CRA Snitch Line Accepting Tips on COVID Fraud

The Canada Revenue Agency (CRA) have announced that they are opening up their Informant Leads (snitch) line to information regarding COVID-19 benefit program fraud.

Amid reports that people are double dipping or taking the benefits when there are not entitled to, the CRA are intent on not waiting for 2021 when people file their tax returns, but are asking for Canadians to come forward and provide information regarding the Canada Emergency Response Benefit (CERB), the Canada Emergency Student Benefit (CESB), and the Canada Emergency Wage Subsidy (CEWS).

The Snitch Line accepts information of tax cheating such as not declaring all income, accepting “under the table” cash payments or setting up a fake business to claim losses and thus reduce taxes. The information reported goes right to an audit group, who compare the information they receive with the information the CRA already has on that individual and business, and if the amount to recover is significant, will act to seek recovery.

The CRA said it is looking for information regarding people who are receiving either CERB or CESB who were ineligible, or businesses or charities who are “misusing” the wage subsidy program.

The decision to go after cheaters marks a significant turning point in the Trudeau government’s desire to take on fraud of COVID-19 emergency aid programs. In mid-April, a CRA spokesperson dissuaded Canadians from snitching on potentially ineligible CERB recipients because, at that time, the CRA said their focus was on “getting crucial (CERB) payments to those who urgently need it now.”

The CRA stated that those who received a payment to which they weren’t entitled will be required to repay the amount in due course.

Due course meant with the filing of the 2021 personal income tax return for many who applied for and received the credit, only to learn that their income did not dip below the amounts making them eligible to receive the funds. With so many Canadians providing direct deposit information to the CRA, means that with direct access to your bank account, the CRA can take those funds when they want. It also means if there are not sufficient funds in your bank account that the CRA can freeze you bank account and send a garnishment to your employer, if warranted.

With this significant change in direction, it should be noted that any business or individual who are caught receiving money they we not entitled to, will be ordered to reimburse it and it could be quite costly. In the case of the wage subsidy, a business which falsified documents, in order to claim the benefit can face penalties up to 225% of the amount received through the program.

The CRA and Service Canada have records of all individuals who’ve received payments for the CERB and CESB. What has changed is that the CRA have brought in their audit staff – presently not working on audits due to COVID – to verify payments were correctly allocated.

How to Snitch

In order to successfully provide information to the CRA through their Informant Leads line, there is information that the CRA requires.  Remember, all information provided to the CRA is anonymous.

Depending on the program they may have falsely claimed, the CRA would require details on the suspect’s work situation (CERB and CESB), their schooling situation (CESB) or their employer’s number of employees and total payroll (CEWS).

In many cases, people brag to their friends and neighbours about how stupid the government is, by providing them with benefit payments when they are not entitled, and that information is usually enough for the CRA to investigate.

The link to the CRA’s Informant Leads Program information, is here.

Tax Deductions for Canadian Professional Athletes

We’ve been working on a list of tax deductions for Canadian professional athletes, and in doing so, have compiled this list.

As of the date of posting this, this list is believed to accurate, although may or may not be inclusive of every possible deduction. In addition, there is no supporting legislation linked to these deductions – that will be coming. This list, is therefore not meant to be taken as fact, it’s always prudent to check and double check eligible deductions, to ensure that all possible deductions have been claimed and that none are missed.

Tax deductions unique to professional athletes.

1. Meals and Incidental Travel Expenses – According to tax law, a taxpayer who travels for business purposes can deduct “ordinary and necessary” travel expenses including meals, tips, local travel (such as taxi fare, rental cars, and other modes of transportation), as well as other miscellaneous expenses. Taxpayers have the option of either documenting their actual expenses or deducting a per diem amount per tax law.
2. Temporary Housing – Temporary living expenses may be deductible under certain circumstances. Law provides for deduction of these expenses if they stay in a location is temporary in nature (generally less than one year) and at the convenience of your employer. A lot of times minor league players fall into this category. In most cases, the living expenses of a player competing at the major league level will not be deductible given the indefinite nature of the stay.
3. Clubhouse Dues – Clubhouse dues are deductible as ordinary and necessary business expenses. It is best to pay these dues by check so there is acceptable documentation to support the payment was made. If you cannot pay by check, ask for a receipt from the clubhouse manager to save for your records.
4. Health Club and Training Expenses – Most or all of the conditioning and training expenses incurred by professional athletes are deductible as a miscellaneous itemized deduction.
5. Equipment – Most or all equipment purchased by a professional athlete used in competition or training is either wholly deductible or able to be deducted by taking a depreciation deduction over a number of years.
6. Union Dues – Union dues paid to a Players Association are deductible as a miscellaneous itemized deduction.
7. Agent and Management Fees – Fees paid to an agent or to a manager are tax-deductible, as are fees paid for account and tax preparations and consulting.
8. Charitable Giving and Planning – Charitable planning can play a significant role in the career and life of a professional athlete. If a plan is structured properly, the athlete can marry the goals of supporting causes that are meaningful to their family and him/her both during his playing days and long after they have retired.

This can be achieved while maximizing his/her charitable income deductions during his high income/high tax bracket years. Philanthropic athletes who don’t consider a formalized plan to integrate their desire to help others with a well thought out tax strategy would be doing themselves a grave disservice.

Winnipeg insulation company to pay nearly $500K in fines and back taxes for tax evasion

The Canada Revenue Agency (CRA) has announced on their website that a Winnipeg-based insulation company has been fined after underreporting its taxable income by more than $1 million.

The CRA’s Investigators found irregularities in the books and records of Thermo Applicators Inc., such as, that the company’s president included personal expenses in the company’s books, including construction costs for a cabin near Kenora, Ont. and a vacation home in Mexico, as well as a fly-in fishing trip. None of these are eligible tax deductions.

Thermo pleaded guilty in Manitoba provincial court on May 21 to two counts of making false or deceptive statements in the 2009-14 tax years. The court found $1,139,000 million in taxable income went unreported, in addition to the claiming of ineligible expenses.

As a result, the company is being ordered to pay $190,142 in income tax and $47,611 of sales tax that should have been withheld. In addition to paying the taxes, the company was fined $237,753.

Once penalties and interest are added to the debt dating back to 2009 the balance will shoot up well over $500,000.

This conviction is a clear reminder that failing to declare income and claiming false expenses can be very costly should the CRA perform and audit and find it.

Keep good records, report all income and claim eligible expenses.