Tax Free Money! Really?

More often than I can count I have been asked “Do I really need to include this in income?”
Yes, yes you do.
Aside from the obvious point that it is tax law, and that I personally have no intention of risking my designation so you don’t have to pay taxes, is the fact that the CRA is very much enhancing their focus and efforts on tax avoidance.
One job market in particular that this should be of interest to is the freelancers.

It is quite easy when using platforms like Upworks, Fiverr, FlexJobs to present your portfolio and bid on jobs, large value jobs. No harm no foul here. But the risk comes with the ability to now work with international clients and if you do not have a complete understanding of the CRA’s position on tracing cash transactions, this may cause you a great deal of trouble.

What you must be of aware of is that for jobs over $10,000 the CRA has a mandatory requirement that all financial intermediaries that facilitate the payment between parties are required to report the transactions to the CRA.
This can be one single transaction for $10,000 and over or two or more EFTs of less than $10,000 each that are made within 24 consecutive hours by or on behalf of the same individual or entity when they total $10,000 or more, as these are considered to be a single transaction.

Simply put, if you are paid $10,000+ via electronic money transfer (bank, western union, credit union etc.) those institutions will be sending yours and the senders information to the CRA. So that money you thought “hey, maybe I actually won’t have to claim the job from Europe or the USA.” is actually being reported without your knowledge.

Why is this a risk you don’t want to take? Well, aside from the obvious tax payment, interest payment and penalties that would arise, is the one thing most businesses want to avoid: Audit.

Willingly making a choice that could subject you to an audit and give the CRA cause to review multiple years tax returns is seldom a good move and one that everyone should take into consideration as it will not only end up costing more money in the long run but also the time and resource required to facilitate.
Keep in mind that in more serious tax evasion cases the CRA does prosecute criminally, is the risk truly worth it?

As our marketplace continues to develop internationally for freelancers and even small businesses ensure that you take some time to find out the facts as tax season is upon us.

CRA & IRS links posted below, remember countries have international tax treaties for this purpose, to share information and ensure the integrity of each countries tax system.

Don’t hesitate to reach out via the Connect button above.

For reference:

https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/electronic-funds-transfer-reporting.html

https://www.canada.ca/en/revenue-agency/campaigns/tax-cheating-consequences.html

https://www.irs.gov/businesses/small-businesses-self-employed/form-8300-and-reporting-cash-payments-of-over-10000

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