When the Canada Revenue Agency went looking for tax cheats back in 2001, John Marsden was an unlikely target.

For years, Marsden, 52, lived near the poverty line. His cramped, rundown bungalow in Guelph, Ont. is without many modern appliances. He chops wood to heat his home in the winter and in the summer hangs his laundry out to dry.

Even the judge who eventually presided over his tax case agreed Marsden hardly fit the bill of a typical tax evader.

"One would think that he would be the last person of interest to the ever vigilant gaze of Revenue Canada," said Justice Norman Douglas.

But none of that mattered to the CRA. Instead, they pursued Marsden relentlessly. It would take him five years and tens of thousands of dollars before he was ultimately vindicated.

Start of the nightmare

Marsden's nightmare started in July 2001, when the CRA first came knocking, seeking to audit his business's books.

"I had gone through 15 years of being self-employed and hadn't had an audit yet, so I thought, it's my turn and it shouldn't be a problem," said Marsden.

He owned a small futon store and put whatever money he made back into the business. When the auditor started looking through Marsden's books, he felt he had nothing to hide.

"I'm quite careful about tax. I think government is a good thing. I think tax is a reasonable thing and I pay my taxes," said Marsden.

But the CRA auditor was suspicious about a memo written by one of Marsden's employees. The auditor thought there was evidence of undeclared business income.

That set into motion an investigation and chain of events that would lead the CRA to exercise its substantial powers.

In 2003, a team of CRA investigators, armed with a search warrant, swooped in on Marsden's home while he was away and seized documents, computers, even his daughter's homework and love letters from Marsden's girlfriend.

A year later, Marsden was shocked when the Ontario Provincial Police came to his door and charged him with 28 criminal counts of tax evasion.

By the time the case got to trial, the CRA alleged that Marsden owed about $120,000 in back taxes, penalties and interest.

The CRA investigator in Marsden's case later testified that she'd spent 3,000 hours reviewing his documents, but hadn't even bothered to interview Marsden for his side of the story.

The Canada Revenue Agency randomly conducts about 300,000 small and medium-sized business audits every year. Normally, if the CRA finds a problem after an audit, it reassesses the taxpayer. If the taxpayer disagrees with the reassessment, they can appeal through a Notice of Objection. If an appeal is unsuccessful, the taxpayer can send the case to tax court. Even though this process can take years and may leave the taxpayer unsatisfied, criminal charges for tax evasion are much less common.

Off the rails

So why did the Canada Revenue Agency pursue Marsden's case with such zeal? Some reasons may have emerged during Marsden's trial.

"The auditor was asked about her career at the CRA. And she started as a teen working in the mail room, and she had taken a training course as an auditor and it was her very first audit," explained Marsden.

The auditor was a rookie, but she wasn't the only one. It turned out that this was also the CRA investigator's very first case.

"At the time they were looking at low-income taxpayers, people that were not reporting a lot of income and they were assuming that they were hiding funds," said David Bell, the accountant hired by Marsden's lawyer to review his documents before the trial.

"Really, it seems they did not talk to John and proceeded on their merry way towards a criminal prosecution."

Prior to trial, the CRA did make several offers to settle with Marsden, always lowering the amount he would owe. But the offers always came with the condition of his admitting guilt to some of the charges. Even though that would have been cheaper than defending his innocence to the end, Marsden refused.

"I wasn't (guilty). I couldn't," said Marsden.

Eventually, the cost of defending himself reached $70,000.

"Their goal is to break the taxpayer," said Geoff Perry, a former CRA auditor, in an interview with W5.

"(CRA auditors) have the feeling that if the person has no resources, how are they going to defend? People go and they'll pay their assessments even though they know they're not true assessments because they can't afford the process."

CRA's response

W5 asked the CRA for an interview with its Commissioner, Linda Lizotte-MacPherson, and the tax agency refused.

In an email the CRA claimed it "serves taxpayers with a high degree of accuracy, professionalism, courteousness and fairness when addressing service complaints and disagreements over tax assessments."

Although Marsden had given permission to W5 to discuss his tax case with CRA, the agency refused.

"Even where taxpayers give us permission to discuss their files in the public domain, it is standard CRA practice not to do so," wrote Noël Carisse, Assistant Director of Media Relations.

"Discussing an individual's tax situation in the media, even where that taxpayer has given permission could erode taxpayers' confidence in the CRA's protection of their information."

The email further detailed legal avenues available to taxpayers in dispute with the Agency.

But there was one place where CRA did have to openly account for its handling of Marsden's return: in open court. John Marsden's trial eventually ended with the judge acquitting him of all 28 criminal charges. The judge also slapped the CRA, finding that the taxman had "jumped the gun" and accused the CRA investigator of "tunnel vision." The judge also listed several instances where the investigation breached the CRA's own guidelines.

For Marsden it was an emotional end to a grueling ordeal. "I just stood in the parking lot and cried," said Marsden.