Talking Tax for Friday, April 13, 2018
Bruce Ball, vice-president of taxation at CPA Canada
TAX IMPLICATIONS FOR THE SHARING ECONOMY
Money earned from renting out your home or driving passengers in your car is taxable despite what many people believe. So it’s much better to report this income net of reasonable expenses now rather than having the Canada Revenue Agency discover this income later, as penalties can apply.
Ensure that your expenses are reasonable and keep receipts. The income you earn is business or rental income (in the case of Airbnb) and you are allowed to claim reasonable expenses. Also, it will be necessary to prorate some expenses, assuming you use an asset such as a car or home for both personal and commercial use. Documentation is always important but even more so for income from the sharing economy, as you may be called upon to prove the expense was genuine and how much of it was personal.
WHAT HAPPENS IF I FIND A RECEIPT FOR LAST YEAR?
If you missed a credit or deduction in a prior year, you can still claim it. Many people find receipts or other information for prior years when doing their current year’s return. If you do, you can ask the CRA to adjust your prior year’s return. Although there are exceptions, you generally can’t just claim the amount this year. One common exception to this is a donation receipt: you can claim a donation made in the past five years this year.
PRINCIPAL RESIDENCE SALES
One issue I wanted to remind people on is that they now do need to report the sale of their principal residence even if they have only one, and it will be non-taxable. In order to deal with individuals who're not treating gains properly, the government decided in 2016 to make it mandatory to report. This will allow them to check and make sure the gain is truly exempt. So it' important to report the transaction.
CRA’S ONLINE RESOURCES
For those who haven’t, I would recommend signing up for CRA’s My Account service. Under this service, you will have a record of your current and past tax information. Your assessments and other carryover information is available from past years, and for the current year, all of your income slip information should be there. If you have multiple slips, it’s always a good idea to check what’s there.
Make sure that you adjust your return if you find unreported income. For those that have already filed, receiving additional or amended tax information is not uncommon. If the tax information is related to income that you haven’t reported, it’s important to change you return (see the CRA website for the methods available).
Beware of fraudulent communications from the CRA. It’s been top-of-mine for me lately, as I’ve received a few phone messages from someone pretending to be from the CRA. Emails are also very common. The phone calls I’ve received are the usual: the caller tells me they’re about to reassess me unless I call them. Though I didn’t phone because I know it’s a hoax, what they’ll try to do is get my SIN and other personal information.
The fraudulent emails are after the same thing. They say they have a refund waiting for you as long as you click a link and enter personal information. In both cases, they’re looking for information to steal your identity or for some other sort of fraud.
It’s important to remember how the CRA will contact you. If there really is a tax issue, you should receive a letter from them. In terms of emails, you will only receive one from the CRA if you sign up and even then the emails will only say that there’s new information waiting for you in their online services.
These issues have been around for quite a while, but unfortunately the fraudsters are getting more sophisticated.