Staffing Firm & Client Receive Jail Time For Improper Source Deduction Remittances


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A staffing company operator in Ontario Canada was fined almost C$1.3 million (US$1.2 million) and sentenced to four years in jail, the Canada Revenue Agency announced Tuesday. The owner of the  staffing companies did not remit proper payroll and income tax deductions to the government, according to the agency. According to court records  The Staffing Agency failed to remit approximately C$5.8 million owing to Canada Revenue Agency. The Director of the Staffing Agency will have one year to pay the fine upon release from jail, or she will serve an additional five years in jail.

A related party who owned a business that used the services of the staffing companies was also sentenced to two years in jail and fined C$397,758 (US$373,499).  As per the Canada Revenue Agency report the owner of TPM Machining Group knowingly used the services of the staffing companies to avoid remittance of payroll and income tax deductions, the agency reported.

This case highlights how client organizations need to perform a higher level of due diligence on the staffing firms they have within their supply chain to gain better visibility into the staffing firm’s ongoing compliance with payroll, employment and tax laws.  Even with a complex structure of contract and agreements in place, the CRA was able to establish that the client of the staffing companies knowingly used the services of a staffing agency to avoid remittances of payroll and income tax deductions and was therefore able to assess fines and jail time to the client’s management.

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