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It is stressful for a taxpayer to think about being audited by the Canada Revenue Agency (CRA), especially when they are notified that an audit is taking place. We recommend staying calm when being audited and understanding these things about taxes in Canada:You have to understand that the tax system is based on self-assessment. This means that you must report your income. You have to calculate your taxes, whether an employee or an employer. You have to figure out if you are owed a refund. The Canadian government believes that it is an effective system.

What Does the CRA Do?

Canada Revenue Agency administers the tax laws for the federal government and most provinces and territories.Among other things, it collects taxes:

  • Income tax for the feds, provinces, and territories
  • GST/HST - Goods and Services Tax
  • CPP contributions
  • EI premiums

In addition to offering benefits and credits through the tax system, the Canada Revenue Agency also makes sure people are filed up to date and eligible for benefits.Most often, when the CRA audits you, it's their verification process where they make sure you're giving accurate information on your tax return and can back it up with receipts and proof.Here's what you need to know when you get the notice:

  • You can reduce the challenges of auditing by having a systematic approach and an appropriate attitude
  • Send a quick response
  • Please provide all the information they need to clear the issue
  • Ask questions if you're unsure but keep a respectful atmosphere. The person is just doing their job.
  • You have the right to disagree with the results. You can appeal within 90 days of the audit.

How Does the Audit Process Go?

Audits start when you get a letter from the CRA saying you've been selected for an audit and describing its scope. Your receipts or records for whatever area they're auditing may be required to be submitted, or they might ask for a whole list. This isn't a field audit.In addition to the letter, you might get a request for an auditor to come to your house or business. They can also send you a list of documents that the CRA wants to see. Audits like this are what we think all requests are, yet it's not true.Keep in mind, the CRA audits the records of lots of honest taxpayers to find cheaters. You should contact the auditor to confirm the request, provide the information, and leave it with a note like, "If you need anything else, just let me know."

How It Ends

All issues should be fixed at the end of the audit. If you have to pay a balance, it'll usually be an honest mistake or an incorrect interpretation of tax regulation. You should not owe any tax if your paperwork is complete and the auditor found no mistakes. You will receive a letter confirming the auditor's findings. You will be asked to sign the pink letter if you have a balance owing, and you will be told why the balance exists. A Notice of Assessment will be mailed to you with the deadline to respond and question (appeal) the assessment. If you get audited, keep your audit records too. You have to keep your records and receipts for at least six years after filing your tax return.Most people do not know how to go about when they receive an audit invitation. For the best results, contact an accounting firm for all your tax preparation, filing, and audit needs. Our accounting firm has more than a decade’s experience in all audit matters and can help you. Just contact our experts and they will handle it all for you.