A lot of times we have wondered if you need to report an income, or sale or property or an asset on your tax return. Also, a lot of times we have turned to that know it all co—worker or family friend for advice. Unfortunately, a lot of times, the advice is that the government won’t know about it and you do not need to report it.
Well, it general ends badly and let me tell you something: Government knows!
Let’s discuss a few reporting myths:
- Sale of your house: If you sold your house, it must be reported to the Canada Revenue Agency. The rules changed in 2016. Failure to report can make you liable for penalties up to $8,000. So yes, it’s always better to discuss with an expert rather than just getting some friendly advice from your peers. And yes, the government knows as all transactions are made through a financial institution and recorded at the land registry office as well. The tax liability on the sale will depend on a few factors such as:
- Did you maintain the house as principle residence for all years of ownership?
- Did you rent it or use it as a home office? If yes, what percentage of the house was being used for these purposes?
- Foreign Property: If you own property that is valued at more than $100,000, you are required to report it to on your tax return by filing form T1135. There may be no tax liabilities to reporting the property but failure to report will result in penalties of $2500 per year. So, suppose you bought a piece of land abroad for $100,000 10 years ago. You sell the land for $150,000 and bring the funds to Canada. The government at this point will review your transactions and failure to report the land for last 10 years will cost you $25,000.
- Earnings from digital currency: The digital currency exchanges are not regulated and therefore no tax slips are issued but eventually all funds get transferred to Canadian dollars and can be tracked. Any gains made from digital currencies should be reported and appropriate tax should be paid.
- Reporting inflated expenses: The government regularly audits the returns with self employment income or employment expenses. You may be tempted to play the audit lottery, but the government has recently substantially increased their efforts to audit a higher a number of tax returns and if you get audited ever, there is no chance that inflated expenses will escape the eye of an auditor.
Get help from professionals such as tax experts at Softron and ensure that your taxes are done right the first time. Call 905-273-4444 today and let the best handle your taxes.