I don't know if this will help or not, but I found the basic rules for reporting tip income at the CCRA site:
http://www.ccra-adrc.gc.ca/eservices/iis/topics/t/tipsandoccasionalearnings/indexa-e.htmlAnd this is the site with all the rules:
http://www.ccra-adrc.gc.ca/E/pub/tg/5000-g/5000-geq01-01.htmlI'm not really familiar with Canadian taxes or audit strategy, since I'm an American, but I can tell you some things about the IRS and how they perform audits. There are several different kinds:
1) Everyone who files a return is audited every year whether they know it or not by an IRS computer. The IRS has certain expectations for the numbers being reported, and anything out of the ordinary is flagged for a closer look. Otherwise, this method never uses human eyes.
2) There is a random audit conducted on individual taxpayers, I have no idea what the number is, but it's a rare event.
3) In addition to random audits, rich people are observed a little more closely. The IRS frowns upon sending out a field agent for someone who can't possibly be more than a few dollars off on their return. The auditors make a lot of money, and the IRS wants their salaries to be justified during the audit. So they go after the people who are already suspect and promise a return in back taxes and penalties.
4) Audits are conducted on any individual or business who is reported as filing fraudulantly.
As for strategy, I can assure you that the audits are at least half finished before the agent ever arrives. The numbers we put on our returns are compared against those of everyone else in the country, statistically, and the IRS will calculate what they
expect us to report. For example, if a waiter in a 5-star restaurant works full time and reports $45 dollars in tips for the year, they'll know, statistically, that this isn't right. When they come, they expect to see proof in the form of a daily log or something similar.
