Make no mistake CRA will search for your unreported income

So how will they do it?  John Lorinc outlines eight places CRA will check for unreported income in an article – here are a few to get you thinking.

“Repairs or renovations. If your company owns real estate, make sure you don’t claim capital improvements as repairs that can be deducted. Jonathan Garbutt, a tax lawyer, says Revenue Canada will home in on cash-intensive businesses that buy, renovate, and sell buildings because unreported cash income can be used to pay contractors under the table. “Revenue Canada knows this scam and is looking at families with cash businesses and also property flips where there have been big cap gains in an unduly short time,” he explains. Net-worth audit. Toronto tax lawyer David Piccolo says Revenue Canada will look to see if your lifestyle is roughly equivalent to your income and net worth. That comparison may involve estimates on your investments and other assets, especially if they include equities whose values fluctuate. “When you have a net-worth audit,” Piccolo counsels, “you almost have to go through it with a fine-tooth comb” to see if Revenue Canada’s assumptions are accurate. Inferred revenues. With cash-intensive businesses, such as restaurants, Revenue Canada has taken to double-checking reported company revenues by indirect means, such as extrapolating total sales based on tip income declared by wait staff.” To read Lorinc’s full list click here. | Raymond Matt, CFP, CLU, TEP, CHS

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