The CRA Orders PayPal to Provide Information About Business Accounts
News broke recently that PayPal has been ordered by the Canada Revenue Agency (CRA) to provide information about its business account holders to the agency. PayPal received a Federal Court order requiring it to disclose to the CRA all information about PayPal business accounts that sent or received a payment between January 1, 2014 and November 10, 2017. According to PayPal, affected account holders have been notified.
PayPal personal accounts are not covered by this court order.
PayPal is required to provide the CRA with names, business names, dates of birth, phone numbers, addresses, email addresses, as well as Social Insurance Numbers and Business Numbers, if available. PayPal must also provide the CRA with information on transactions made by the account holder, including the total number and value of sent and received transactions that occurred between January 1, 2014 and November 10, 2017.
PayPal has until December 25, 2017 to comply.
What This Means
The CRA states that this is a “one-time” disclosure of information. It has requested the information to ensure that individuals and companies who use PayPal for business purposes are complying with their tax obligations under the federal Income Tax Act. In recent years the CRA has cracked down on tax evasion and boosted its investigations into undisclosed income and the “underground economy.”
If the CRA determines that individuals or businesses have not correctly disclosed income on personal or corporate income taxes, the CRA will require that the person or company pay the taxes owing on the undisclosed income as well as penalties and interest charges.
If the CRA determines that the tax avoidance tactics were deliberate, it could consider the situation to be tax evasion, which is illegal and can result in criminal charges.
If you have correctly disclosed all income on your taxes, including income that was received via your PayPal business account, then you likely have nothing to worry about. That said, it is still recommended that you prepare your tax documents for a potential CRA audit.
However, if you did not properly disclose income that you received through PayPal, the CRA will find out about it. When the agency does, it will not only require that you pay the taxes owing on the undisclosed income, but it will also charge you with interest and penalties that could be very high. It could even file criminal tax evasion charges.
If You Have Undisclosed Income that the CRA May Discover Through Information Provided by PayPal
If you have not properly disclosed all of your income to the CRA, one of your best options is to apply for the Voluntary Disclosure Program (VDP). This is a program that is designed to provide people with a “second chance” to correct income tax returns that have been filed or to file returns that have not been filed but should have. You could be granted relief from interest charges and penalties if you successfully apply for the VDP.
In order to be accepted by the program, you must apply for relief voluntarily. This means that you must apply before the CRA contacts you regarding your tax situation. As the CRA is seemingly getting more aggressive with cracking down on undisclosed income, it is important to apply for relief quickly before the CRA reaches out to you.
In addition, due to upcoming changes to the program, it has become even more crucial that you file a Voluntary Disclosure Program application as soon as possible. However, it is also just as critical that you file the application correctly. Since you are providing the CRA with information voluntarily, you are giving the agency information that it may not already have. Therefore, you’ll need to make sure that you don’t make any missteps or errors when completing your application. These can be very costly. If you provide the CRA with details about your income, but are not accepted to the VDP, the CRA will now have additional information about you that it can use against you.
The best way to ensure that your application is completed promptly and accurately is to work with a trained professional. Trust Tax Solutions Canada to handle your situation. Contact us today to schedule a free consultation to discuss your tax issue and how the CRA’s court order to PayPal could affect you.