PayPal is the most common means of sending and receiving money on the Internet these days. There are a lot of common questions surrounding this payment system, though, and one of them is how to go about declaring income earned through this virtual bank.
The short answer is that reporting your earnings in PayPal is the same as reporting any other earnings you make. Come tax time, you must file income received via PayPal as you would other revenues.
PayPal isn’t a virtual credit card. It’s a virtual bank account, and any money deposited to your account is considered revenue by the government. You must pay income tax on that amount. It doesn’t matter how long you wait to withdraw your money from PayPal to deposit it in your bank account. If you like, you never have to withdraw a penny and the money can sit in PayPal forever. But that doesn’t mean you’re exempt from paying tax on it.
Lately PayPal had received a Federal Court order, which requires them to disclose information to the Canada Revenue Agency (CRA) about PayPal Business account holders that have received or sent a payment through their account during the relevant reporting period between January 1, 2014 to November 21, 2017.
What information has PayPal been ordered to share with the CRA?
- The full name of every individual or corporation holding a business account that has a Canadian address.
- The date of birth of each individual holding a business account.
- The business name, if applicable.
- The telephone number(s) of the corporation or individual holding the business account, if available.
- The full address(es) of the corporation or individual holding the business account.
- The email address of the corporation or individual holding the business account.
- The Social Insurance Number and/or Business Number of the corporation or individual holding the Business Account, if available.
As part of their regular obligations, PayPal business account holders are required to file their taxes as appropriate. Details on how to file your income tax returns can be found on the CRA website. The CRA has a Voluntary Disclosure Program that provides an opportunity to change a tax return you previously filed or to file a return that you should have filed. Contact your professional advisor. You can find more information about this on the CRA website. Also note that the Voluntary Disclosure Program will be changing on January 1, 2018. More information about the new program can be found on the CRA website.
You can log in to your PayPal business account and select the Reports tab to view your transaction data. PayPal must disclose to the CRA only the total number and value of payments sent and received.
The CRA regularly seeks court orders as part of its mandate under the Income Tax Act and the Excise Tax Act to compel organizations to disclose information related to an individual or business for tax reporting purposes.
The CRA is subject to strict confidentiality obligations under federal laws and therefore your personal details are not shared. For more information on when the CRA is permitted to disclose your personal information, please refer to s. 241 of the Income Tax Act.
Why PayPal casinos are less in number?
You must have seen that there are very few online casinos that offer PayPal as banking method to Canadians. The reason is that PayPal prohibits transactions for gambling activities by merchants and account holders in jurisdictions where gambling activities are illegal, and by merchants whose services are accessible to account holders in the U.S.
PayPal allows approved gambling merchants to use their service in certain jurisdictions where gambling activities are legal. To be approved by PayPal, online casinos must demonstrate to PayPal’s satisfaction that they have the ability to block gambling activities for account holders in the U.S. and any jurisdiction where gambling activities may be illegal.
Unless the casinos has been approved by PayPal, account holders may not use PayPal to send or receive payments for any form of gambling activities, including but not limited to payments for wagers, gambling debts, and gambling winnings, whether conducted online, in person, or through any other means of communication. Gambling includes placing, accepting, recording, or registering bets; participating in lotteries; or otherwise carrying on a game of chance for money, property, or other things of value.
PayPal prohibits the following activities, even where the specific activity is lawful and/or is not legally defined as gambling, unless the transactions are associated with an approved online casinos.
- Games of chance and games of skill –Includes any activity with an entry fee and a prize, regardless of whether the outcome is determined by chance or skill.
- Casino games -Include (but are not limited to) the following virtual or physical games: baccarat, blackjack, craps, faro, keno, pachinko, pai gow, poker (whether or not it is considered a game of skill in the gambler’s jurisdiction), roulette, sic bo, slot machines, or wheel of fortune.
- Sports books or sports betting –Includes placing bets on actual sporting events against a bookmaker or through a betting exchange.Horse or greyhound racing –Includes gambling on the following types of races:• Simple betting (betting between individuals).
• Sweepstakes betting, where large entry fees, or stakes, are pooled and awarded to winners.
• Bookmaking betting, in which speculators offer odds against each horse or dog and accept bets against their predictions.
• Pari-mutuel betting, where betting odds on a given horse or dog are derived from a comparison between the total amount wagered on the animal and the total wagered on all the animals in the race.
• Off-track betting (OTB), where players bet on a race taking place in a location outside of where the bettor is situated.Person-to-person betting –Includes individual wagering and wagering through betting exchanges.Lottery tickets –Include the purchase or sale of any opportunity to participate in a raffle, drawing, sweepstake, pool, or any other form of game or contest involving the distribution of prizes or monetary compensation.
Gaming machines –Include devices meeting the following three criteria:
1. Constructed or adapted for playing a game of chance.
2. Containing a slot or other aperture for the insertion of money or money’s worth in the form of cash or tokens.
3. Offering prizes in money or money’s worth regardless of whether any player is at risk of losing any money or money’s worth.
Gambling-related ventures –PayPal may also prohibit transactions for the following ventures related to gambling:
• Gambling services, such as handicapping, or providing gambling tips or instructions.
• Use of intermediaries to facilitate the process of placing bets or securing offshore gambling licenses.
• Organized forums that facilitate person-to-person betting.
For casinos seeking approval to conduct gambling activities in accordance with this policy are required to send contact information and a brief summary of their business to firstname.lastname@example.org.