For anyone who has worked in the serving industry, you know a thing or two about under the table income (money you make that doesn't show up during tax season). It's a bit of a job perk and a loophole that the government has unhappily had to deal with. For decades, servers have been able to rake in as much as tens of thousands of dollars annually in tips, without paying taxes on the income generated - but that's all about to change.
The Globe And Mail just recently reported a terrifying story of dozens of staff and up to 200 managers in PEI receiving a notice from the Canada Revenue Agency (CRA) asking for back taxes on tips earned in previous years. The reason being is that the government now has a way to accurately calculate the amount each server makes without having to audit each person individually.
According to a CRA rep, the method they're using is simply just collecting information from debit and credit payments processed on a company's point of sale system. The digital payments leave a nice and easy trail toward each staff member working at an establishment and how much they've earned each shift - give or take. With that in mind, they however still won't be able to calculate cash tips that aren't keyed into a card processing pinpad.
This has caused a lot of anger to servers who say this method of information gathering on the CRA's part isn't accurate because it doesn't' factor in tip outs or other expenses the server has has to pay out for. However the CRA claims that you can always explain that in a written statement after your tax information has been reassessed.
And for current and longtime servers, while you might think being more forthcoming during the upcoming tax season is be A-OK, beware because many are being nailed for undeclared tips from as far back as 2014. With these back taxes notices also coming with financial penalties, some being as large as 50% of the tax owed on omitted on undeclared earnings.
So servers, you better start tracking those tips a lot closer than you have before. And hopefully you've got some sort of record on tip income earned in the past few year.
For more information on tipping culture in the serving industry, click here.
Source: Globe & Mail