Getting audited by the Canada Revenue Agency largely due to GAS

Jabby92

Member
Messages
3,392
Paypal records are a good thing in your case. They will either show a loss or very slim profit... in which case you wont get taxed and they'll leave you alone.

They are probably turning over stones looking for undeclared retailers.... whether they consider it a hobby or not, if they are making a profit... the IR will want its cut.
It doesn't work this way. Its not like buying/selling stocks or real estate, its a transaction that counts as income no matter if you take a loss on it or not. Any money hes made from buying/selling gear is seen by income by the CRA, thus its technically required to have taxes on it. The CRA sees it as 'oh heres a guy selling guitar gear out of his basement, thats a business', etc.
 

Tootone

Member
Messages
5,319
It doesn't work this way. Its not like buying/selling stocks or real estate, its a transaction that counts as income no matter if you take a loss on it or not. Any money hes made from buying/selling gear is seen by income by the CRA, thus its technically required to have taxes on it. The CRA sees it as 'oh heres a guy selling guitar gear out of his basement, thats a business', etc.
Exactly. If you are trading 500 units a week, and clearing $6000/month in profit... the IR will be all over you like a cheap suit. That's an undeclared business.

If you buy and sell a few guitars, maybe some old video games and a couple of pedals over the course of year... they aren't gonna start rocking your boat.

They're after pirate businesses basically. I don't think OP has anything to worry about. Unless he's flipping 400-500 units a week for profit and was hoping nobody would notice.
 
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Jabby92

Member
Messages
3,392
Exactly. If you are trading 500 units a week, and clearing $6000/month in profit... the IR will be all over you like cheap suit. That's an undeclared business.

If you buy and sell a few guitars, maybe some old video games and a couple of pedals over the course of year... they aren't gonna start rocking your boat.

They're after pirate businesses basically. I don't think OP has anything to worry about. Unless he's flipping 400-500 units a week for profit and was hoping nobody would notice.
Yeah, I'm thinking he must have moved some big numbers to get audited.. if you're moving like $10K+ worth of gear I can see why they could be interested.. or if you have a PayPal business account which it sounds like that is the lawsuit CRA won but that was over 2 years ago now.
 

Borg20

Member
Messages
166
The Canada Revenue Agency recently won a court case that forced PayPal to show them my transactions among many others. They want to do all 7 years and are digging deep. They dont believe I'm buying and often selling gear because it doesn't suit me, I need to pay for something else etc. They assume I'm buying and selling them for a profit. I doubt I can find paperwork on all my stuff including what I bought or traded elsewhere. They are making me feel like a criminal even though I lost money on almost everything gear wise that I had to sell. With the kind of digging being done, I'm worried they'll assume something that I can't prove and I'll be paying more money than I have. After speaking to that agent and being pressured, I ended up feeling bad for almost a week. He even suggested I get a lawyer which would likely cost more than I could afford in itself.
I don't get it. Do you operate as a sole proprietorship or small business? Why is CRA auditing you in the first place? Just because you buy stuff online is not a reason for an audit unless you claim revenue / losses from online sales.

Something's missing here...
 

nowhere

Member
Messages
957
Probably not. I don't think mounties carry tasers.
Actually, they do... and pepper spray... and 9mm pistols... and, sometimes, 12 gauge shotguns and AR-15's.

I know a guy who claimed he was not subject to tax here in Canada because of his religion. Never went to jail, but that was only because he passed away before the trial was completed. Otherwise he likely would have got five to ten. Fortunately I've only had one close-up and personal encounter with CRA (the non-profit music school I offered to be treasurer for hadn't sent in a tax return once in the seven years since they were founded) and in that case the CRA agent was very helpful and professional.

Find a good lawyer. Good luck.
 

big mike

Gold Supporting Member
Messages
12,282
Posts deleted, warnings issued

1) no hate speech. be civil and use decorum
2) if someone breaks the rules, report and move on, don't engage and start a bickering match
3) don't quote rule breaking posts. it creates a ton more work for the mods to clean up, and we don't always see them all (#1 reason for thread nukage...one post easy to clear, multiples take much longer)
4) the mods dont 'patrol' the forum for things to moderate. If you see something that breaks the rules, it's likely it hasn't been reported and/or not seen.
 

