Evelyn Jacks: Business Owners Face CRA Scrutiny

CRA is acting to shore up compliance for small business owners – both tax practitioners and their clients will be engaged in a “Get it Right the First Time” initiative which includes office visits by CRA. 

Today there are millions of small businesses in Canada. They are led by small business owners of every type: retail store owners, consultants, professionals, commission salespersons, farmers, fishermen, and bed and breakfast owners, all of whom are working hard to make money for their families, employees and communities and build equity. Thanks largely to improvements in communications technology, all generations can now make lifestyle decisions to work from home in a self-employment capacity. 

Entrepreneurship, in fact, is on an upward trend in Canada. Up to 150,000 new business are expected to emerge in the next ten years^[1]. Canada also has the lowest insolvency costs in the G20, and we have recently recruited thousands of new immigrant entrepreneurs as well.

Business owners are distinct from other types of taxpayers. They are people who invest their time and money first, to reap the rewards of both profit and equity in their enterprises later. There is lots of risk involved, too.

The Canadian tax system takes this into account. Business owners can write off business losses against other income of the year; they can also split income by hiring family members to work in their enterprises. When they sell their qualifying Canadian Controlled Private Corporations, each shareholder may also qualify for an $800,000 capital gains exemption for 2014; an increase over the $750,000 amount available in years 2007 to 2013.

But many of these potentially successful ventures of the future will face potential failure because they have not prepared themselves for their relationship with the CRA. They have to, by law, keep proper books and records; they have to collect sales and payroll taxes for various levels of government and remit them properly and on time. And they have to pay personal and corporate income taxes.

Recently, two Winnipeg men, faced the consequences of non-compliance: 

On May 16, 2014 the Manitoba Provincial Court fined Ken D. Blackmore, of Winnipeg a total of $12,000 after pleading guilty to charges of failing to file his tax returns from 2007-2012. The Court gave Mr. Blackmore sixty days to file the missing returns. If he does not comply, he could face jail time.

Mitchell Rygiel, a photographer, was fined $48,719 on March 13, 2014 for evading taxes. The fine represents 75% of the total federal and excise taxes that were evaded. Both Blackmore and Rygiel were given 12 months to pay their fines.

It’s Your Money. Your Life. Keeping proper records and filing correct tax returns is a prerequisite to successful business development. Make a great decision: see a Tax and/or Bookkeeping Services Specialist for help as a first line of defence. Working with a qualified professional can help you focus on what you need to do well – making income and building equity – rather than non-compliance with CRA, which can erode both.

Evelyn Jacks is president of Knowledge Bureau and author of 51 books on tax and personal wealth management. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management”  Follow Evelyn on Twitter at @EvelynJacks.