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SUMMERSIDE, P.E.I. - When the Canada Revenue Agency (CRA) pays a visit, you’re either about to have a really good day or a really bad one.
For Robert Gallant, owner of Michael’s Pizza in Summerside, one such visit recently left him perplexed.
Gallant was working in his office a few weeks ago when three representatives with the Canada Revenue Agency arrived and asked to speak with him. They explained they were in Summerside doing outreach at local restaurants, educating servers about their responsibility to claim tips as part of their income.
They gave Gallant information packets and asked him to distribute them to his staff. Gallant did so, attaching the flyers to employees’ pay statements and had a conversation with them, relaying what the CRA visitors had had told him.
But he remains concerned.
“You’d think they would have bigger fish to fry,” he said, of the federal government body’s efforts.
According to the CRA, all gratuities or tips are considered earned income under the Income Tax Act and must be reported as such. However, it is common for some in the service industry to only claim a portion of their tips on their income tax.
"...If you don’t claim it and get caught, then what? You have to pay it all back, plus more. So do you really want to take that chance?”
The Journal Pioneer spoke with one Prince County server with decades of experience in the industry who said she has only ever reported a relatively small portion of her tips on her income taxes. The Journal Pioneer has agreed not to identify her so she could speak honestly about her situation.
The server said that depending on the time of year, day of the week and other factors, her tips could vary anywhere from about $50 to $200 or more per shift.
She has traditionally reported a few hundred dollars in tips annually.
She is aware of the CRA outreach program and said it has shaken her coworkers – though maybe not to the point where they will start reporting all of their tips.
“I really don’t think they will – because it’s going to hurt them,” she said. “But if you don’t claim it and get caught, then what? You have to pay it all back, plus more. So do you really want to take that chance?”
The Journal Pioneer asked to speak with CRA about its restaurant outreach efforts, but that request was denied. The agency would only provide emailed responses to questions.
“The CRA is conducting outreach across the country, including in P.E.I., to educate businesses and employees who earn tips,” it wrote. “The CRA is conducting this outreach through its Liaison Officer service, which is a free service to educate small business owners on their tax obligations.”
It added that it anticipates more such visits to Island businesses in the spring and the lead-up to the tourist season.