Personal Finance

CRA going after paypal business holders

  • Last Updated:
  • Nov 17th, 2017 9:26 pm
[OP]
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KingKuba wrote:
Nov 14th, 2017 8:44 pm
Ebay/Paypal will just lose more business.
I agree. This is very bad for business for paypal. People will just start using BitCoin or other non-trackable payment methods.
[OP]
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The real question here is why has the CRA been completely blind to the tax evasion going on for 15 years in the Vancouver Real Estate market, and yet now suddenly is going after mom-and-pop businesses on paypal? The government knowingly admits that people are evading millions of dollars in taxes by illegally claiming "principal residence" tax breaks. This went on for years before it was cracked down on. I hope that the government isn't shifting too many resources to bring down Mom's garage sale money.
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I just checked my account and I have a personal account and not a business account but i have sold a few things in the past.. Am i ok?
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Nov 13, 2017
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skeet50 wrote:
Nov 14th, 2017 1:18 pm
So many tax issues with what you are doing.

It is considered a big NO NO from a tax perspective to mix personal and business transactions. When this happens, the CRA will generally disallow the business aspect of your claim and consider everything as a personal transaction. This means you cannot claim expenses and any income will be taxed at the much higher personal rate.
This is entirely untrue. You can have personal transactions in your business account for a sole proprietorship, as long as you account for them properly (ie. owner draw account). Is it a good idea? No, but small businesses face cash crunches all the time and it is all your money that you are free to spend as you wish. Your business is a business if you have a reasonable expectation of profit and the courts have ruled that this means you have those expectations, not the CRA.

At some point, Paypal combined my personal and business account into one account so that makes the accounting trickier.
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Nov 13, 2017
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adamtheman wrote:
Nov 14th, 2017 11:19 pm
The real question here is why has the CRA been completely blind to the tax evasion going on for 15 years in the Vancouver Real Estate market, and yet now suddenly is going after mom-and-pop businesses on paypal?
I wrote more detail that got buried earlier, but the real issue is foreign sellers who pay no income tax in Canada, can build customer e-mail lists that Canadian businesses aren't allowed to, and our own government fails to collect GST/HST/PST, Duty and Customs Brokerage at the border while we actually subsidize the shipping rates from China.
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Nov 13, 2017
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grilw wrote:
Nov 14th, 2017 7:33 pm
Seeing as this is the digital age, I was thinking more along the lines of taking some sort of proactive/preventative measures NOW, such as changing/distorting Paypal info before it's disclosed to the CRA to make reconciling identities harder, or some other create tactic.
Obstruction of justice is a serious offense. Just sayin'
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Nov 13, 2017
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I highly doubt their primary interest is "mom-and-pop businesses", PayPal has grown too large, extremely large, to the point that its unreasonable for CRA not to check, no matter how silly it may sound. Your bank sends your transaction records to CRA, why wouldnt PayPal do that? See what I mean?
Goverment wants control over a VERY large electronic finanicial processor that has been running without checks for a long period of time. For example, PayPal USA is obligated to send customer data to IRS since late 2000's.

If you are not doing anything shady, it unlikely anything going to happen. Keep your taxes in check and make sure to file future taxes. In future CRA can always refer back to 2014-2017 transaction even in 2020 if they suspect anyone of doing anything suspicious. Basically its another source of confirmation of personal identity and business activity. Panama papers, paypal, square payment, possibly air bnb (next)... they all can interlink once more data will be available to CRA.

IMO
Last edited by jayrony on Nov 15th, 2017 12:01 am, edited 1 time in total.
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Nov 13, 2017
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I know a HIGH volume KIJIJI seller who was audited by CRA. Guy would easily make $ 200 a day, so around $ 6,000 per month cash.

So that's probably equivalent to someone who makes $ 10,000 salary a month doing some job and gets only $ 6.000 in hand per month as he has to pay maybe 40 % income tax on it :(

That was his FT job. Guy would buy & sell stuff on KIJIJI and other online forums, sites, Facebook groups . Everything was in cash, but they still caught him, somehow. He would sell electronics, paintings, small decorative items, tables,chairs, fixtures - you name it & he would buy/sell it.

