Common Tax Myths Debunked: What Canadians Get Wrong About CRA Rules — A Complete Guide by a Montreal CPA Firm Near You

Introduction

Every tax season, CRA faces millions of filings filled with misunderstandings, inaccurate assumptions, and dangerous “tax advice” circulating online, among friends, and across social media. These myths lead to missed deductions, lost refunds, incorrect returns, CRA reassessments, costly penalties, and—in serious cases—audits or criminal investigations. This guide breaks down the most common Canadian tax myths, explains the actual rules, and helps taxpayers avoid major compliance errors. Whether you’re an employee, landlord, business owner, student, freelancer, investor, or newcomer, debunking these myths protects your financial future.

Myth #1: “If I don’t get a slip, I don’t have to report the income.”

This is one of CRA’s biggest audit triggers. All income is taxable whether or not you receive a:
T4
T5
T4A
T3
1099 (U.S.)
Online payouts (YouTube, TikTok, Shopify, PayPal, Stripe)
Cash payments
Gig income from Uber, Lyft, Skip, DoorDash
CRA receives third-party data from platforms, financial institutions, foreign governments, and employers. Not reporting income results in reassessments and repeated-failure-to-report penalties.

Myth #2: “Tips don’t have to be reported.”

Wrong. ALL tips are taxable. Whether controlled or direct tips, CRA requires reporting via payroll or T1 returns. Restaurants and bars are heavily audited for tip compliance. Failure to report leads to payroll penalties and income adjustments.

Myth #3: “Cash jobs are tax-free.”

Absolutely false. CRA uses bank deposit analysis, lifestyle audits, and industry benchmarks to detect unreported cash income. Cash jobs are taxable like any other business income, and unreported cash can create a net-worth audit spanning multiple years.

Myth #4: “My accountant will be blamed if something goes wrong.”

Incorrect. YOU are legally responsible for your return, not the accountant. Even if a preparer makes an error, CRA holds the taxpayer liable for:
tax owing
interest
penalties
documentation
Using a CPA is protective, but taxpayers remain fully responsible for accuracy and truthfulness.

Myth #5: “I can deduct all my meals, vehicle, and home office expenses.”

No—deductions must be directly tied to earning income and require documentation. CRA denies:
personal meals
vehicle claims without mileage logs
home office claims without a dedicated workspace
meals are only 50% deductible in most cases
vehicle claims require detailed logs
home office requires business-use-percentage calculations
Incorrect claims often lead to audit adjustments.

Myth #6: “If I made less than $30,000, I don’t need to charge GST/HST.”

This myth is only HALF true. If you exceed $30,000 in ANY 12-month period, even once, you must:
register for GST/HST immediately
charge GST/HST
file returns
submit ITCs properly
Failing to register leads to retroactive GST/HST assessments plus penalties and interest.

Myth #7: “I don’t need to file taxes if I live abroad.”

If you’re a Canadian resident, you must file taxes regardless of where you physically live. Residency is determined by:
residential ties
family ties
financial ties
days in Canada
Leaving Canada without severing ties results in continued Canadian tax residency.

Myth #8: “TFSA income is always tax-free.”

Not always. While TFSA income is tax-free in Canada:
U.S. citizens living in Canada
Canadians holding foreign PFIC investments
those operating a business inside a TFSA
may face tax reporting or loss of TFSA benefits. CRA also penalizes over-contributions.

Myth #9: “RRSPs are tax-free.”

RRSPs are tax-deferred—not tax-free. Withdrawals are taxable. Failure to plan RRSP withdrawals leads to high retirement taxes, OAS clawbacks, and tax spikes.

Myth #10: “I can avoid capital gains tax if I reinvest the money.”

This is an American rule (1031 exchange). It does NOT apply in Canada. Selling stocks, crypto, or property triggers capital gains unless protected by:
principal residence exemption
capital losses
specific rollover provisions
Canada does not allow capital gains deferral through reinvestment alone.

Myth #11: “Real estate flips can be reported as capital gains.”

Not always. CRA aggressively audits real estate:
preconstruction assignments
short holding periods
renovation flips
Airbnb conversions
If CRA considers you a real estate trader, profits become 100% taxable business income.

Myth #12: “Crypto is anonymous so CRA can’t track it.”

Completely false. CRA has partnerships with major exchanges, uses blockchain analytics tools, and receives international data through CRS, FATCA, and KYC reporting. Crypto transactions are fully traceable. Not reporting crypto income leads to severe penalties and full-scale audits.

Myth #13: “I don’t need receipts if I use my credit card statement.”

Wrong. CRA requires:
itemized receipts
invoices with vendor details
proof of payment
Credit card statements alone do not prove deductible purchases. Missing receipts = denied deductions.

Myth #14: “If CRA doesn’t ask for something, they don’t care.”

CRA audits retroactively for up to:
3 years normally
6+ years for business and GST/HST
10+ years for foreign assets
unlimited years for misrepresentation or fraud
Not being “caught” today does not mean CRA won’t reassess later.

Myth #15: “I can ignore CRA letters if I don’t owe money.”

Ignoring CRA always makes things worse. Even informational or review letters must be taken seriously, or CRA will reassess your return using assumptions and begin collections.

Mackisen Strategy

At Mackisen CPA Montreal, we help individuals and businesses avoid costly tax myths by providing accurate guidance, compliance reviews, strategic tax planning, and full audit defense. We correct incorrect filings, rebuild deductions, dispute CRA assumptions, and ensure taxpayers follow the law—not internet rumours.

Real Client Experience

A Montreal freelancer faced a $29,000 reassessment after following online tax “tips”; we reversed most of it through documentation. A landlord fell for the “capital gains reinvestment myth” and was reassessed; we corrected filings and minimized penalties. A creator misreported crypto income believing it was anonymous; we rebuilt her ACB and avoided penalties.

Common Questions

Are cash payments taxable? Yes. Are tips taxable? Always. Does CRA track crypto? Absolutely. Can I fix past mistakes? Yes through amendments or VDP. Are home office claims automatic? No—documentation required.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal provides clear, accurate, and compliant tax guidance that protects Canadians from misinformation and CRA penalties. We help taxpayers file correctly, maximize deductions, and stay fully compliant.