The CBC attached article focuses on Arden Professional Client Care and its CRA audit. But workers in situations like this shouldn’t assume the audit stops at the company door.
When workers receive income, regardless of how their employer characterizes it, they carry their own tax obligations. Canadian tax law places the responsibility on each individual taxpayer to understand and report their income correctly, regardless of what an employer tells them, a letter from a company VP describing wages as “non-taxable” does not make them so. That said, the specific circumstances of how workers were misled may still be relevant, and defences can exist on a case-by-case basis.
If the CRA turns its attention to individual workers in situations like this, the exposure can be significant. It is not just the unpaid tax that becomes owing, it is also interest, which accrues retroactively from the date the tax was originally due. Add potential gross negligence penalties on top of that, and balances that once seemed manageable can grow quickly. The CRA’s normal reassessment period also means prior years can be reopened, in some cases going back several years.
For workers who suspect they may be in a similar situation early action matters. The Voluntary Disclosure Program may be available to those who come forward before the CRA makes contact and can in some cases reduce or eliminate penalties and limit interest exposure. That window closes once the CRA is already at your door.
If you’ve received similar letters from an employer, haven’t reported income you were told was non-taxable, or are concerned about how a company audit could affect you personally, these are exactly the situations we work through with clients — from assessing the exposure, to navigating the VDP, to defending reassessments if it comes to that.