Taxation of Internet Sourced Income

All Income is Taxable in Canada

Income from all sources is taxable in Canada, including internet sourced income such as sales on Ebay, ride sharing income from Uber, or rental income from airbnb or flipkey, and has to be reported to CRA. Recent reports that CRA has conducted an income tax audit of Uber in Canada and has asked for Uber’s books and accounting records is not a new development in CRA’s ongoing campaign to target the underground economy. The Canadian tax department has identified the underground economy as a key target for income tax enforcement, and in the 2014-2015 CRA Annual Report to Parliament quotes from “The Underground Economy in Canada, 2012”, Report by Statistics Canada, 2015 that the revised and updated estimates show the total underground activity in 2012 was equivalent to 2.3% of the gross domestic product. Income earned from operating a car ride share as an Uber driver, or rental income from flipkey or airbnb, is fully taxable and has to be reported to CRA, although expenses related to operating that vehicle, or rental expenses, such as insurance, gas or utilities and repairs and maintenance are fully deductible. If you have more than $30,000 in gross sales from any businesses, including multiple different businesses, you are also required to register for GST/HST and to collect and remit the GST/HST charged. If you do not report your internet sourced income or GST/HST you are committing tax fraud and can be sentenced to a fine as well as jail time.

Voluntary Disclosure Program - Toronto Tax Lawyer Tax Amnesty Application

If you are losing sleep because of unreported internet income, your income tax situation may not be as bad as you fear. Any Canadian taxpayers who have unreported internet income are subject to tax prosecution for income tax evasion as well as civil tax penalties for unreported income. However there is a way to avoid these tax penalties because the Canada Revenue Agency wants to promote voluntary compliance with Canadian tax laws, through a tax amnesty with the voluntary disclosure program (VDP). The purpose is to encourage taxpayers, such as airbnb renters or Canadian Uber drivers, to come forward to report any previously unreported GST/HST or unreported income or to file income tax returns that were not previously filed. The Canadian taxpayer who has not reported income has to initiate a voluntary disclosure with CRA through one of our Toronto tax lawyers before the tax man commences an income tax audit of unreported internet income. If the Canada Revenue Agency has begun audit or enforcement action, or has asked for information, the disclosure won’t be considered to be made on a voluntary basis and all penalties and possible prosecution will be applicable. If the voluntary disclosure application is accepted there will be no civil penalties including gross negligence and late filing penalties or income tax fraud prosecutions. There will be a full waiver of all possible tax penalties and an interest reduction may sometimes be available as well. The income taxes that would otherwise have been owed will have to be paid, along with interest. In addition, the identity of any Ebay seller, airbnb or flipkey renter or Uber driver making a voluntary disclosure for unreported internet income will be held in confidence. This is unlike CRA’s position with all other income tax fraud prosecutions where they seek the maximum publicity possible and issue press releases. It is important to emphasize that the voluntary disclosure program applies even to someone who has committed deliberate tax evasion, including failure to declare income, such as Canadian taxpayers with internet income who have not declared their income. If you have unreported income or unreported GST/HST, contact one of our top Toronto Income Tax lawyers now for assistance, before CRA contacts you.

FAQ's

Is online income taxable in Canada?

The simple answer is yes. All income is taxable in Canada, whether you derive it from a regular 9-5 job, an Airbnb rental, driving a Lyft, or even selling your old clothes online.
In fact, the Canadian government has taken an increased interest in these so-called “underground economy” jobs in recent years, as they have realized that it is an increasingly important source of lost tax income. Failure to report this type of income counts as tax fraud.

Do I have to report online income in Canada?

Yes. All income, regardless of how it is earned, is taxable in Canada. Failure to do so is considered tax fraud.If you have failed to report online income in the past, you can correct this problem without fear of prosecution. The CRA’s Voluntary Disclosure Program was designed to encourage citizens to voluntarily pay back missing taxes. If you are accepted into this program, you will have the opportunity to “make good” on past transgressions by paying the full amount of taxes owed for up to ten years, free of penalty charges with reduced interest charges.

What is the penalty for unreported income?

The penalty for failing to report income greater than $500 for any given year is compound daily interest will begin to accrue on May 1st of that year. You will also be charged interest and penalties the day after your filing due date. If you have repeatedly failed to report income, you may be charged both federal and provincial/territorial repeat failure to file penalty, in addition to the above-stated interest charges.

What is the penalty for unreported income?

Disclaimer:

"These articles provide information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. 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 the articles. If you have specific legal questions you should consult a lawyer."

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I did not know that eBay income was taxable, so I did not report it. Then I read about the CRA investigation of eBay and realized that I had a problem. I did some on-line research and found out about the voluntary disclosure program, and I retained the firm of Rotfleisch & Samulovitch as my tax lawyers to represent me. They submitted the tax amnesty application on my behalf, but CRA rejected it for 2 reasons. First, they had sent me a letter about an audit, but I never received it because it went to an old address. Second my bookkeeper made mistakes in the tax returns we submitted to complete the VD. David Rotfleisch, CPA, JD and his team submitted a second level voluntary disclosure review application arguing in detail why CRA was wrong and my voluntary disclosure should be accepted. CRA accepted his arguments and processed the VD with no penalties and reduced interest. If I had originally gone to an accountant I’m sure there would have been a different result. I am delighted with his services and results, and do not hesitate to recommend him.

PN, Saskatoon - Client

CRA assessed me for over $140,000 in tax liabilities due to payments from my husband when he had his own taxes owing. My accountant filed a Notice of Objection on my behalf, but CRA wrote back denying my appeal and giving me 30 days to make further submissions. I went to a trustee in bankruptcy to deal with my tax debt and he referred me to a Toronto tax lawyer, David Rotfleisch. David reviewed my file and said that the accountant did not make the proper legal arguments. He and his team submitted a detailed 13 page submission to the appeals officer. CRA accepted the arguments made on my behalf and eliminated all of my taxes owing. I could not be happier with the result and recommend David to anyone with tax problems.

R.L. Toronto, Ont

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My professional accounting practice consists of individuals and small to large business clients. I'm a Chartered Public Accountant, Certified General Accountant, Certified Public Accountant in the U.S.A. and a member in the Association of Chartered Certified Accountants in the U.K. My clients are often in need of a Canadian tax or business lawyer either to carry out tax planning to reduce taxes owing or to dispute CRA assessments. I have been working with David Rotfleisch for more than 5 years and he is my only choice for legal tax assistance. He is effective, responsive and very committed to solving my client's tax issues. I would not consider going to another tax lawyer for assistance.

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