If you were an eBay “PowerSeller” a few years ago and didn’t report the income from your sales, then you may have been the target of an audit and tax assessment from the Canada Revenue Agency after they obtained a Federal Court order against eBay requiring eBay to release the account details and sales information of its PowerSellers. Now the CRA has even more online sellers to go after.
In addition to eBay there are now more platforms for the ordinary person to sell goods and services online than ever before. Platforms like: Shopify, Etsy, Amazon, Kijii, Craigslist, Upwork, Fiver, Pinterest… just to name a few… have made it a lot easier for the average person to start and run a business from their home. Last year, in response to the COVID-19 pandemic, the Canadian Government partnered with Shopify to launch the Government’s “Go Digital Canada” initiative which gave people who wanted to start a new online business a 90 day free trial of Shopify to build an online store using the Shopify platform and resources. You had to register for the program by October 1, 2020, so that offer may no longer be available but the Ontario, Alberta and New Brunswick Governments currently offer a similar program under the name “Digital Mainstreet“.
Click here for information on the Go Digital Canada program
Click here for information on the Digital Mainstreet program
Now if you sell your hockey card collection that was a birthday present years ago, and it is a onetime sale, the CRA is not likely to come after you. But if you are operating an online business of selling sports cards at a profit, then you are going to have to report the income and pay tax on it. If you don’t, then the CRA will at some point find out about your online activity and will audit and assess you.
Income from house shares or short-term rentals is also taxable . Online platforms such as Airbnb make it easier to rent out your home or a room in your apartment and make a profit.
There are also a growing number of people who have started their own social media channels and make an income from advertising, affiliate marketing, subscriptions, product placement and as social media influencers. Just do a search on YouTube, Instagram, Tik Tok, Facebook or Twitter on whatever topic you are interested in, and somebody will have a channel on that topic. Then look at the number of subscribers they have. Many people who started with an audience of maybe 5 people (all family members) now have over a million subscribers. I’ll bet dollars to donuts that those people are earning an income from their channel.
But how will the CRA find out about me you ask? Well, if I can find your YouTube channel, or your Shopify store, or your Facebook ads, or your Airbnb listing, so can the CRA. And that’s without even having to get a Federal Court Order.
So what can happen if the CRA comes calling? Well, for starters, they can make your life miserable by auditing you. Then they will issue a Notice of Assessment or Reassessment for the tax years that you have not reported your income, plus interest and penalties. It doesn’t stop there. Depending on the amount of unreported income, they may send your file to “Special Investigations” for a further audit. Special Investigations are the “tax police” or criminal investigation division of the CRA. Their job is to charge and prosecute tax related criminal offences.And that’s just for unreported income tax. What if you haven’t registered for or remitted the GST / HST that you were supposed to have collected? What started out as a part-time home based business could end up with you in financial ruin and on your way to prison.
If the CRA has not contacted you yet, they will. My advice is to contact a tax litigation lawyer experienced in tax audits and criminal tax fraud cases, before the CRA contacts you.