The Canada Revenue Agency has recently received a court order from the Federal Court allowing them to collect a broad range of data from paypal. The service is frequently used by relatively informal businesses, particularly those based online, to make sales simply and securely.
If you receive income through PayPal, this is taxable just like a regular paycheque, but the relative secrecy and absence of deductions at the source make not claiming it particularly tempting.
The CRA and PayPal
As Paypal themselves summarized the order, they would be required to disclose:
- “The full name of every individual or corporation holding a business account that has a Canadian address;
- The date of birth of each individual holding a business account;
- The business name, if applicable;
- The telephone number(s) of the corporation or individual holding the business account, if available;
- The full address(es) of the corporation or individual holding the business account;
- The email address of the corporation or individual holding the business account; and
- The Social Insurance Number and/or Business Number of the corporation or individual holding the Business Account, if available.
The following information on transactions made by the account holder:
- The total number and value of received transactions for each calendar year between January 1, 2014 and November 10, 2017; and
- The total number and value of sent transactions for each calendar year between January 1, 2014 and November 10, 2017.
In short, if you have a PayPal business account, the Canada Revenue Agency will figure out who you are in short order, and it should not surprise you if they compare the information they receive from PayPal to your tax filings. Any information accumulated between January 1, 2014 and November 10, 2017 may now be available to the CRA.
Most businesses in Canada need to register for and remit GST or HST payments to the government. In the simplest terms, businesses need to record all of their sales, subtract the costs of their inputs, and collect a percentage of the amount remaining (the “Value Added”) as tax.
Fortunately for many of the relatively informal businesses using Paypal, “small suppliers” are exempt from GST. If your “taxable supplies” (in short, the amount you are selling) does not exceed $30,000 in any given year, you do not need to collect or register for GST.
This will be a relief to you if your Etsy enterprise or ghostwriting gig is not the main way you pay your bills. However, if you are over or are nearing the $30,000 revenue mark and have not registered for GST/HST, you should seriously consider reaching out to a tax professional. Otherwise, you may start to rack up penalties and interest quickly.
If you have not been reporting income received through a Paypal account, consulting with tax professionals will let you minimize your income in the eyes of the CRA, and so keep your tax bills as small as possible, by helping you take full advantage of and prove any deductions you are entitled to.
If you have received a substantial amount of money through a PayPal account which, for whatever reason, you have not been disclosing to the Canada Revenue Agency, there has never been a better time to reach out to our office to discuss the possibility of an application under the Voluntary Disclosure Program. Particularly given the changes that the CRA will be making to the program beginning on January 1, 2018, making it less friendly to taxpayers, sooner is better than later.
However, the Program is not available where taxpayers have been contacted by the CRA to initiate collections or enforcement action. If you do not quite get there in time, there are still options, and we would be happy to discuss your recourse should you find yourself subject to an audit, reassessment, or start hearing from collections officers.
Contact a lawyer at Rosen Kirshen Tax Law today to ensure you get proper advice on how to clean up your affairs with the Canada Revenue Agency in the most tax efficient manner possible!
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.