Help clients track income sources

When clients are paid in cash for completing jobs or projects, remind them to record and keep track of those payments.

People may need to do this if they run a renovation or construction company, for example, or if they run a small side business in their spare time.

Recording all income sources throughout the year is key since clients will then be able to report accurate amounts of annual income at tax time. If they don’t submit an accurate return, they may be audited by the CRA.

Read: Come clean with CRA

That’s because the agency can find unreported income (even when inaccurate records are kept) by:

• conducting lifestyle audits when people seem to be living beyond their means;
• comparing people’s reported incomes and expenses to industry or regional averages;
• following up on leads received from informants, enforcement agencies, and other tax authorities; or
• comparing the information on tax returns to information received from third parties.

For more on filing taxes, read:

How CRA finds unreported income

What happens to unreported pension income?

Many employees facing back taxes: EY

When trading profits are income

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.