Businesses: report all your income!

The Government of Canada continues to address emerging risks of tax non-compliance to maintain a robust tax system that is fair for all taxpayers. The Canada Revenue Agency (CRA) has been actively engaged in uncovering unreported income received by businesses, including incentives.

Regardless of the means by which it is received, incentive income earned as part of the business or professional activities of a person (individual, corporation, or trust) or a partnership of which a person is a member, is taxable in the year it is received and must be reported. In some industries, it is common for manufacturers and other suppliers to offer incentives to businesses to develop a relationship or build demand for a product. Some businesses receive incentives in the form of a cheque or electronic transfer of funds, while others receive incentives through other means, such as pre-loaded credit cards or gift cards.

Third-party data and its use in ongoing audit activity

The CRA is actively engaged in obtaining data about businesses that have received incentive income. This information is being used to identify and reassess those who failed to include this income in their tax returns.

The CRA recently conducted a project where it obtained third-party data on incentive income received by businesses in formats other than cheque and electronic transfer of funds. The CRA found that $86 million had not been reported as taxable income by the recipients, resulting in reassessments of more than $19 million in additional taxes owed. The CRA began additional projects in late 2017 and will release results as they become available.

Disclosing unreported incentive income

If you have incentive income that you have not reported in previous years, now is the time to correct your tax affairs. If you come forward voluntarily, you may be eligible for relief from penalties and interest through the Voluntary Disclosures Program. For more information visit canada.ca/taxes-voluntary-disclosures.

Report businesses who fail to report incentive income

If you suspect that a business owner has not reported incentive income, you can inform the CRA’s National Leads Centre. You may provide information anonymously and your identity will not be disclosed. Helping to keep the tax system fair for everyone benefits all of us. For more information visit canada.ca/taxes-leads.