The Canada Revenue Agency (CRA) is now ramping up its tax audits after slowing down during the pandemic. So many individuals and businesses are scrambling to organize their books before getting a notice from the tax office.
If the CRA notifies you of an upcoming audit, don’t panic. Read the tips below so you’ll be prepared when you will have to go through one.
Things You Shouldn’t Neglect During an Audit
The good thing about CRA audits is you’ll always see them coming. The agency usually sends out letters for upcoming audits days before they actually happen. The letter will specify what type of audit they will conduct and provide a specific period, usually 30 days, for you to provide the information asked.
Here are some tips to help you with your CRA audit:
1. Provide Accurate and Detailed Records
Knowing the best bookkeeping practices will make your audit go by faster and clear your name off CRA’s list. Always keep copies of all expenses, from personal to business, and be sure they’re categorized, so getting them within 30 days is no problem.
2. Don’t Overcomplicate the Audit
CRA auditors will specify what document or information they need, so only provide that. There’s no need to give additional information that might confuse the audit or invite more questions. Just let the auditors do their work with what they asked.
3. Hire a Professional
Once the CRA notifies you about an audit, it’s best to let the professionals organize the books needed. Make a request to the CRA on what files they need and contact a tax professional or an accountant immediately to help with all the documents required. It’s best to do all this once you get the notification to have a head start and avoid any inconvenience during the audit.
4. Respect the Auditors
Respect always goes a long way. So always be courteous and cooperative with auditors.
If they have questions, provide clear and honest answers to speed up the audit. Provide a decent space for them in a quiet corner to help them concentrate while working and prevent your employees from roaming around them.
During the audit, it’s business-as-usual. You can go on with your day-to-day operations while it’s happening. However, always make time when the auditor needs you.
5. Right to Appeal
The CRA may require tax adjustments once they complete the audit. They will then send you a proposed statement of adjustments for your rebuttal. If you find something wrong with the assessment, don’t be afraid to appeal. The agency accepts any plea as long as it follows the proper appealing process.
Bonus Tip: Avoid Audit Triggers
Audits can be costly for individuals and businesses who need extra help, so avoid drawing attention to yourself by complying with the country’s income tax return laws. It’s also best to avoid different audit triggers, such as claiming unreasonable expenses or rounding-off numbers in your tax returns.
Always Be Ready for an Audit
Got a CRA audit notice? Don’t worry. Getting one doesn’t always mean you’ve done anything wrong. Just relax, understand what CRA needs, and comply. It also helps to avoid the different audit triggers, so you’ll never have the cloud of being audited over your head in the first place.
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