Business owners, have you received income using PayPal? If so, the Canada Revenue Agency (CRA) may be contacting you for an audit.

In November of 2017, PayPal was served with a Federal Court of Canada order to submit specific information to the CRA about PayPal Business account holders.

PayPal had to give the CRA account details for businesses that sent or received payment via the service between January 1, 2014 and November 10, 2017.

What does this mean for you?

• If you’re a business that doesn’t use PayPal, you won’t be affected.
• If you’re a business that has a PayPal Business account and used it for transactions between the above dates, you might be facing an audit.

With the information from PayPal, the CRA is looking for business income that was not reported in annual filings.

If you reported all of your income, including any from PayPal, and can prove it, then the audit would proceed as normal.

But what if you received income via PayPal, but didn’t report it? That’s a different matter.

If your business is audited and you know that you will owe, then you need to get a financial plan in place. Don’t ignore the problem!

The CRA cares less about the fact that you didn’t report all of your income and more about closing their file. They can’t close their file if they don’t collect from you.

If they can’t collect from you, they will turn to collection action – like a frozen bank account or issuing requirement to pay notices to your clients. This is why it’s best not to ignore the situation.

Having a plan means putting measures in place to protect yourself once the debt is determined. One of the most important measures is figuring out how you will pay what you owe – or what you will do if you cannot pay.

How to pay the CRA what you owe and stop collection action:

• Pay the amount in full if you have the funds available.

If you don’t have the funds available…

In general, it is better to owe another financial agency than it is to owe the CRA. The CRA can take swift collection action with devastating consequences – and they are not required to give you notice.

• If possible, consider taking out a loan to pay the CRA what you owe. Then pay back the other loan over a fixed schedule.
• If you can’t take out a loan, can you refinance your mortgage?

If you can’t take out a loan, refinance, or otherwise find the funds…

• Negotiate with the CRA. In some cases, the CRA will agree to a payment schedule with you. However, this is a risky move and could further expose your business to collection action. And even in the best-case scenario, you will still owe the CRA – they will want their payment in full.
• Part of their negotiation plan may still be to collect – such as sending out requirement to pay notices to business clients, which could harm your reputation.

If negotiation isn’t viable…

• File for a consumer proposal or bankruptcy.

If you can’t pay in full, find the funds, or make an agreement, filing for insolvency will immediately stop CRA collection action. For many businesses, this is a far preferable alternative than having the CRA issue requirement to pay notices or freezing your bank account.

The Bottom Line

Whether your business is being audited by the CRA for a PayPal Business account or another reason, if you are found to owe and you can’t pay, you need a plan.

Ignoring it won’t make the problem go away – and, in fact, will make it worse through collection action that can harm your finances and your reputation.

When dealing with the CRA, it’s best to have an advocate on your side. At DebtCare Canada, we’ve helped thousands of Canadians deal with problem debt, including CRA tax debt. We offer access to one of the only programs that can resolve a CRA back tax problem.

Contact us today to make a plan for your CRA business audit. Call 1-888-890-0888 or visit https://www.debtcare.ca/back-taxes/.