Your wedding day should be one of the happiest of your life; however it is possible for this event to end up causing you a lot of frustration with the CRA. After your big day, you will likely go to the bank and deposit all of your cheques and cash. What many people neglect to do is to record the guests and amounts, and even photocopy the cheques.
At this point, you may be confused and be wondering what your wedding gifts have to do with the CRA. Firstly, the bank notifies the government when an individual makes a deposit exceeding $10,000. This may make you a target for an audit. If the CRA does decide to audit you, they will consider any unsupported deposits to be income. This means that if you cannot support your wedding gifts, you may end up having to pay tax on them! Undeclared income will also land with you with gross negligence penalties of 50% and compounded daily interest.
This is a situation that no one wants to be in. In order to substantiate your deposits, keep evidence of the guests list, proof of the wedding date (ie. Contract for the venue), make photocopies of the cheques and keep a detailed list of amounts and names for all the gifts received in cash. By supporting your deposits to the CRA, you have proven to them that your wedding gifts are not in fact income and you should not be paying tax on these funds.
It goes without saying that this scenario is true for any event that you may have in your life that results in large deposits. Protect yourself against a future audit and take the time now to support all of your money. If you are currently in this situation and need help through your audit, please do not hesitate to give our office a call.
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