He would even do some services like pick up & delivery for you in his van in case you didn't have a car, mowing lawn, some small handy work - all this in cash via Kijiji :)

Maybe the daily cash he was making, he would deposit it into his bank account to pay various payments like Mortgage, Car insurance etc and they must have caught him that way :)
[OP]
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Importz wrote:
Nov 14th, 2017 11:26 pm
I just checked my account and I have a personal account and not a business account but i have sold a few things in the past.. Am i ok?
For now CRA appears to only be going after business accounts so you are not included in this audit.
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Nov 13, 2017
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dutchca wrote:
Nov 14th, 2017 10:17 am
@bewiseman

You may have a huge HST issue if you were ever to be reviewed by CRA. What you are doing is called "resupplying" the liquor.
What you want to find out is if you are considered an "agent" with respect to the supply of liquor. If this is the case, you are merely buying the liquor for the client and charging them $8 to bring it to them. In this scenario you don't need to register for GST/HST unless your $8 delivery charge sales are more than $30,000. It could still be to your advantage to register though. One quick point though is that PayPal charges a $0.30 fee + 2.9% of the total transaction, which means you are actually making less than $7 per delivery on a $25 + $8 average order.

My comments on this thread are for informational purposes only and you should obtain professional advice from a CPA, not rely on internet chat boards for actual advice.
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adamtheman wrote:
Nov 15th, 2017 12:04 am
For now CRA appears to only be going after business accounts so you are not included in this audit.
Thank you Thank you
Newbie
Nov 13, 2017
6 posts
Also, many business use amazon, square, apple pay, paypal and other 3rd party payment processors. The data cra receive from paypal alone may not be sufficient to initiate an audit but rather provide insight if the business is more or less filling their taxes, for the reference. But once more info is collected from other payment processors as they release customer data, more red flags to be raised, resulting in audit.
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Mar 6, 2013
2 posts
Calgary
I started to rent retro/neon ski suits to stag parties/birthdays going on ski trips back in 2015. That year I didn't make enough money to cover the suits I had bought. Last year, I bought more suits and managed to break even. This year I spent some money on developing a logo but the rest of the winter I should flip a profit. Based on last year, my projections are around $3000- just enough for a season's pass and a few ski trips. I was planning to claim any income on my taxes this year. I've kept all my Value Village receipts and have my Ebay purchase history just in case something like this happened.

My issue is this; I use PayPal to charge a $200 deposit when someone rents a suit. When they return the suit I send them a refund of $170. I make around $27 after fees. If I rent to a group of 5 people, my account looks like I have $1000 coming in when in reality, after refunds have been sent, I'm only bringing in around $115.

My reports only show the inflated summary of money, not my actual earnings. Am I missing a setting in PayaPal somewhere? Should I fill out that volunteer disclosure form and claim what? A loss? lol
I want to follow the rules, I'm just not sure what to do.

As I said, I was planning to claim this winter and I have not officially registered my business with the CRA. Someone told you me you don't need to register a business that makes under 5k (or maybe it was 30k?) as long as you claim the income.

Any suggestions?
Thanks!
Syl
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blacknail wrote:
Nov 15th, 2017 12:13 am
What you want to find out is if you are considered an "agent" with respect to the supply of liquor. If this is the case, you are merely buying the liquor for the client and charging them $8 to bring it to them. In this scenario you don't need to register for GST/HST unless your $8 delivery charge sales are more than $30,000.
To me, it seems like agency relationship can not exist here simply because @bewiseman purchases booze for end users who are not subject to HST rules and there is no relationship between him and LCBO to form the agency relationship on the purchasing end. It is essential for the principal to be subject to HST collection rules in order for agent to avoid collecting.
Loose lips sink ships.
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blacknail wrote:
Nov 15th, 2017 12:13 am
What you want to find out is if you are considered an "agent" with respect to the supply of liquor. If this is the case, you are merely buying the liquor for the client and charging them $8 to bring it to them. In this scenario you don't need to register for GST/HST unless your $8 delivery charge sales are more than $30,000. It could still be to your advantage to register though. One quick point though is that PayPal charges a $0.30 fee + 2.9% of the total transaction, which means you are actually making less than $7 per delivery on a $25 + $8 average order.

My comments on this thread are for informational purposes only and you should obtain professional advice from a CPA, not rely on internet chat boards for actual advice.
Here is the infomation on agency:

https://www.canada.ca/en/revenue-agency ... gents.html

Possible, but unlikely given the facts of the situation.

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