CRA Audits Casino Records of Canadian Gamblers
In a new audit approach CRA has been reviewing the records of Canadian casinos and sending proposed tax assessments amounting to multi millions of dollars to Canadian gamblers on the basis of unreported income. This new audit methodology is a variation of a net worth assessment, appears to be flawed and results in grossly inflated proposed gambler income tax assessments. Furthermore CRA is threatening to charge gross negligence penalties to those gamblers based on the artificially high tax assessment amounts. Tax evasion charges for tax fraud are also a strong possibility when CRA alleges unreported income of such magnitude. Our Canadian tax law firm is fighting CRA on these files.
CRA has approached Canadian casinos and has audited their records for large gamers. They produce a report that purports to show amounts in cash, chips and cheques that were used by large gamblers to fund their wagers. If reported taxable income of the casino players does not exceed the CRA wagering calculation from the casino records then CRA proposes to issue a tax assessment to the gamblers for the difference. However the reports produced by CRA are not an accurate record of the actual wagering conducted. For example if a Canadian gambler exchanges $10,000 for chips, then wagers and loses $2,000, deposits the remaining $8,000 with the casino and then withdraws the $8,000 as chips on a subsequent day, every stage of the funds flow is added as a separate transaction. So what is in effect $10,000 used to gamble in the casino ends up as high as $26,000 in the CRA casino gambler tax funds analysis. This is clearly wrong but is the approach the tax auditors are taking. CRA also has the ability to apply to court for a Jeopardy Collection Order , on an ex parte basis, that is to say without notifying the gambler or his or her Canadian tax lawyer representative, to seize funds and assets of the gamer, on the basis that CRA’s ability to collect the tax owing is at risk.
This is not a case of CRA alleging unreported casino income or unreported gambling income. What CRA is saying is that the volume of what they say is funds gambled in the casino is larger than the amounts reported from other sources in the tax return of the gambler. Therefore CRA says there is unreported income.
Our experienced Toronto tax lawyers can provide you with immediate advice if you have received a letter from CRA threatening you with a large tax assessment based on their review of casino records. You need to respond right away to any such proposed tax assessment based on a casino tax audit of your gaming records before CRA issues a tax assessment and proceeds to collect the taxes they say are owing.