or a slightly more instructive tone in his conversations with Elena, could have produced a very different result for him.

What you can learn from this