You have done your taxes as best you can, filed on time and now all of a sudden you have been notified that you are going to undergo a CRA tax audit. So what in the world triggered this?
There are a few common things that will raise a concern with the CRA and may cause them to do an audit.
The CRA has a very good understanding of what is normal for any given industry. For example, they will know what are the average expenses and income for a salesman in the car industry. Now this is in general. If they happen to see a return that fits into this category and it is way out of the norm, it could possible raise some concerns for them where they believe it justifies an audit. That doesn’t mean you have done something wrong. You could be a top notch salesman or something extraordinary took place during that particular tax year. As long as you can back up your tax return with the proper documentation then you have nothing to worry about just because you are out of the ordinary.
With so many people now working at home, it has created a keen interest on watching the returns for these individuals. Most of the interest lies within the expense section of the return. Most often if an individual is going to stretch the truth concerning their returns it will be will inflated expenses. Be sure that you are very accurate here when claiming your expenses and you have all the receipts to back them up, plus ensure that they are allowable expenses.
Never a profit and always a loss is another hot spot that draws attention. The CRA knows that it takes time for a business to hit a profit margin. It does expect this to eventually happen, but when a company files a loss year after year then the tax department begins to question this. Be prepared for an audit if this sounds like your situation.
These are just a few of several hot spots that could trigger an audit. The best thing you can do is have a trusted Toronto accountant prepare your taxes for you. This will serve a few good purposes. To begin with this expert knows what the hot spots are with the CRA. While preparing your return he may question you about information that could be a trigger for an audit. You must be able to justify the information. It may be that you will have to adjust the information because it is not accurate. This could avoid some serious tax hassles. On the other hand if you feel justified in your claims then your accountant will have the expertise to be able to support you with this, and will go ahead and file it as the information to support the claim shows.
Using a trusted Toronto accountant will give you much more peace of mind when it comes to your tax filing. If you need assistance with your taxes or in responding to a CRA tax audit request then contact us at (416) 398-1700 or by completing the contact form on the right hand side.
