The Canada Revenue Agency (CRA) administers federal taxes and various benefits programs on behalf of the federal government and the provinces and territories. The CRA audits taxpayers to maintain public confidence in Canada's tax system. A CRA audit verifies that a taxpayer or business follows tax laws correctly, fulfills their tax obligations, and gets the benefits and refunds to which they are entitled. This article is your guide to CRA Audits, so pay attention while we get busy explaining to you what they are.
The Audit Process
A CRA audit process begins when you are notified by letter, phone, or both, that your account has been selected for an audit. In addition to the audit's date, time, and place, the CRA will give specifics about the audit. In most cases, an on-site audit occurs at your place of residence, at your business, or the office of your representative. In the absence of on-site auditing, an auditor will conduct the audit at a CRA branch office. When you are assigned an auditor outside your region, they will ask you to send or bring any supporting documents needed for the audit. You will receive a notice stating what information you must provide to the auditor, but keep records as a best practice. Auditors may need to borrow some of your documents or make copies of your electronic records wherever an audit occurs. Any documents you borrow from the auditor will be returned to you as soon as possible after receiving a detailed receipt. Due to the possibility that information sent by email may not be secure, auditors are not permitted to receive records via email. The CRA will provide you with information on how to send documents using the CRA's secure services.
What Exactly is A Business or Corporate Audit?
An audit of this type checks books and records to determine whether a business has complied with its tax obligations concerning income tax, deductions, employee benefits, payroll remittances, and GST/HST. The CRA may also audit employee benefits or payroll remittances based on a smaller subset of a business audit. Payroll audits and GST/HST audits are also called trust examinations.
What Gets Audited?
An auditor will examine books, records, and information. Particularly:
- Data on tax returns, credit history, and property details are available to the CRA.
- Documents related to business operations - ledgers, journals, invoices, receipts, contracts, and rental records.
- Your documents - bank statements, mortgages, and credit card statements.
- A tax adjustment made by your bookkeeper or accountant.
- Records related to a tax return being audited that pertain to the person or business records of other individuals or entities. For instance, your accounting entries may be asked about your operations by family members or an auditor.
Auditors may uncover issues during audits and discuss them with clients. Clients, too, can raise concerns with auditors at any time.
A tax audit almost always results in the CRA finding that you owe more than what you paid. It is only possible to achieve a satisfactory outcome if you hire an experienced tax lawyer who can help you in bookkeeping, taxes and other legal advisories. It is possible that an auditor would deny a deduction that you are entitled to under the law. Tax representatives are aware of the same level of deductions as accountants, whereas CRA auditors aren't. CRA auditors cannot cite laws supporting deductions. In addition to understanding tax court precedent, a tax lawyer may offer nuanced legal advice on a complex issue. An experienced tax lawyer can usually lower the amount of tax that the CRA would otherwise claim you owe. For more information, you can always contact us, and we would be happy to assist you.