Content creators and social media influencers can earn income from many different sources, including OnlyFans, Instagram, TikTok, YouTube, Twitch, sponsorships, advertising, subscriptions, tips and brand partnerships.
The Canada Revenue Agency (CRA) can audit content creators to determine whether they have reported all of their income and whether the expenses they deducted were incurred to earn that income.These audits can become complicated because creators often receive income through multiple platforms and incur expenses that have both personal and business elements.
If you are a content creator or social media influencer who has been contacted by CRA, a Toronto tax lawyer can assist with the audit.
What Does CRA Look at in a Content Creator Audit?
CRA will generally focus on whether all income was reported and whether the expenses claimed against that income are deductible. CRA may request platform statements, bank and credit card statements, payment processor records, invoices and other documents relating to the business. CRA may compare deposits into the creator’s accounts against the income reported on their tax returns and ask for explanations for amounts it cannot reconcile.
Before providing records to CRA, creators should understand what those records show. Income should be reconciled against platform and banking records, unexplained deposits should be identified and significant expenses should be reviewed to determine what evidence exists to support their business purpose.
Does OnlyFans, TikTok, Instagram or YouTube Income Have to Be Reported?
Canadian residents are generally required to report their worldwide income. Income earned through OnlyFans, TikTok, Instagram, YouTube or another online platform does not become non-taxable simply because the platform is located outside Canada or the money is paid through a foreign payment processor.
Creators may also earn income outside the platform itself, including sponsorship payments, affiliate commissions, tips, gifts and other benefits. It is therefore important to identify all sources of income and reconcile those amounts against the income previously reported to CRA.
What Expenses Can Content Creators Claim?
Content creators carrying on a business can generally deduct reasonable expenses incurred for the purpose of earning business income, subject to the limitations in the Income Tax Act. Depending on the nature of the business, these expenses may include platform and management fees, photography and videography, equipment, advertising, software, professional fees and certain home-office expenses.
More difficult issues can arise with expenses that have both a potential business and personal purpose. Travel, clothing, cosmetics, meals, vehicles, cell phones and internet expenses may all be questioned by CRA. For example, a creator may travel to another city or country to participate in a production, work with other creators or produce content. CRA may question whether the trip was genuinely undertaken for business or was primarily personal.
Receipts establish that money was spent, but they do not necessarily establish why it was spent. Communications arranging the production or collaboration, contracts, schedules, photographs, videos, invoices and other contemporaneous records may help establish the business purpose of an expense.
GST/HST for Content Creators
Content creators also need to consider GST/HST. A person carrying on a business who exceeds the $30,000 small supplier threshold may be required to register for GST/HST. This does not necessarily mean that GST/HST must be collected on every dollar of revenue. The GST/HST treatment can depend on the nature of the supply and where the recipient is located.
A creator who has earned significant revenue without registering for GST/HST may therefore have a separate GST/HST issue in addition to any income tax issues identified during the audit.
What Happens if CRA Finds Unreported Income?
CRA can reassess a content creator to include additional income and charge interest on the resulting tax. CRA may also impose penalties. In more serious cases, CRA may propose gross negligence penalties.
The fact that income was omitted does not automatically mean that a gross negligence penalty is justified. CRA must separately establish the requirements for imposing the penalty. Where a creator discovers unreported income before CRA begins an audit or other enforcement action, the Voluntary Disclosures Program may also be available to correct previously filed returns.
How Kirshen Tax Law Can Help
Kirshen Tax Law assists content creators and social media influencers with CRA audits, objections and tax disputes. We can review CRA’s proposed adjustments, determine what evidence supports the Taxpayer’s position, prepare submissions responding to the auditor and dispute improperly assessed income, denied expenses or penalties.
If you are a content creator or social media influencer dealing with a CRA audit, contact Kirshen Tax Law for a free consultation with a Toronto tax lawyer.
Jeff Kirshen BA, JD (CA), JD (US)
Tax Lawyer | Founder, Kirshen Tax Law
Disclaimer
The content on this website, including articles and blog posts, is provided for general informational purposes only. It reflects the laws and regulations as of the date of publication, which may have since changed. This content is not intended to serve as legal advice and should not be relied upon as such. Tax laws and situations can be complex and unique to each individual. The information provided may not apply to your specific circumstances. For personalized advice regarding your tax or legal matters, we recommend consulting a qualified lawyer.