The restaurant business has long been an industry that the Canada Revenue Agency monitors for possible tax evasion schemes. As all restaurant owners and their advisors know, it can be an incredibly difficult industry to compete in and underreporting of sales is very common. More recently, many restaurants have had unreported income discovered by CRA through investigations of their Point-of-Sale terminal providers. You can’t be a successful operator in the restaurant business without using POS terminals; however the use of these systems is leading to audits as POS terminal providers are being audited and those audits are identifying differing degrees of information about the customers (you the restaurant owner) which, when CRA compare to the records you have/have not filed, leads to you being audited (or worse – an investigation for criminal tax evasion).
What does this mean? If the company that provides your Point-of-Sale system gets audited, Canada Revenue Agents are going to go through all of their information with a fine-toothed comb. This will inevitably lead to an audit of your company. If CRA finds income that you have not reported, you will be liable for not only the tax debt, but also the interest and penalties that accompany it. Worse still, tax evasion in Canada can carry a jail sentence.
If you are a restaurateur who has failed to report income, you need to be very concerned about the fact that the CRA is no longer uninformed about the existence of those electronic devices designed to help you evade paying taxes, nor are they weak in their auditing or prosecuting ability.
Owing money to the government is not a crime – but failing to declare income and/or filing false returns are. If you know that you have made false claims it is best to come clean before the CRA catches on and audits you. A CRA audit can lead to consequences, both for you as an individual and as a business owner. Don’t wait until you are audited. Let an experienced tax solutions professional help you get on your way to complete tax compliance.
If you have failed to report income and the CRA has caught on, you need to be extra careful so as to protect yourself as best you can. Simply making full disclosure to the CRA can be harmful (though not as harmful as not coming forward and getting caught). Instead of just giving CRA agents whatever they ask for in the hope that this will seem compliant, make sure that you seek representation from a tax company. Don’t think that just because you are now being compliant that the CRA will go easy on you – they won’t. They can and do use this evidence to assess penalties and/or to prosecute criminally.
For more information about tax audits and what to do if you are being audited by the CRA, please contact Tax Solutions Canada by calling 1-888-868-1400.