Tax Tip:  3rd Party Disclosure of Unreported Income

In an April 10, 2013 Tax Court of Canada case, CRA reassessed a taxpayer to include approximately $28,000 of income. CRA based this income inclusion on the results of the audit of a different company which listed the taxpayer as a Subcontractor.

Taxpayer wins

The Court indicated that, “It is simply insufficient to tax a person solely because another person under audit points to them and provides their name and address. Names and addresses are readily available publicly and the companies could just as easily have given CRA almost any Canadian’s name, this would include mine.” In allowing the appeal, the Court indicated “it is unfortunately entirely possible that the taxpayer did work for, and got paid by, these companies. However, the evidence of that, such as it is, falls very short of allowing me to conclude that, on a balance of probabilities, he did.”

Action Item: CRA’s assessments can be challenged – make sure you contact us to review any surprises from the CRA. While the win is positive, it bears noting that the taxes were only reversed because the taxpayer went to court.