JWhite

Member
Messages
226
I do not know the OP so please bear with me. I would like to know what caused the Canadian Government to come after the OP? Pretty scary they are tracking private sales in Canada and went to the extreme of suing Paypal for the OPs records. Crazy and sad at the same time.
You know there’s more to it than just a handful of guitars. They didn’t go to PayPal on whim or they that had nothing better to do.
 

twoheadedboy

Member
Messages
11,320
It doesn't work this way. Its not like buying/selling stocks or real estate, its a transaction that counts as income no matter if you take a loss on it or not. Any money hes made from buying/selling gear is seen by income by the CRA, thus its technically required to have taxes on it. The CRA sees it as 'oh heres a guy selling guitar gear out of his basement, thats a business', etc.
If they're going to accuse him of operating an undeclared business, then that business is going to have expenses and sales. He would have to pay sales tax, but if the expenses exceed the sales, there's no income to tax.
 

scott

Supporting Member
Messages
4,631
Is stating you are a sovereign citizen work in Canada like it does here?
Yeah, that's the joke.

Since all the other posters provided solid advice, I thought I'd toss in a little levity.

Apparently, I missed.
Actually I know a guy that does it and he’s mastered it to the point where he doesn’t even pay house taxes, insurance, traffic tickets (including impaireds) the whole deal. They are constantly after him and he somehow manages to evade it every time. He is also obsessed with it and it’s all he talks about to the point where I stopped talking to him years ago.

Anyway, i had a GST audit a few years back. They wondered why I got my GST back but I wasn’t sending any in. It was because I never sold to anyone Canada. They wouldn’t listen and sent a guy. They made me show him my shop and house. I had to prove I was actually a business. In the end they owed me money. LMAO!! Never heard from them again.
 

vortexxxx

Supporting Member
Messages
10,026
I don't get it. Do you operate as a sole proprietorship or small business? Why is CRA auditing you in the first place? Just because you buy stuff online is not a reason for an audit unless you claim revenue / losses from online sales.

Something's missing here...
I used to run a business in the 90s to the early 2000s. My PayPal account had that name on it as well as my name as I didn't think it would matter since no such business exists any more. No bank account in that name no ads like I used to run. I used to sell rare videos but it's doubtful that I sold any videos of any kind during this period.
I dont know to much about the rules but if I can prove the business doesn't exist can I get them to stop harassing me and stop the audit?
 

Suave Eddie

Member
Messages
10,969
The Canada Revenue Agency recently won a court case that forced PayPal to show them my transactions among many others. They want to do all 7 years and are digging deep. They dont believe I'm buying and often selling gear because it doesn't suit me, I need to pay for something else etc. They assume I'm buying and selling them for a profit. I doubt I can find paperwork on all my stuff including what I bought or traded elsewhere. They are making me feel like a criminal even though I lost money on almost everything gear wise that I had to sell. With the kind of digging being done, I'm worried they'll assume something that I can't prove and I'll be paying more money than I have. After speaking to that agent and being pressured, I ended up feeling bad for almost a week. He even suggested I get a lawyer which would likely cost more than I could afford in itself.
How did you initially catch the attention of the CRA?
 

vortexxxx

Supporting Member
Messages
10,026
Yeah, I'm thinking he must have moved some big numbers to get audited.. if you're moving like $10K+ worth of gear I can see why they could be interested.. or if you have a PayPal business account which it sounds like that is the lawsuit CRA won but that was over 2 years ago now.
I had single guitars that I bought for 7 or 8k and sold at a loss of 2 or 3 I each so it adds up.
 

vortexxxx

Supporting Member
Messages
10,026
How did you initially catch the attention of the CRA?
Payal sent a list of people who had business accounts to the Canadian government after the government went to court to get the list. I lost money in general based on what I originally paid for things, so I didn't declare it.
 

vortexxxx

Supporting Member
Messages
10,026
Are they coming after you for income tax (money you made on transactions) or taxes (importation taxes/duties) that that weren't paid on the items themselves as they crossed the border? If you've been up front with the cross boarder stuff and have already paid the taxes, they'll have a record of all of that stuff too and you should have nothing to worry about. They're not looking to steal from people, just recoup money that should have been paid when you brought the good into Canada.

If it is for income tax purposes, then I am not sure. Seems anyone buying and selling gear these days isn't making much if anything at all.
It is income tax but I often sold other things I owned in order to support buying a guitar I really wanted for example, so I was selling alot of stuff various things on Ebay to afford the collection I had. At some point I ran out of money and had to sell most of my collection. I've since started a new collection but that may need to be sold (and more) if I can't prove losses.
 

Suave Eddie

Member
Messages
10,969
Payal sent a list of people who had business accounts to the Canadian government after the government went to court to get the list. I lost money in general based on what I originally paid for things, so I didn't declare it.
Does your "business" involve buying and selling guitars? Why do you have a business account?
 




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