Getting audited by the Canada Revenue Agency largely due to GAS

Discussion in 'Guitars in General' started by vortexxxx, Aug 12, 2019.

  1. YYZ

    YYZ Supporting Member

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    Yikes. Sorry to hear this but please step away from the Gear Page...and Reverb...and Ebay. This may be a wake up call.
     
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  2. vortexxxx

    vortexxxx Member

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    I used to sell rare videos but when I stopped I never changed my patpal account. It was called Video Vortex. I didn't think it mattered.
     
  3. Ripthorn

    Ripthorn Member

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    Hopefully you can turn it on them and claim the losses on the gear instead and then they owe you money! Either way, hope it shakes out well.
     
  4. Mikeroesoft

    Mikeroesoft Silver Supporting Member

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    When were you forced to sell? I am wondering if the change in currency value USD/CDN has something to do with it. In 2012, the dollar was at or near par and it dipped into the $0.60's at some point since then. Even if you're selling "at a loss" theoretically you could have made money in CDN$. Sounds far fetched though and you'd have to be talking about big money for them to be concerned with this.
     
  5. Jabby92

    Jabby92 Member

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    Yeah see those are big numbers, almost like selling a used car. A loss or not, its still income to the CRA that needs to be declared (technically).
     
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  6. sonic1974

    sonic1974 Member

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    We don't have that.
     
  7. Rockledge

    Rockledge Member

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    I think musicians are left in a bit of a unique precarious situation.
    I wonder if, for example, guys who are into remote control airplanes who go to swap meets and buy and sell and trade parts and all that deal with the same quandary of where it quits being a hobby and starts being a business, and are under the same scrutiny as gigging musicians or guys who can't help but buy guitars and sell other ones to make room.

    I remember reading an article in a music publication some hears ago that was talking about a situation in which guys were turning their project studios into demo studios, and in the best interest of playing by the rules were declaring it as a business, and as a result were being audited because they were being accused of using the business as a way to finance their gear by writing it off.
     
  8. drbob1

    drbob1 Silver Supporting Member

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    I can see a few $8k guitars getting their attention. Especially if you used to run a business thru that PayPal account. Still, if it's only a few guitars, you should be able to find records of how much you paid and how much you lost, right? For me, with thousands of pedals/guitars/amps bought and sold over 2 decades, if they decided they wanted records, it'd be a blood bath...
     
  9. mikendzel

    mikendzel Member

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    (10' pole aimed and prepared for use)
     
  10. Zigeuner

    Zigeuner Member

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    Hmmmm. take a look at the Sovereign Citizen vdieos on You Tube before you say that the Sovereign Citizen issue works in the US. They sure break a lot of car windows. LOL.
     
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  11. derekd

    derekd Member

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    Yeah, we have a spate of SC videos crop up on the Pub at least once a year.

    It never ends well for the person in question.
     
  12. Zigeuner

    Zigeuner Member

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    It would be difficult. And to look a little deeper into what the Canadian authorities really want - they are looking for any profits that you may have made in past years. In that regard, PayPal shows only your gross sales minus their 3%. It doesn't show the eBay cut (assuming the sales were made on eBay). That would be another 10% of everything. Once they get the net values that were realized, they would have to see the amounts that you paid for each item so that they could compare the price paid versus the amount received. That would be impossible for me since I buy things that I often don't get receipt for.
    What a mess!!!
     
    Last edited: Aug 12, 2019
  13. Simon

    Simon Supporting Member

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    Yes, get receipts when buying.
     
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  14. danelectro

    danelectro Supporting Member

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    Its likely that the process will be a pain in the ass, but in the end I don't see any reason why it wouldn't come out in your favor based on what you say you're doing. If there's no profit, you're not going to owe money, but you're going to have to gather the documentation together to prove as such. Even if you don't have receipts, you should be able to find at least some records from PayPal, eBay, credit card statements, bank records, TGP PM messages regarding sales and purchases, archived TGP classified listngs, etc to show what you've been up to.

    In addition to doing engineering consulting for a living, I have a hobby that evolved into a business. The business is registered and I do everything above the table, yet I still ended up getting audited 6-7 years ago. The agent claimed it was a random audit, but I suspect it was targeted because the business went from nothing to a decent profit within a short period of time. The auditor claimed this was a "Research Audit" that they occasionally perform as a checks and balances method to make sure that the IRS process works as it should. She said that I would need to provide documentation for all aspects of the business, as well as my personally finances including bank information, credit cards, etc. Maybe it was a random audit, but I think they thought I was up to something. It was a royal pain in the ass gathering all of the documentation, but I figured fighting it would not work in my favor, so I collected every piece of information I could.

    Since my home was the location of the business, that's where the audit was conducted. I knew it was going to be a long day when she showed up first thing in the morning and had she had her lunch box with her. I presented the agent with several tall stacks of well organized documentation which we reviewed together for several hours, then she went over it for another 3-4 hours. She said she would finish reviewing the documentation at her office, review the findings with her management, and get back to me within a couple of weeks.

    After presenting her with records for several thousand business transactions (as well as all of my personal finance records), she found two errors. One was an expense for plastic material that I paid for in December of the previous year, but I received it in January and I inadvertently claimed it for the year that was being audited. The other error was was a calculation error that worked in my favor, so when it was all done, it was basically a wash. I invested a good 40-50 hours preparing for the audit, who knows how many hours the agent and her team spent on it, and basically they got nothing out of it.

    Maybe the one good thing to come out of it, is that if my name ever comes for an audit again they'll review the results of this audit and say "Forget this guy and move on, he's clean".
     
    Last edited: Aug 12, 2019
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  15. Jabby92

    Jabby92 Member

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    It doesn't matter if its profit or loss.. he's selling guitars. This is NOT the same as the stock market or other regulated assets. The CRA sees it as income which is taxed in Canada.
     
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  16. Borg20

    Borg20 Member

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    CRA don't normally audit individuals unless you're declaring large sums as revenue. If you're not incorportaed as a business and aren't declaring revenue from online sales they shouldn't be auditing you...are you sure you're not being scammed?
     
  17. Borg20

    Borg20 Member

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    Also to note, they cannot come after you for undeclared duties as they are paid by the carrier on your behalf when the goods cross the border. The carrier would have to collect from you.
     
  18. jacklickson

    jacklickson Member

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    There is no Canadian equivalent of the 5th Amendment. You can not decline to answer questions in a judicial proceeding.
     
  19. Boundcustom

    Boundcustom Member

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    This is actually not a bad idea.
     
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  20. big mike

    big mike Plexi Loving Admin Staff Member

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    Be very careful on the political points guys...a few have crossed the line and been deleted. (general reminder)
     
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