Your Facebook friends just learned that you bought a new Mustang; however, you told CRA that you are barely making $20,000. There is a big discrepancy between your Facebook post and your tax return and now the taxman is on your trail. Bragging on Facebook will not actually trigger an audit but the fact that you declared $20,000 as your earnings when you live in neighbourhood where the median income is $60,000.
Once your tax returns have been selected for audit, CRA will surely look into your social media accounts. The CRA does not undertake mass monitoring of Facebook accounts but it practices risk-based compliance. Once a tax payer has been identified as high-risk, any relevant information that is publicly available and related to the specific risk factors will be gathered and analyzed.
CRA can also force online-based companies to release user data. For example, CRA won a case against eBay in 2008 that resulted into the release of thousands of records of people who have managed to earn at least $20,000 in 24 or more sales during one year or made more than $100,000 in a year. The eBay files were used by CRA to launch audits during the massive crackdown on tax evaders.
The government cannot be stopped from using the approach with Uber and Airbnb. The law is pretty clear that the government has the right to get information. It is surprising that Uber tried to challenge the law because it did not want to release data pertaining to its employees.
CRA is now using cutting edge technology to sift through large amounts of data that it has collected from different online sources. Big data analytics and information-sharing with other federal government agencies have certainly boosted CRA revenue collected from audits.
Your best proactive and cost effective solution when you are worried that your tax returns may be subjected to audit is tax investigation insurance that covers professional fees related to the audit. Professional fees can be substantial during the tax audit and investigation. The insurance can compensate the accountant for the cost of the services rendered during the length of the investigation.