CRA Tax audit procedure

January 10, 2019 | Written by: Sohail Afzal

Tax audits are about the last thing you happening to you, it is a frightening experience and it can also be very costly. CRA auditors will seek your books, records, receipts, and bank account statement. Questionnaires could be asked to be filled out, and any declared information that is wrong regardless if it was due to error or other reasons, it will be used against the taxpayer. Should that happen, one of our top CPAs at GTA Accounting will be involved and help you through the process should an auditor contact you.

When you get audited, first you’ll receive a notice from CRA regarding their intention to audit. The notice typically outlines the preliminary information that is required from you with a possibility for future requests asking for more information. Typically speaking the beginning of an audit is the best time to obtain legal representation; auditors are generally not very reasonable and may not listen to your explanations and reasonings for the filing the returns the way you did. Our top CPAs here at GTA Accounting will speak on your behalf and begin the legal work necessary to remove any issues relating to your tax return, especially if you do not accept the outcome of an audit. In this case, you have 90 days to appeal by filing a notice of Objection, and as always one of our top CPAs at GTA Accounting will be readily available for any sort of assistance in filing your income tax objection.

In Canada, there are over 350,000 tax audit and review actions concocted annually by the Canada Revenue Agency. Around 15,000 of these tax audits focus on ‘cash only’ businesses, also known as the underground economy, and around 35,000 audits are tax shelter audits. There are several reasons for why the CRA might want to audit you:

  1. Random selection
  2. Third party tips
  3. Comparison of information on returns to information received from third-party sources
  4. Past history of non-compliance

The Canadian Income Tax is based on “self-assessment”, the taxpayer is solely responsible for filing their own personal tax, and the CRA performs audits in order to maintain the integrity and functionality of the ‘self-assessment’ tax system. Here are a few examples of issues that may arise in an audit that would cause a taxpayer to be reassessed by the end of an audit:

  1. Overstated expenses
  2. Overstated deductions
  3. Overstated credits
  4. Underreported or unreported earnings
  5. Unreported offshore income
  6. Unreported offshore assets
  7. Credits, such as charitable donations not supported by receipts

As such, it is imperative that you keep completed records detailing every expense or deductions claimed on your tax return. If the CRA has approached you with an impending income tax audit, do not hesitate to contact us for any taxation needs.

Sohail Afzal CPA Toronto

Sohail Afzal, CPA, CMA, MBA

Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.

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