Unreported Internet Tax Canada | Ebay Revenue Taxes

CRA’s right to compel the production of “third party information”

The Canada Revenue Agency (the Canadian income tax department, “CRA”) has broad powers to require the production of documents and information including the right to compel the production of “third party information” under section 231.2 of the Income Tax Act. The decision in eBay Canada Limited et al v MNR 2008 FCA 348 demonstrates that taxpayers are not afforded much protection under subsection 231.2(3) should the Minister of National Revenue decide to conduct an “audit project” targeted at a specific group of taxpayers, such as eBay PowerSellers.

Are you an eBay PowerSellers ?

eBay Canada has lost its appeal in the Federal Court of Canada against the Canada Revenue Agency (the Canadian income tax department, “CRA”) in eBay Canada Limited et al v MNR 2008 FCA 348 and is required to release sales details of eBay Powersellers to CRA. Powersellers who have not reported their online income may still be eligible for the voluntary disclosure (tax amnesty) program to avoid prosecution and penalties.

eBay seller ? Consider making a voluntary disclosure of your unreported online income.

The Canada Revenue Agency has won an order in the Federal Court of Canada requiring eBay Canada to turn over the names, addresses, phone numbers and e-mail addresses of all high-volume power sellers. EBay power sellers who have not reported their online income should consider making a voluntary disclosure (tax amnesty) application before being approached by CRA.

CRA can get the details of the sales figures of Canadian eBay PowerSellers

The Canadian Federal Court of Appeal has upheld a lower court ruling and ordered eBay Canada Ltd. to comply with a request from the Canada Revenue Agency to produce the names, addresses, phone numbers, e-mail addresses as well as gross sales figures for all Canadian eBay PowerSellers.

FAQ's

Which websites or web pages should I include when reporting Internet income?

If all or part of your income comes from online sources, i.e., web pages or websites, you are required to list the URLs of the websites in your income tax return form. The number of websites should not exceed five URLs, which means you only list the top five highest earners on your CRA tax return. You must also indicate the percentage of your income that these websites generate. Note that the CRA doesn’t require you to list websites that don’t make money despite their role in generating traffic to your money site.

It's difficult for me to estimate exactly how much income I'm deriving from online sources, so how do I go about reporting my Internet income?

Tax return software is available for self-employed individuals to help determine how much you may be earning. SaaS (Software as a Service) platforms offer an easy and intuitive approach for organizing your information concerning online-source income.

I did some minor freelance work through Upwork. Is that considered as Internet income?

Yes. As long as you received a payment for the freelance work you did on Upwork, the CRA expects you to include your income tax return amount. You, therefore, need the Upwork website URL or web address as an income source. Furthermore, you need to indicate the percentage of the money earned from your Upwork freelance gig as part of your total income. This applies even if the Upwork job was a one-time gig.

What is considered unreported income?

Unreported income is any income earned by a taxpayer, whether earned in Canada or offshore, including cash receipts, that was not reported in the appropriate tax year that it arose.

What is a false statement or omission penalty?

The Canada Revenue Agency has the authority to impose a penalty on any taxpayer who knowingly or, in conditions of gross negligence, makes or assists in making a false statement or omission on a tax filing. False statement or omission penalties can be substantial, potentially reaching 50% of tax payable on a taxpayer’s understatement of income that would have otherwise been payable.

Is it possible to object to assessments of unreported income?

You are entitled to file a Notice of Objection to any assessment or re-assessment of tax made by the CRA. The window to object will generally be only 90 days following notice of the assessment or re-assessment. It is therefore crucial that you consult with a Canadian tax lawyer as soon as possible to determine how best to appeal any assessment or re-assessment you may have received. Challenging any unreported income tax assessment is very important because it may lead to a criminal tax evasion prosecution.

Pro Tax Tip

Tax Audits in Ontario

There are over 350,000 tax audit and review actions conducted by the Canada Revenue Agency on a yearly basis. Around 15,000 of these tax audits deal with “cash only” businesses (i.e. the underground economy). Additionally, an estimated 35,000 are tax shelter audits.

Unreported Internet Income