June 11, 2018

CRA using Social Media for Audits

CRA using Social Media to its Advantage?

Well over the last few months we have come across this – a lot – CRA could be using social media to determine if people are reporting their income correctly or not and they could be using it as a tool during their audit process.

So the way this came to light was a few months back, CRA started targeting people from LinkedIn, who were bragging about their return on investment from their TFSA investments. There were people on LinkedIn that were stating that they were making  $ 100K or more and it basically triggered the CRA to look at these people and see whether or not they were following the rules that they needed to in relation to TFSA accounts and that’s how it all started.

Now in my own personal experience I was actually discussing this with my colleague and she told me about this case where her client was audited because of Social Media.

Excerpts of the Case:
So one of the client of my colleague was audited and he has a sole proprietorship, which was pretty successful so as a part of the audit the client was requested to provide all the previous months bank statements for everybody in the household which also included the spouse of this person.

Now the CRA Auditor visited his office and found out on his work computer there were several social media websites related to salon service, on further investigation it was found out the that his spouse was actually running a side business of a salon/massage in the basement of their house, which is no problem but when the auditor actually went and looked at her personal tax return there were no statement of business activities and there were no gst/hst numbers or corporate account numbers registered under her name either.

So there was a clear case that there is no reported income and obviously because it was the massage/salon industry and everything was on cash, hence there was nothing in the bank account therefore she thought she was free and clear, well in this case she was caught by social media, believe it or not!

Obviously there’s a whole avenue of things involved and it could be a little bit of a horror story at the end of the day when it comes to unreported income for  my colleague as well as he would have to go through the gross negligence etc. But it just goes to show you how dangerous it could be if you have clients starting to post little bit too much information on line with regards to their personal lives or in particular their investments and their business which doesn’t matches with their income tax returns.

Obviously social media is a great platform to do marketing but make sure that the social media feed whatever channel that might be matches your tax filing because that was the case for my colleague’s client and it wasn’t very difficult for CRA to prove that the spouse was running the business as there were lot of proof available online with the pictures showcasing the spouse and her clients .

CRA is trying to update their tools, trying to use technology to their advantage and this is just another way that they can go out and try to find people that try to evade taxes or find ways to use it against the people that they are audting at the moment.

So something to be aware!!

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