If you sell anything online and collect money through PayPal, chances are good you received an email earlier this week, similar to this one from a Reddit user:
According to PayPal, Canadians who use PayPal for business transactions will need to disclose their earnings to the Canada Revenue Agency (CRA), or face the consequences.
“We received a Federal Court order which requires us to disclose information to the Canada Revenue Agency (CRA) about PayPal Business Account holders that sent or received a payment between January 1, 2014 and November 10, 2017,” a spokesperson from PayPal said in a statement to Yahoo Canada Finance.
“We have informed affected customers and they can contact us if they have any queries. We have also shared information on our Help Centre to help them understand our reporting obligations. PayPal business account customers are responsible for making sure they file taxes with the CRA as applicable to their business.”
The court order only affects people who use a PayPal business account, so if you’ve only got a personal one, you won’t receive any notice.
PayPal also said in a statement that this isn’t an ongoing investigation, it’s a one-time request for information.
Affected users will have several pieces of information disclosed to the CRA: their full name, date of birth, business name, phone number, address, email address, and Social Insurance Number and/or Business Number. Users will also have the total number and value of received and sent transactions between Jan. 1, 2014 and Nov. 10, 2017 disclosed.
PayPal was flagged as part of a routine procedure applied to any business operating in Canada. Similar disclosures were made for eBay Canada in 2009 and Square Canada in 2016.
Why it matters
The whole process won’t affect most people. The ones who will face bigger issues are holders of business accounts who haven’t been disclosing their PayPal income on their taxes.
In Canada, there is a penalty for failing to report your income. Anyone who made more than $500 in the previous tax year must report their income to the CRA.
If you don’t report your income for 2016 and at least one year of 2013, 2014 or 2015, you may have to pay a penalty equal to 10 per cent of the amount you failed to report in 2016, plus 50 per cent of the difference between what you reported and the tax withheld from the amount you failed to report.
A one-time false statement or omission is $100 or the 50 per cent difference outlined above. The CRA may be willing to waive the penalty if you’re upfront with them, however. You can read more on the CRA website or contact them by phone.