The CRA (Canada Revenue Agency) administers tax laws and benefit programs for the Federal Government and several territories and provinces. The auditing process is meant to acquire and maintain public confidence in the integrity and fairness of the tax system. The CRA examines the records and books of a business to confirm whether the company is following tax laws correctly, fulfilling its tax obligations, and receiving the benefits and/or refunds they are entitled. The following are tips and best practices for successfully navigating a CRA audit.
Tips and Best Practices for Compliance
The following suggestions help speed and smooth the audit process, ensuring compliance.
Provide all requested documents:
- Personal records ( bank statements, mortgage documents, credit card statements, etc.)
- Business records (invoices, ledgers, journals, bank statements, receipts, rental records, contracts, etc.)
- Records of people related to your business (spouses, family members, partnerships, corporations, trusts, etc.)
- Records from your accountant that relate to the tax returns and books of the business
Ensure your books are up-to-date and accurate:
- Review all accounts
- Keep personal and business expenses separate
- Reconcile bank balances, ensuring they are free of mistakes
- Record and categorize expenses,
- Save and organize receipts
- Backup all data
- Utilize accounting software, increasing accuracy and easing record-keeping
- Consider outsourcing accounting tasks
Communicate clearly and openly with auditors:
Keep the auditors informed. Be polite. Prepare and submit everything that is requested. Request updates periodically. Promote clarity by asking questions.
Be available:
Be available to answer questions, to assist, and to gather further information.
Review all findings:
Ask for an explanation of any changes made. Go over changes with your Chartered Professional Accountant to deduce if you are in agreement or if you wish to challenge the findings.
Possible Results of an Audit
There are three possible outcomes of a CRA audit.
- The assessment is correct: If the audit determines that your assessment is correct, nothing has to be done. You’ll receive a letter and the audit is closed.
- You owe more taxes: If the auditor determines an adjustment resulting in more taxes, you’ll pay the balance due.
- You receive a refund: If the auditor determines an adjustment resulting in less taxes, you’ll receive a refund.
What if you Disagree with the Assessment?
If you disagree with any part of the assessment, contact the auditor. Provide documents/records to support your position. If the disagreement can’t be resolved, you can appeal.
Filing taxes for a business is a complicated and complex procedure. A Chartered Professional Accountant ensures your tax return is complete/accurate, you get any deductions you’re entitled to, and the chances of your file being chosen for an audit are minimized. If you are audited, your Chartered Professional Accountant supports you through each step of the process.
Contact Cook and Company Accountants for all your tax and/or audit needs. Whether you operate a large corporation with many subsidiaries or a sole proprietorship, the Cook and Company team uses our expertise/experience to make tax and/or audit time a breeze. We assist in dealing with the CRA. Contact us for a consultation.
