Canadians who are found not to have reported all of their income are hit with not only having to pay the taxes on their reassessed income but interest on the taxes owed as well
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Shannon Lee Simmons, certified financial planner and founder of The New School of Finance in Toronto, says roughly half of her clients do some form of gig work. A common sentiment she hears when she brings up side jobs is people not realizing that the money is considered self-employment income. Ms. Lee Simmons notes that many clients in that position feel a sense of frustration and stress at not having known to set some extra money aside for tax time.
If clients are not aware of how the tax system works, when taxes come and they don’t have the money to pay, that becomes a motivation for them not to make a claim, Ms. Lee Simmons adds.Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth in Toronto, says gig workers may not understand the gravity of not reporting their income – or think they can get away with it.
Alternatively, the CRA can levy a “gross negligence” penalty if the tax filer ought to have known that they should have been reporting income, with the penalty being 50 per cent of the understatement of the tax payable on their income. She also shows clients a detailed breakdown of how much of what they owe is taxes and how much are CPP contributions. Seeing the latter can help ease clients’ minds, she says, because they know they’ll see that money in retirement.
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