CRA Warns That Income Earned Online Is All Taxable

by Glen Shapiro, LawAndTax-News.com, New York

26 October 2007

The Canada Revenue Agency (CRA) has issued a reminder to Canadians that the tax laws that apply to traditional commerce also apply to electronic commerce.

The tax authority stressed that taxpayers who earn income through online commercial activity should review their tax situation to ensure they are accurately reporting their income and meeting their tax obligations.

The CRA continues to vigorously enforce the provisions of tax laws to ensure that all Canadians pay their taxes, it added.

If taxpayers occasionally use the Internet to sell personal items, such as used furniture or sporting equipment, they do not normally have to report this on their tax return. However, if they regularly use the Internet or electronic boards to make a profit, then they must report those earnings on their tax return.

In some cases, the seller listed on an electronic board is actually a business, or could be considered a business for tax purposes. Business income includes income from any activity undertaken for profit or that has a reasonable expectation of profit. Online businesses must comply with the tax rules that apply to any business operating in Canada.

The CRA went on to reveal that it has a Voluntary Disclosures Program available to taxpayers who want to correct their tax affairs before the Agency begins any audit action or investigation. If a full disclosure is made before compliance action is launched, taxpayers will only have to pay the taxes owing plus interest, not any penalties.

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