[mrkajz44]

I haven't dabbled in personal tax in a few years, so I may be a bit off base. My recollection is the process looks like this:

1) CRA comes in to audit business
2) CRA learns about how business works, including compensation for employees
3) CRA checks employees tax returns and notices you didn't report any tip income
4) CRA estimates the amount you should have reported based on their knowledge of the business from the audit and re-assesses the employee
5) Onus is now on taxpayer to object to the re-assessment if they think it is wrong. Many don't because they don't have any records of their tips, and if they do they could be in even bigger trouble because they were tracking the amount and still didn't report it as income

Put me in the camp that I feel no sympathy for those that get hammered with a re-assessment. They know exactly what they are doing by skipping out on tax for income they earned.