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Tips on Tipping Policies

If  your restaurant pools or shares tips, charges automatic gratuities, or receives a tip-out “to the house”, this article could save you thousands of dollars.

If you’re like most restaurateurs, you probably think that the Canada Revenue Agency’s only concern about tips and gratuities is that servers report them on their personal income tax returns.  While the CRA is concerned about this, now, they are even more interested in restaurants that fail to report certain types of tips.

The CRA’s policy on tips and gratuities can be found here.  The rest of this article may shock you.

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CRA Auditors Charged

I’m certainly not saying that all, or even a significant number, of CRA’s tax auditors are corrupt, but this story in the Montreal Gazette highlights some very interesting issues surrounding restaurant tax audits.

The corrupt tax auditors seemed to focus on restaurants, knowing that they could “justify” large reassessments, unless the owners paid them bribes.  In at least one case, the auditor asked for the bribe before auditing the restaurant!  Finally, the auditors could just as easily make a restaurant appear to be reporting all of its income as it could make it look like they were evading large amounts of tax.

An RCMP investigation of Canada Revenue Agency employees has resulted in three former auditors being accused of shaking down restaurant owners for cash.

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