Canada Revenue Agency reportedly auditing taxi drivers
A couple of things that have crossed my desk this month are possibly of interest to you.
I’ll start by covering my butt and stating that I am not a tax accountant or expert in any way. If you have tax questions or need help, I urge you to get professional assistance.
I am told by a correspondent that the Canada Revenue Agency is conducting audits of taxi driver incomes.
I am not at all surprised, and neither should you be, as I’ve tried on numerous occasions over the past couple of years to warn you of this happening.
When the GST/HST was at 7 percent it was probably not worth CRA time and effort to go after unpaid taxes. But 13 percent is an entirely different matter.
How many cab drivers are not registered to collect and submit GST/HST? I haven’t a clue. I personally know a few, and I suspect they are the tip of the iceberg. I’ve warned, in the strongest possible terms, those who have told me they aren’t submitting the tax regularly that they could have deep problems with the GST/HST people. Whether they listened and tried to get straight with the tax agency is an open question.
Here is what my correspondent sent out: “They use a math trick by using Block Chain computing (I don’t know what Block Chain computing is, so don’t ask me to explain. I am an admitted techno-dolt) to link to every single payment that the driver got.
“The computer does a random check on 100 received payments via credit card.
“They check those 100 people’s HST numbers of the business that paid for the taxi fare.
“If there are any differences, then they decide to audit every dollar that the driver claims that he took in. They usually audit back for the previous five years.
“Some get audited back for seven years. A big cheater gets audited for the past ten years.
“So far they have checked 20,000 taxi and limo drivers across Canada.
“Fines are about 25 percent of the money owing plus interest plus the outstanding amount owing.
“And any cheaters automatically get audited for the next three to five years.”
I cannot personally attest to the information in this message, but overall it tallies with what I know of what has been going on across the country. I do know some drivers who have been audited and had to pay substantial sums to the government, sometimes on a negotiated payment plan. For them, it has not been a pleasant or pretty experience.
I will add to this the simple fact that tax evasion is a serious crime punishable by other fines and possible jail time in cases of criminal conviction. For non-citizens, it could also lead, in some cases, to loss of Canadian residency due to a criminal record. Normally the CRA doesn’t go to extremes Ð they just want the money, but harsh legal action is always a possibility.
In the interests of full disclosure, I’ll also tell you that my company has also been audited. I passed with flying colors, not owing a dime in additional taxes. I recorded all of my income, kept all my invoices paid and kept all my receipts from cash and credit card expenses. It was a serious and very time-consuming task.
In related information, my friend Terry Crawford dropped by the other day and handed me an information sheet passed out by Uber to prospective and current drivers detailing how to register for HST for their businesses.
I suggest the City and/or cab companies do something similar for drivers, if they haven’t already.
Like Uber drivers, every cab driver is the sole proprietor of their own business that must legally register for HST purposes and collect and submit this tax on all transactions.
What follows is a short version of the registration process. You can register online. Go to www.cra.gc.ca/bro, go to Register Now and give your personal information, the same as on your personal tax return. You are a sole proprietor. For taxi drivers, state your type of business is taxi driver. When this is filled out properly, you will get a nine digit Business Number.
Then create GST/HST account, giving your SIN number. Click on Operate a taxi or limousine service as your type of business. Click on NO when asked if your sole activity is from commercial rental income. Enter your total worldwide and Canadian taxable sales. If this number is unknown (eg. If you are a new driver), enter Zero. Then enter the date the account is to start. Essentially, this would be the date you started driving taxi, but it might be worthwhile checking with a tax accountant or the CRA for help with this. If you’ve been driving cab for some time, even years, and haven’t registered, I suspect you will almost certainly need professional help. Also you will likely need help from a tax professional for help selecting a reporting period. (Mine is every three months. You might find it more convenient to file monthly, or whatever is least painful.)
Once the full process is complete you will receive a GST/HST number.
Perhaps these will also help: The CRA phone # is 1-800-959-5525. HST registration online is at www.cra.gc.ca/bro. The checklist for small business is at http://cra-arc.gc.ca/tx/bsnss/sm/chcklst-eng.html. To file a GST/HST return go to http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/bspsbch/rtms/menu-eng.html.
One final note: some believe they do not have to file GST/HST if they make less than $30,000 a year. Wrong. The Income Tax Act specifically cites some occupations, including taxi and limo drivers, as being required to submit the tax regardless of total income. The tax built into fares is not yours. It must go to the government.
The CRA has enormous legal power and don’t forget it. But my experience is they much prefer working with people to get taxes right than using a sledgehammer.
I hope this helps.