Okay, we’re into April now. That means the deadline for filing your income tax returns is fast approaching. Of course, we’re all law-abiding Canadians, happy to pay our share to keep this great nation strong and free.
However, in the unlikely event that any Pursuit readers were thinking about fudging the numbers a little but to save some money on taxes, here’s a quick reminder that Big Brother is always watching. Given recent revelations about wealthy Canadians stashing money on offshore accounts, the Canada Revenue Agency has been putting increased efforts into catching up with tax evaders this year.
It was announced earlier this year that CRA agents can now monitor your social media posts if they suspect that you are cheating the system. This means that sharing pictures of your yacht parked in front of your beachfront retreat is a bad idea while you’re claiming $50,000 in income.
You may think that nobody would make such an obvious mistake, but people do. There was the case from a couple of years ago where a Swedish man was fined $750,000 for tax evasion. He had claimed to be unemployed and declared minimal income for years. Unfortunately, he also kept an up-to-date LinkedIn profile which revealed he was working for a number of international employers making a large – and largely undeclared – living the whole time. He was ordered to pay $150,000 per year in unpaid taxes.
Anyway, the CRA won’t likely be trolling your social media profiles for discrepancies unless they already suspect you’re hiding something. And why would they suspect that?
Five red flags that can get your taxes audited
The CRA can’t find you. If the revenue agents have any questions or want clarification on the tax return you filed, and they can’t get in touch with you, this can trigger greater suspicions, potentially flagging you for further scrutiny.
Late filing. Income tax returns that come in late can receive more attention from CRA agents, and slight errors or inconsistencies that may have gone unnoticed in the rush of tax season can now trigger an audit.
Lifestyle discrepancies. Basically, the yacht thing I mentioned. But it doesn’t have to be that glaring. If you claim to be earning $40,000 a year, but you live in a neighbourhood of multi-million dollar houses, it can raise questions.
Your deductions. If you claim fully half the cost of your home as a business expense, or the entire cost of your car as a work-only vehicle, the CRA will likely have their doubts. You may need to provide proof.
Unreported income from a T-Slip. The CRA receives copies of the same T-Slips as you do from employers and financial institutions, so failing to claim one is a major red flag.
Obviously, another major red flag can be not filing your taxes at all. The deadline is April 30th at midnight. That’s a Sunday this year, so if you’re using an accountant who doesn’t make weekend house calls, Friday the 28th is your last business day.