Contractors look out!

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It is no secret cash is king when it comes to working with contractors. Whether it’s at the customer’s request or the contractor’s, cash if often the preferred method of payment due to the perceived benefits. Customers typically want to save the 13% HST and contractors often want to avoid paying income tax. Further cash transactions are hard for the government to audit and one of the only tools the government has is a lifestyle audit which is no small undertaking. That is until June of this year when the Federal Court of Canada and the Federal Court of Appeal allowed the Canada Revenue Agency (CRA) to issue a Requirements for Information to Rona Inc.

What does this mean exactly? The CRA will soon have the access to store records identifying contractors and their purchase history. With access to these records, you can bet your bottom dollar the CRA will be auditing a fair number of said contractors. The CRA already has access to corporate/personal business statements via income tax returns and so, the CRA will very easily be able to analyze costs claimed on tax returns versus purchases made in a year from Rona Inc.

What can you do?  The request for information is for the years 2012-2015, if you feel you’ve misrepresented your income for any of those years you should strongly consider using the Voluntary Disclosure Program (VDP) to come clean and minimize the interest and penalties. Our firm is experienced in filing VDPs in a timely manner; time is of the essence with these filings because once you receive that dreaded letter from the CRA your adjustment will no longer be voluntary and you will be subject to heavy penalties.

It is worth pointing out Rona Inc. has sought a request to take this matter to the Supreme Court of Canada however many in the legal community think this request will be denied and the CRA will be given access.  One wonders will this request for information be limited to Rona Inc. or eventually be extended to Home Depot and Lowe’s?

Edelkoort | Smethurst | Schein CPAs LLP is located in Burlington Ontario servicing the Golden Horseshoe and Greater Toronto Area and beyond. The firm is fully licensed with CPA Ontario to provide assurance, tax and accounting services as well as registered as tax preparers with the Canada Revenue Agency (CRA) & Internal Revenue Service (IRS). The firm is also registered as an IRS Certified Acceptance Agent.

All blog posts published on this site are for informational purposes only and do not constitute professional advice. Readers should contact a professional to discuss their individual situation. Neither the author or the accounting firm shall accept any liability for any reliance placed on the information posted.

2017-09-01T10:44:38+00:00

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