Taxes in Canada?

[atom_new]

I figure I might as well comment on everything said here.

First off, I'm not a lawyer, I'm a law student. I can't give any legal advice. However, as a student I have access to tons of legal information all for free, as opposed to lawyers who pay $250/hr to get the info. I also have more free time and an interest in the area, so I've done tons of research in this field. In my files I've got info on pretty much all of the case law in Canada, every article ever written for professionals, and copies of pretty much all gaming laws ever passed going back to the 1500s.. Since I really enjoy poker I've taken a lot of time to learn the materials.
That being said, I don't have the accounting experience that someone like TorontoCFE has. Looking at his stuff though, everything seems to be right, but he is missing a few things. In areas of accounting and how things work in practice in that field, I'd defer to him as the expert.

Anyway, here are just a number of things which stood out for me:

Large winnings in bank accounts
A reminder: Under Canadian law, any transaction of over $10,000 or several smaller ones in a short period of time that add up to $10,000 will be reported by the bank to the government under the Proceeds of Crime and Terrorist Financing Act: http://lois.justice.gc.ca/en/P-24.501/index.html. However, this info is held by FINTRAC, not the Canada Revenue Agency, and it can not be given directly to the CRA(It can through the RCMP or CSIS though)

Innocent until proven guilty
Doesn't apply in tax situations. That's a maxim regarding criminal law. In taxation issues, if the CRA makes a determination, you would have to show that it's not true.

Leaving Canada to terminate residency
Residency is a much more complicated issue. Many many factors are considered than simply your physical location. Everything such as licenses, magazine subscriptions, property owned, etc. are all considered.

Taxability of online poker
Unfortunately, I don't have good news here. I know you all want to hear good news, and people who are trying to sell you their services want to give you good news.
The income of most people here would be taxable in online poker, for a few different reasons. Poker is a game of skill, and online poker is more so, due to the massive number of hands that you can play(See: Law of large numbers). The PPA constantly argues that it's a game of skill, and if it were a game of chance, it would be illegal in Canada.(Without getting into technical debates about mixed skill and chance, which I can if people want a bit more info). Playing with pokertracker or PAHUD also gives evidence that you're organized. The fact that you seek out advice, constantly improve your game, etc. also contributes to it being taxable.

You also can't just look at windfall vs. expectation of profit. There's a lot of history as to why windfalls aren't taxed, mostly through old UK law regarding the idea that gambling is an irrational activity and the money that is won doesn't flow from a source.(The same probably can not be applied to poker).

That being said, WILL poker players be taxed?
CRA and the government has made a conscious decision to avoid taxing most gambling gains because it is not worthwhile for them to do so. When you compare all the money won by all Canadians to all the money lost by all Canadians, the net amount is so small that it is not worth the effort to tax it. This is the main reason that the system is as it is now.

Incorporating to avoid taxes
Very dangerous IMO. Incorporating is great to minimise taxes, since you're paying at a lower rate, but the fact you've incorporated shows you're carrying on a business, and that you should be paying taxes.

Moral Issues
There is a fundamental right in the Canadian tax system: Everyone has the right to rearrange their finances in order to minimise taxes, but can not evade taxes. Putting anything under someone else's name, trying to conceal the source, etc. is one of the worst things you can do.

Anyway, hopefully this helps. Feel free to ask more, or point out where you think I'm wrong. I don't have all my documents here but when I get back to them I can either back some of this up or point out where I may have missed something.

[TorontoCFE]

All of this is true and doesn't go against anything I have said.

[Mossberg]

[ QUOTE ]
Large winnings in bank accounts
A reminder: Under Canadian law, any transaction of over $10,000 or several smaller ones in a short period of time that add up to $10,000 will be reported by the bank to the government under the Proceeds of Crime and Terrorist Financing Act: http://lois.justice.gc.ca/en/P-24.501/index.html. However, this info is held by FINTRAC, not the Canada Revenue Agency, and it can not be given directly to the CRA(It can through the RCMP or CSIS though)

[/ QUOTE ]

I want to withdraw about 20k combined from 3 different sites within the next month or two, mostly because of the rising Canadian dollar. I've never made a deposit >10k, and I play poker as my sole source of income (I'm a student). So the bank is going to report me - what does this mean though? Am I going to be getting a phone call from the gov't? Am I going to be audited next year?

Thanks in advance for the help.

[TorontoCFE]

The answers are only "maybes".

All it means is that FINTRAC will be notified and the transactions logged.
The odds of an audit go up, but that may mean going from 1% chance to a 5% chance.