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Tips - Gratuities

Does anyone have in their engagement letter anything concerning tips and gratuities and that the taxpayer is responsible for declaring their tips and gratuities. I can only ask and when they tell me no know tips, there is not much more I can do unless I tell them sorry I can’t file your return.

Engagement letter::You confirm that you have provided me with all income

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On the other hand, some clients consider tips & gratuities as “freebies” and not income :wink:

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I have an Engagement Letter, which is signed on starting. And there is a Representation Letter, which is signed after the review of their tax return. And in the latter letter is a phrase where they represent that they have reviewed the return and agree that it fully declares all income, even if there was no slip.

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Thanks for the commentary it is appreciated. @TimParris I like the representation letter. Regarding tips and gratuities I am going to specifically include in my engagement letter, but not sure how to word it exactly.

Thinking along the lines of “Taxpayers who receive as part of their employment or self-employment additional remuneration in the form of tips, gratuities and barter, please be advised that CRA requires that all income has to be reported and by signing this engagement you are declaring all your income.”

Any recommendations on wording greatly appreciated

“Taxpayers who receive as part of their employment or self-employment additional remuneration in the form of tips, gratuities and barter, please be advised that CRA requires that all income has to be reported and by signing this engagement you are agreeing to declare all your income.”

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Here are some extracts from my representation letter:

First line: “I have reviewed my tax return(s), which you have prepared from information I supplied to you.”

Further: “I confirm that I have provided you with all income and deduction items to be included in my tax return and that they are correct and complete.”

And again: “All income and benefits, from employment, if any, have been reported, whether or not they are on the T4 slips.”

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I know you are focused on tips but you may want to say T slips so things interest income from a personal loan, sale of a recreational property, etc would not be excluded by your wording.

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Those were only extracts @helga_spence - The full letter does cover off the other items.

I have my engagement letter set up as dual purpose engagement and representation, with a ‘ticky’ box that all the income is reported, including tips and all other cash income.T1TY2013.PostSeason.taxcycletemplate (824.7 KB)

I send a “Planning letter” at the beginning of the season and require it to be signed and brought back with them. It includes a number of tickbox items to be filled out if they apply:

Complete the rest of the questions ONLY if they apply to you:
❑ Pension split
I DO/DO NOT wish to split my (or my spouse’s) pension income with my spouse to reduce our combined income.

❑ US Citizenship/Green Card Status
I DO/DO NOT hold US citizenship or Green Card Status.

❑ Children and other dependents under the age of 18
I request that you file a tax return for any child over the age of 17 so that they may qualify for their GST credit and accumulate any appropriate RRSP contribution room.
OR
I request that you DO NOT file a tax return or any child over the age of 17.

❑ I have added the following family members to my household:
Name
Date of Birth
Relationship
SIN (if available)
Disability (Y/N)
❑ Dependent parents/adults/others
I confirm that my parent(s) and/or my spouse`s parent(s) lived with me or were otherwise dependent on me at any time during 2017.
Details of dependent parents:
Name
Date of Birth
Relationship
SIN (if available)
2017 Net Income
Disability (Y/N)

❑ Medical Travel
During 2017 I had to travel more than 40km (ONE WAY) from my home for medical care, and will provide you with information about such trips.

❑ Fertility treatments
In the last TEN years I have paid for medical interventions in order to conceive a child. These amounts have not been previously claimed. I will provide you with receipts and /or statements.

❑ Personal automobile use for business or employment purposes
I have no significant use or do not use a vehicle owned by myself personally for these purposes.
OR
I maintain a travel log or have an understanding of my business or employment vehicle use to advise you that the usage is _______ km for business or employment purposes and the total kilometers of vehicle use last year was ________ km.

❑ Business/Farming/Rental income or employee expenses
a) All information provided represent the results of operations and include all material transactions.
b) No expenses have been included in the amounts provided to you that are solely personal in nature.
c) Only the appropriate deductible portion (the non-personal portion) has been provided to you, or alternatively the complete cost, together with the business/farming/rental or employment portion has been provided to you.

❑ Uber/Lyft/TappCar/AirBnB/etc.
I state that I have received $___________ in bookings, tips, and other income from my participation in “the sharing economy” during the year. I enclose a summary of all my expenses related to earning this income (worksheet available upon request).
(PLEASE NOTE: Effective July 1, 2017, the definition of a taxi business has been changed to include all persons engaged in a business of transporting passengers arranged for or coordinated through an electronic platform or system, such as a mobile application or website. All drivers MUST be GST/HST registered)

❑ Cash income
I state that I have received $ ___________ in tips or other cash income during the year. This is the total cash income that I have received in 2017 .

❑ Investment income and Capital Gains and Losses
I state that I have provided you with all investment income including interest and capital dispositions, whether or not they were disclosed on a tax slip. Additionally, I have provided you with details of all capital gains and losses realized in the calendar year, including brokerage statements and details on the purchases of these stocks and bonds.
Further, I state that there were no transactions entered into with the purpose of effecting a loss in the current year with an offsetting gain deferred to a future tax period (“staddle transaction”)

❑ BitCoin and/or other cryptocurrencies
I DID/DID NOT at any time in 2017 recieve, spend or hold BitCoins (or any other cryptocurrencies)

❑ Reimbursements
With respect to tax credits, business income, or employee benefits, all reimbursements, if any, have been disclosed to you including income items on which tax receipts have not been received.

❑ Tuition transfer
Under certain circumstances, college-age children can transfer their unused tuition fees and education amounts (to a maximum of $5,000) to their parents’ tax return. To do this, I have provided the child’s income information as well as a tuition certificate (T2202) signed at the back by the child.

❑Family member loan
During 2017, or in a prior year, I lent cash or other income earning assets to my spouse/other family member, and will provide you with the details, including amount and timing of any interest payments.

❑ Direct deposit
I would like my refund (if any) directly deposited into my bank account (and have attached a blank voided cheque or have provided a blank voided cheque in the past).

I also make them sign a questionnaire about if they have foreign investments or not.

All of these are also in the engagement letter. So they sign 3 forms before I even start!

Feel free to copy and paste anything useful to you :slight_smile:

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