Does the government tax e-transfers? That question has been popping up more and more, especially as side gigs and digital payments become the norm in Canada. The short answer is: not all eTransfers get taxed, but many can trigger CRA attention especially in 2025.
So what’s the deal? Are they after your birthday money? Will sending rent to your roommate set off an audit? Or is it only about business payments and freelance work?
This guide breaks it down in plain English, so you know exactly where you stand and what to do next.
TL;DR: What You’ll Find Inside
- Does the government actually tax eTransfers?
- What types of eTransfers are considered income
- Why the CRA is paying closer attention this year
- How personal vs business eTransfers are treated
- Real examples of what can (and can’t) be taxed
- Tips to keep your transactions clean and audit-proof
So, Does the Government Tax e-Transfers?
Technically, the CRA doesn’t tax the eTransfer itself, they tax the income the eTransfer might represent. That’s an important difference.
If you’re receiving money through eTransfer as payment for a service, rental, sale, or gig work, then yes, that income is taxable. The eTransfer is just the method of payment, but the government definitely wants its cut of the earnings.
If you’re sending or receiving money for personal reasons like splitting dinner, loaning a friend cash, or paying your portion of rent, that’s not taxable. No need to worry in those cases.
But here’s the catch: the CRA doesn’t know the context unless they look and in 2025, they’re looking more closely than ever.
Why Is the CRA So Focused on eTransfers Right Now?
The pandemic reshaped how Canadians earn and move money. Freelance work, part-time hustles, digital services, and peer-to-peer selling exploded. At the same time, so did eTransfers. They’re now the most common way to move money outside of payroll or credit card payments.
With this shift, the CRA is tightening up how it monitors digital income. Their goal? Catch unreported earnings.
They’ve already been cracking down on income made through:
- Airbnb and short-term rentals
- Freelance and gig work
- Digital platforms like Etsy, Fiverr, and even OnlyFans
- Facebook Marketplace and Kijiji sales
- Construction, hairdressing, tutoring, and other trades
As more people get paid through eTransfers for this kind of work, it’s becoming a key signal for the CRA (Source: Globe and Mail).
What Kind of eTransfers Get Taxed?
The CRA only taxes eTransfers if the money you receive is considered income. So the real question is: what does the CRA count as income?
If you receive money for:
- A service (cutting hair, tutoring, fixing phones, driving someone)
- Selling goods or digital products
- Renting out a room or property
- Freelance jobs, even if they’re irregular
- Recurring payments for something you provide
That’s all taxable income. It must be reported on your tax return, no matter how informal it feels.
On the flip side, non-taxable eTransfers include:
- Birthday gifts
- Reimbursement for shared costs (rent, bills, dinner)
- Loans between family or friends
- Personal support or donations not tied to a service
The difference comes down to this: Are you receiving money for doing something or selling something? If yes, CRA wants it reported.
Wait Can the CRA Actually See My eTransfers?
Not automatically, but yes, they can trace your eTransfers if needed. Your bank keeps a full record of all transactions including who sent money, when, how much, and what message or description was included.
If the CRA believes you’ve underreported income, they can request this data from your financial institution. It’s legal. Banks are obligated to comply.
They usually go digging if:
- You’re audited
- Someone reports you
- Your declared income seems suspiciously low
- You’re in an industry with a history of underreporting (like trades, rentals, or content creation)
Once the CRA has your bank data, they can match deposits with your tax returns. If they spot a pattern of payments that look like earnings, but you didn’t declare them, that could trigger a reassessment or penalties.
Here’s Where People Get Caught Off Guard
A big misconception is that “casual” income doesn’t count. Like getting paid $200 to shoot a wedding for a friend, or $50 here and there for babysitting.
But from the CRA’s point of view, money is money if you’re earning it, it needs to be reported, even if it’s not through a business.
This happens a lot with:
- Freelancers getting paid through eTransfers instead of platforms like Upwork
- Cash job workers who ask clients to eTransfer “under the table”
- Creators and influencers selling digital content informally
- People who assume small amounts “don’t matter”
It all adds up. If the CRA finds unreported income even in small amounts they can reassess your taxes for the last several years. In some cases, they’ll tack on interest and penalties too.
What If It’s a Mix of Personal and Business Payments?
That’s where things can get messy. If you’re using the same bank account for everything, it gets harder to prove which eTransfers were personal and which were income. During an audit, it’ll be up to you to prove a payment wasn’t for a business service.
So if you’re side-hustling, even a little, this year’s best move is to separate your income. Open a dedicated account for payments. Keep a spreadsheet or notes. Store eTransfer confirmations and categorize them right away.
Even something as simple as writing “Gift – Happy Birthday!” in the message field can help clarify intent down the line.
What Happens If You Don’t Report Income from eTransfers?
If the CRA catches it, they’ll:
- Reassess your return and charge tax on the unreported amount
- Add interest from the original due date
- Possibly fine you for gross negligence (if they think it was intentional)
In serious cases, where it looks like full-on tax evasion, it can lead to court but that’s rare. Usually, it’s just costly and time-consuming to fix.
If you’ve missed reporting income, you might be able to use the Voluntary Disclosures Program to come clean before the CRA finds it on their own. This can reduce or even eliminate penalties but only if you act before they audit you.
How to Stay CRA-Compliant Without Stressing Out
The goal isn’t to scare you, it’s to help you stay ahead. If you earn money, report it. If the CRA never asks about your eTransfers, great. But if they do, you’ll be ready.
Here’s what helps the most:
- Separate accounts for personal and income transactions
- Clear descriptions in eTransfer notes
- Simple records showing what was a gift vs. what was payment
- A habit of reporting all income, even small side gigs
That’s your best defense if an audit ever comes your way.
Key Takeaways
- Does the government tax e-transfers? No, they tax the income behind them, if it’s for services or goods.
- In 2025, CRA audits are rising, especially for side hustlers and digital earners.
- Personal eTransfers (like rent splits or gifts) aren’t taxable, but business payments are.
- The CRA can trace your eTransfer history through your bank if they’re auditing you.
- Keep clean records and report all income, even small amounts to avoid penalties or reassessments.
If you’re unsure whether you’re handling your eTransfers the right way, or think you’ve already made a mistake with unreported income, Contact Us for help. We can guide you through compliance, reporting, and protection from audits.