Getting audited by the Canada Revenue Agency largely due to GAS

Borg20

Member
Messages
166
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.
The sale of personal goods is not considered revenue. Since these types of sales are taxed at the provincial level and you don't need to remit taxes on the sale nobody really cares if I sell a used guitar to the guy next door, especially CRA. It is only the sales of property that becomes a capital gain of which one would have to declare as revenue.
 

PBGas

Supporting Member
Messages
5,856
OP.....I am very sorry to hear of this. I sincerely hope you can resolve this!
One thing is for sure, you need to get a much better accountant if you don't have one.
At the request of my accountant, years back he had me start a small sole proprietor business and I got audited a couple of years back. No issues. My accountant had everything in order and he dealt directly with Rev Can as he was a former investigator for them.

They can go back 7 years as they did with me.

Good luck to you and hope it resolves well.
 
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DiPa

Constant GAS
Gold Supporting Member
Messages
14,044
Start to get all your paper work together, search and find.
It appears you have not broken the law or ripped off Canada.
If you have told us everything here and there is no hidden thing, then you should be able to go through this audit and come out okay.
 

jacklickson

Member
Messages
565
How did you initially catch the attention of the CRA?
Could just be random. For example, in Canada at certain income levels you get non-refundable tax credits for rent or property taxes you pay. One year I bought a house and claimed pro-rated amounts for both rent and taxes (payable by owners). That was a red flag. I explained the situation and that was the end of it.

The most telling comment on here so far has been the assertion that the big corporations are not targeted by the tax man. They are going after the guy who owes 5 grand because they usually don’t have lawyers.
 

Jabby92

Member
Messages
3,392
The sale of personal goods is not considered revenue. Since these types of sales are taxed at the provincial level and you don't need to remit taxes on the sale nobody really cares if I sell a used guitar to the guy next door, especially CRA. It is only the sales of property that becomes a capital gain of which one would have to declare as revenue.
Yes it is.. under certain circumstances. It can be considered income and be taxed:

http://madanca.com/articles/entry/hobby-or-business/
 

dachshund

Member
Messages
791
You should get at least a consultation appointment with a tax lawyer or an accountant. The issue seems to be that you used a business paypal, but if the payments are linked to your personal bank and credit accounts you might have a case in showing that the actual cash flow was not related to your now defunct business..or at least that business transactions made on that account ceased on whatever date and such.

Seriously though, don't panic and just get a true professional's opinion. You didn't act with bad intentions. Youre going to need to know not only whether or not youre responsible but also what the cost could realistically be. That will bring the matter into focus for you to find out your best course of action. I don't think it will turn out as bad as you may think.
 

Jabby92

Member
Messages
3,392
Only if one makes a profit on the sales, meaning the sale generated. profit over the cost of the goods sold. But really CRA do not normally go after people with hobbies...they simply don't have the resources to do so. They prefer the big fish.
Sure, but in this case they're going after someone more 'regular'. I wouldn't rule anything out, small or big fish these days.
 

JWhite

Member
Messages
226
Who buys items and then sells them for a loss unless they are to create a loss for something else.
 

Atmospheric

Member
Messages
3,534
For an initial cut at documentation, download the PayPal transaction history. That will tell you what you sold and for how much. Next, establish your basis in each item somehow. A bet a few of them cross map in PayPal. Initially, your best guess is good enough. Once you establish that you lost money, they should go away.

But if it does go further, be prepared to establish your basis more firmly.
 

Borg20

Member
Messages
166
Who buys items and then sells them for a loss unless they are to create a loss for something else.
People sell stuff at loss or break even all the time including myself. It's called being "hard up for cash". Of you're trying to fund another purchase and are you decide to unload an item for the fastest possible sale.
 

Atmospheric

Member
Messages
3,534
Who buys items and then sells them for a loss unless they are to create a loss for something else.
It's often also the cost of acquiring knowledge that something doesn't work for you.

If you've never had that happen, that's great. I'm an expert on that. Often the only way to find out is to buy one, try it and flip it if it doesn't work.

But given shipping and other costs associated with selling, it's my experience that it's actually quite hard to break even, let alone make a profit, unless you are only willing to buy stupid good deals up front, and wait months for them to present themselves.
 

AlanH

Member
Messages
1,788
This may be more simple to deal with if you can prove that the high value items were bought for personal use rather than for the purpose of selling. Videos of you playing them, collection shots, forum posts showing off your new item....
 

Mr Fingers

Member
Messages
2,478
As others have said, this is likely to be a pain in the butt but not a financial problem, given the overview of profit/loss you describe. I'm not sure how they tracked your volume of transactions or status as a business/individual, but I would think that can be sorted out pretty easily, based on what you've said. I've dealt with Canadian tax authorities, though in my case it was a land sale, and they were slow, non-communicative, and unclear at every turn, but it still came out fine, both in terms of logic and my own personal self-interest. I wish the same for you.
 




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