What are the potential liabilities for directors under the Income Tax Act?

Directors can indeed be held responsible for unpaid corporate tax liabilities under the Income Tax Act. This provision is in place to ensure adherence to tax obligations and to protect the interests of the government and taxpayers.

If a corporation fails to remit the required taxes, the directors can be personally liable for those amounts, particularly if they were aware of the tax obligations yet chose not to ensure compliance. This liability often arises when the corporation is unable to meet its tax payments due to inadequate management or misappropriation of funds, and the directors are deemed to have a duty to oversee and rectify such situations.

This structure serves as a deterrent to prevent mismanagement and encourages directors to manage the corporation responsibly to fulfill tax obligations. Additionally, it emphasizes the importance of diligence in governance, as directors must be proactive in understanding and addressing the financial responsibilities of the corporation.

Other choices discuss areas that are not typically associated with direct liabilities under the Income Tax Act, such as unreported income or penalties for over-reporting income, which do not fall under the typical liabilities for directors. The statement regarding no liability is also incorrect, as it disregards the accountability established by the Act in cases of unpaid tax liabilities.