It may be tempting to pay for certain things in cash because we think that saving a few dollars here and there can't hurt; however, we fail to see the larger impact of what happens when we do. The underground economy makes it challenging to protect the country's revenue base and hinders the government's ability to keep taxes low.
When people pay in cash, they skip out on paying the taxes that support things like healthcare, education and public transportation -- the very social services we rely on every day.
Canadians should also know that the government is paying closer attention to this activity. Last fall, it announced a three-pronged strategy to reduce participation in the underground economy. Increased scrutiny will likely bring harsher penalties for non-compliance, so it's important Canadians know how they can do their part to protect themselves, as well as their friends, family and communities.
Protect yourself as a consumer
When paying for things like home maintenance and car repairs in cash, you put yourself at risk. Let's say you're an Ontario resident and your furnace needs repairs. The quote is for $500 and during negotiations you propose to pay in cash to avoid paying the $65 in GST/HST. You take the technician for their word that the work will be done and guaranteed. No receipt or invoice is needed because it's all done in cash. Feels like it's a good deal, right?
Two weeks later the furnace breaks again. You call your technician to inspect it and they decide that extra repairs will cost another $500, even though they gave you their word that it would be done right the first time.
Without a record of the transaction you have little recourse, because you can't prove that the original work happened and you have no official warranty on the labour. In the end, it costs you twice as much than if you had just done it properly and paid GST/HST.
What can you do to avoid this? First, be sure to hire responsible businesses by asking questions and doing research. Any reputable business will abide by the rules and not accept under the table transactions.
Second, get a written contract and copy of payment for your records. These will give you the protection you deserve and the peace of mind you need.
Protect yourself as a taxpayer
The CRA expects you to report your income accurately, plain and simple. Even though failure to do so could result in penalties, fines and even jail time, people still take shortcuts when reporting their income.
This can easily happen in industries where cash payments are common; however, the government knows what these industries are -- residential construction and repair, food services, hospitality and others -- and knows what red flags to look for when assessing an individual's return.
The best way to ensure that you are reporting income accurately is to keep your sources of income organized and know what the CRA expects you to claim.
Imagine you are a waiter making $11.25 an hour, plus tips. Your employer gives you your T4 reflecting your $11.25 an hour wage, which you then use to file your income taxes. Only reporting this as your income means you aren't claiming your cash tips, which results in missed taxable income.
Most people think that if they just add 10 per cent, it will cover their tips. In some cases, the government expects that your income could be up to four times greater than your base salary once tips are included. This is income you need to track throughout the year so you can report your true, earned income and you should be saving about 30 per cent of these earnings to fulfill your tax obligations as indicated by your income tax bracket.
Protect Canada's economy and social services
Remember the $42.4 billion circulating in the underground economy? That number represents hundreds of millions in outstanding tax revenue that could support the infrastructure and services Canadians rightly need and expect its government to provide.
These are the roads we drive on to work every day. They're the hospitals where loved ones are cared for. They're schools that educate our friends and family. They are all funded by our taxes.
When you buy a product or pay for a service, you expect to get fair value for that transaction. The same is true of taxes, so why short the system by paying in cash?
In the end, your non-compliance diminishes the value of these services for you and your fellow Canadians, and prevents the government from being able to give you what you need and expect.
We can rise above the underground economy by doing our part and filing our returns accurately. Let's think about the bigger picture this tax season and ensure we are protecting ourselves and our communities.
Original Article
Source: huffingtonpost.ca/
Author: Caroline Battista
No comments:
Post a Comment