The CRA has a powerful tool at their disposal, and it’s called the “net worth” assessment. The net worth assessment is used when calculating the tax owed by people who fail to file a tax return or misrepresent their income in filings.
One-third of the 27.5 million tax returns Canadians submit each year are non-taxable and are filed to claim tax benefits. Not surprisingly, some taxpayers aren’t telling the whole story. Suspicious increases in net worth are often blamed on casino wins or monetary gifts, both of which are non-taxable. If caught misrepresenting income in filings, the Minister of National Revenue can impose gross negligence penalties, which will increase the tax by 50 percent on the undeclared income.
This article was written by Vern Krishna on behalf of the Financial Post. Read the full article.