The Canada Revenue Agency (CRA) is reminding Canadians who earn tips and gratuities that they represent taxable income and must be reported on annual income tax and benefit returns. Restaurant servers, hairdressers, valets, taxi drivers, and others who earn tips may not have all of their income recorded by their employers, which means that their T4 slips may not include all of their income.
Deliberately deciding not to report your tips is also illegal. If CRA auditors and investigators find that you are not reporting all your sources of income, you may be audited, face fines, penalties, or potential jail time.
If you have ever made a tax mistake or omission on a previous tax return, the CRA is offering you a second chance to make things right through its Voluntary Disclosures Program (VDP). If you make a valid disclosure before you become aware that the CRA is taking action against you, you may only have to pay the taxes owing plus interest.