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.
The Income Tax Act is clear about income from tips: tips are taxable and it is your responsibility to report any that you receive.
Recently there has been a concentrated effort by the tax authorities to educate taxpayers of these obligations. One area that is easily overlooked, relates to foreign operations and assets held in foreign countries. When you have foreign business operations and/or own property in foreign countries there are additional reporting that is required. The three main types of reporting that may be required are:
Form T1135 – Foreign Income Verification Statement
This form is required if at any
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