Last month I was at a two-day intensive tax course. While not considered exciting by most, I can say there was a lot of interesting information being shared by the presenters and the attendees. The CRA has been busy trying to collect the data and the tax dollars of those that are either trying to avoid the required reporting and remitting, or are ignorant of their responsibilities.
Here are 3 Initiatives, Results or Ongoing Actions:
1. Sale or Transfer of Real Estate
Between April 2015 and March 2017 the CRA reviewed 21,000 transactions (files) related to the sale or transfer of real estate. As a result they assessed over $329 million in previously unreported income. They also applied over $17 million in penalties. They’re looking at rental properties being sold as principle residences, potential house flipping, properties being sold with revenue reported as capital gains when it should be reported as income, etc. As I discussed in a previous blog the reporting of the sale of your personal residence now must be included when filing your personal tax return. The CRA has indicated that this will be an ongoing requirement, and they will continue to enhance their compliance procedures. From the CRA Release dated June 16, 2017 “The CRA will continue to strengthen relationships with key partners such as provinces, territories, and municipalities to further expand, obtain, and exchange information on real estate transactions, thereby enhancing the CRA’s ability to combat tax evasion and avoidance.”
2. Sharing Economy
In a March 2017 Tax Tip the CRA gave us a heads-up that it is co-operating with the industries, the provinces, and the territories to identify and address areas where the tax system and compliance might be affected in the Sharing Economy. If you’re involved in the Sharing Economy you better know your tax obligations. The sharing economy includes;
- Accommodation sharing – an example being Airbnb. Income earned by renting out your home through Airbnb must be declared on your income tax return. Depending on the services you provide it is either rental income or business income. If you’re an Airbnb host you know the detailed documentation you and your guest receive. The CRA also has access to that information.
- Ride sharing – Uber and Lyft are examples of the major ride share resources. And if you ever hear about any of the companies being audited by the CRA, don’t worry about them. The CRA is actually looking for the individual higher revenue earners and the audit will have a trickle-down effect.
- Music and video streaming
- Online staffing
- Peer/crowd funding
Besides reporting the income you also need to be aware of the GST/HST obligations on all of the above. Generally, if you earn income from the above services or supplies of less than $30,000 in a 12 month period, you do not have to register for a GST/HST number. Be aware that this is based on revenue, not profit.
3. Cracking Down on Tax Cheats
The purpose of a CRA news release June 1, 2017 is to update Canadians on the government’s progress to crack down on tax cheats. Here are a few of their initiatives to capture more than $13 billion-worth of taxes owed in the past fiscal year;
- Establishing specialized collection teams and adding technical and legal expertise to its audit and investigative teams
- Improving processes to better use external data for the identification of high risk taxpayers
- Increasing collaboration and information sharing with international partners
And as a positive;
- Striving for early resolution of audit issues in a fair and consistent manner
- Reviewing and modernizing existing programs, such as the Voluntary Disclosure Program, through consultation with experts and Canadians.
As you can see from the above it doesn’t matter whether you are; single, in a relationship, employed or self-employed, in a business partnership or major shareholder in a corporation you may receive a request for information from the CRA. It can come in the form of “the brown envelope”, email or telephone call.
DO NOT IGNORE responding to the CRA. If you’re not comfortable in communicating with them have a representative act on your behalf. If you’re unsure of your responsibilities speak with a tax professional. Death and taxes – CRA will not go away.
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Until next time,