Could The Latest Tax Return Change Target You For It
One of the things that most people want to avoid when it comes to their tax obligations is putting themselves in a position where they are going to become a target for an audit. Even if you’ve done nothing wrong the premise that an audit is going to be conducted on you can be almost frightening.
What many people don’t realize is even though they are very astute at doing their tax returns and there should be no reason for and audit, that just being in a particular job industry or living in a certain neighbourhood can actually increase their audit chances.
You have probably heard of the term a red flag and what that refers to is anything on your tax return that is going to cause attention from the CRA. It can be hard to discern what this may be but what the experts will tell you is really it is anything that makes your income tax look out of the ordinary.
If something is dramatically changed on your income tax return from one year to another then it is going to cause a red flag. It might be that your income dropped dramatically and you know what the circumstances are, but the CRA doesn’t so they are going to be keeping an eye on you. Or perhaps you had a windfall and you made a larger contribution to your favourite charity, now all of a sudden the CRA sees this and wonders what is going on. Then there are those that have bought a condominium and for whatever reason didn’t move into it and sold it this is another potential red fry flag for the taxman.
When it comes to the neighbourhood, auditors will take a look at where a person lives and then compare their income to their neighbours. If an individual is living in a million-dollar home and is only reporting $40-$50,000 of income then you can bet that this is going to demand some scrutiny.
The self employed have traditionally always been more of a target for auditing and this is because there is more opportunity for them to be able to omit some of their income plus they get the chance to exaggerate their expenses, so these are automatically scrutinized.
Then there are those people that have invested in property and are renting it and diligently report the rental income each and every year. Then all of a sudden they stopped but there is no capital gains report showing that the property was sold ,so of course the auditors are going to ask what’s up with this.
These are just a few of the common instances that can cause the CRA to take a second look at you. To give you better peace of mind and confidence that you are on track with your tax filings make sure that you seek out a quality accountant to help you with your tax matters.