Are You Selling Your Real Estate?
The CRA is cracking down on real estate tax compliance.
So you're selling your property - the CRA is watching
When selling your home or any other real estate you must correctly report the transaction. If you go without doing so it could lead to audits, back taxes, high interest, and let's face it a large headache.
It's common knowledge that when you sell real estate you must report the sale on your tax return even if you are exempt from being taxed because of the principal residence exemption. The principal residence exemption is an income tax benefit that provides you an exemption from tax on the capital gain you receive when selling your principal residence.
In 2018 the CRA (Canada Revenue Agency) released updated results of their audits in the real estate sector. These audits lead to over $1 billion in additional taxes since 2015. The CRA released that there was a 65% increase in the last two years with penalties doubling to over $57 million. With that being said the CRA have decided to take steps to not let this behavior in the real estate sector continue. Areas in Canada with consistently high numbers of real estate transactions such as the Greater Toronto Area and the Lower Mainland in British Columbia are regularly being monitored for tax compliance.
From April 2015 to March 2019 results of audit activities found that there was a total of 34,214 files completed with $604.5 million in audit assessments, in British Columbia there was 7,400 files completed with $422.6 million in audit assessments.
The CRA takes the following factors into consideration when deciding if a sold property was reported correctly.
- How long did you own the property?
- What type of property was sold?
- What was the reason for selling the property?
- Did you do any work on the property?
- Have you sold similar properties?
- What is your intention when buying the property?
People often purchase homes with the intentions to resell the home after they quickly flip/renovate. The CRA reported that they have analyzed data that shows some house flips have not being reported correctly and in some cases not reported at all. All profits from flipping homes are taxable.
Correcting a Previous Return
If you have accidentally made a mistake or left out paperwork or important details on your tax return you are able to request an adjustment. Under certain circumstances you may qualify for the Voluntary Disclosure Program, if you do qualify the CRA can give you a second chance to correct your mistakes.
Melanie Gesy Professional Corp. is here to help!
Call 780-995-5236 today.