Tax Tips and Pits: Cash for tax squealers is no joke

The gov't has announced it will pay cash to people who inform on people who cheat on their taxes in excess of $100,000.

If you want to make some money – some serious money – Canada Revenue Agency (CRA) has a job for you.

The government has announced it will pay cash rewards to people who inform CRA about individuals in non-compliance with Canada’s international tax regulations (read: tax evasion) that leads to a conviction.

The recovered tax revenue must exceed $100,000 in order to qualify for the reward program and yield a payout. CRA will then pay 15 per cent of monies collected.

What’s 15 per cent of a million bucks, or 10 million bucks?

Remember, it’s likely wise to report your reward payment from CRA as “other” income on your personal tax return.

Now, what about the clandestine world beyond white collar tax crime? …

How about a taxpayer who earns income from illegal means like the sale of contraband or drugs? For whatever reason, and there are some legitimate reasons, if a taxpayer were to file a personal tax return and claim income earned from criminal activity, you likely would think, “now that’s silly”. Law enforcement will be informed and the legal system will proceed as it should, but this would not necessarily be the case.

That’s right.  Not necessarily.

The Income Tax Act prohibits disclosure of any “taxpayer information” by any “official … of a government entity”.

However, if criminal proceedings have commenced on a person, the Act does permit the disclosure of that taxpayer’s information. The question is, how easy would it be for CRA to determine if criminal proceedings are underway without actually identifying the taxpayer to police?

And of course, if a criminal is living in obscurity and therefore nowhere near the police radar, it’s conceivable that the income and expenses associated with illegal activity could be “safely” claimed on a T1 personal tax return and the taxpayer receive the low income earner GST tax credit, among other credits, for example.

Good for at least an April Fool’s Day smile?

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.net.