What are the legal implications of one spouse having earnings paid to the other spouses home based business?
The husband has a second source of income for which he has all pay cheques made out to his wife’s home based business as it makes less and pays less income tax. If this is an offence under Canadian tax laws who would be charged?
Assuming that by "home based business" you’re referring to a proprietorship – which basically means that the wife is reporting husband’s income as her own on her personal income tax return rather than on his in order to reduce tax, as she makes less money than him.
CRA would likely reassess the husbands to return to include the income, plus interest, plus penalties and would likely leave the income on the wife’s returns as well – leading to double tax. This of course assumes that the individuals did this out of ignorance – if it was done with the specific purpose of defrauding the government out of tax revenues … this is the kind of thing that tends to piss off the government, so you’d likely have the above as well as various negligence and criminal related penalties to deal with as well… in a nutshell, should the govt figure it out, the money it will cost will outweigh any savings from doing it in the first place.
All three could be charged with conspiracy to defraud the government.
References :
Assuming that by "home based business" you’re referring to a proprietorship – which basically means that the wife is reporting husband’s income as her own on her personal income tax return rather than on his in order to reduce tax, as she makes less money than him.
CRA would likely reassess the husbands to return to include the income, plus interest, plus penalties and would likely leave the income on the wife’s returns as well – leading to double tax. This of course assumes that the individuals did this out of ignorance – if it was done with the specific purpose of defrauding the government out of tax revenues … this is the kind of thing that tends to piss off the government, so you’d likely have the above as well as various negligence and criminal related penalties to deal with as well… in a nutshell, should the govt figure it out, the money it will cost will outweigh any savings from doing it in the first place.
References :