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Do You Need to Prepare for a CRA Audit?

Tax auditor

Your business tax is done but you have a feeling that you may be up for an audit.   This could be because your industry seems to have been targeted recently by the CRA.   Or, there could have been some significant changes on the tax return that is going to trigger some concerns that could lead to an audit.

In any case you want to be prepared.   You can keep some control over the situation.  Tax audits can be stressful and time consuming to say the least.

The first thing you want to prepare for is to cooperate.  Being difficult to deal with is certainly not going to help your situation much.  There are guidelines that your auditor must follow, but at the same time they have a lot of authority.

As soon as you have been advised that an audit is going to be conducted you want to sit down with your small business accountant and review everything pertaining to your tax return and your records.

Try to build a working relationship with the auditor by making his job as easy as possible.   Have all of the documents ready for review in a neat and orderly fashion.  If the auditor asks you specific questions about any of the documents or transactions answer them as completely and honestly as you can.

Any time your auditor asks for additional information ask him to make this request in writing.   Tell him you are requesting this so there will not be any misunderstandings of what he is specifically asking for.   This can save you some real headaches down the road if a dispute arises over what you produced compared to what he asked for.

Usually your auditor will set a deadline for meeting any queries.   Do your best to meet these deadlines otherwise the audit is going to drag on.

When you produce anything that the auditor has asked for, put it in writing that you have complied as requested.

Although it is natural to be nervous during an audit do not give the appearance that you are being evasive in discussions with this CRA agent.   During these discussions you may get the drift of what the CRA is looking for specifically.   If you do then you will be more prepared as to how you can resolve this, or at least an idea of why you are being scrutinized.

While you are expected to be time compliant with deadlines it is not unusual for the CRA not to be.  Many times they will delay an ongoing audit simply because they are busy.  You need to keep your auditor on track as by law they are supposed to be compliant with their deadlines as well.

 

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Sam Seidman, CPA, CA, LPA
629 Sheppard Avenue West
Toronto, Ontario
M3H 2S3

Telephone: (416) 398-1700
Fax: (416) 398-6226

Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant

Email: sam@torontoaccountant.ca

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