after a settlement signed between parties employer's lawyer willingly provides false tax deduction document to concerned employee. Is this legal? and what canadian law says regarding this type of parctices by law firms?
Asked over 1 year ago in Toronto, Ontario
Categories:
Tax
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 Ontario lawyer
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I have to first say that I do not believe that law firms have a practice of creating false documents. I will answer the question while taking issue with that suggestion.
If a client asks his/her lawyer to sign a settlement agreement on his/her behalf knowing that the settlement agreement involves the making of a false statement, the client has a duty to inform the lawyer of the error prior to asking the lawyer to sign the settlement agreement. The client must read all documents relating to the settlement agreement before signing the agreement. The client should not question the lawyer's ethics after the agreement is signed in these circumstances. If the client asks the lawyer to sign the settlement agreement on his/her behalf knowing that there is something incorrect, the client is complicit in whatever error existing in the documentation.
As for the lawyer for the employer, it cannot be assumed (as it appears to be in the question) that the lawyer is acting improperly. It will be very difficult to show that a lawyer hired by an employer knows that an error is contained in a document if no one comes forward and informs the lawyer of the error. Entitlement to a tax deduction is a question of fact and law. The facts are often provided by clients and others. The lawyer for the employer does not apply the law to the facts to determine what deductions the employee can take - that is left to the employee.
If the employee takes a false tax deduction, the employee may have difficulties with the tax authorities. If the employee or the employee's accountant discovers the error after the settlement agreement, he/she should not take a false deduction.
If the error is such that the employee is disadvantaged in the settlement arrangemenet (which would be unlikely in light of the fact tax deductions are usually for the employee's benefit), then it may be something to raise with the appropriate Law Society.
Finally, under Canadian law, the Canada Revenue Agency can pursue an advisor if they are participating in tax evasion. There are a number of factual requirements that need to be met.
Posted over 1 year ago
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