Selected for a Tax Audit….What should you do In most cases CRA audit is a costly and time consuming experience, but it is not the end of the world. Below are some easy steps you should follow to survive it: • If you receive a phone call from CRA, DON’T discuss anything with the CRA representative – ask him or her to send you a written request for information. • Don’t panic if you receive a letter from the CRA. You didnt do anything wrong; you just have to prove it. • Don’t hide or ignore this letter, call us immediately. • It is almost always a good idea to request an extension from CRA. This will let us put the whole case together. • Know your rights. Read the CRA’s Taxpayers’ Bill of Rights, prior to your audit. Research tax legal issues by using free CRA publications and commercial tax guides. • Identify your potential problems. These could include missing receipts, bank/credit cards statements, incomplete auto logs and so on. • Make sure you have all the documents that support your tax return as filed. Try to organize all records the auditor might ask for before the audit. • Have realistic expectations. Don’t expect to come out of the audit without owing something — the odds are against you (bad news). In some rare cases though your taxes could actually be decreased (good news). The latter normally happens where we uncover a tax-filing method, provision or receipts that have been missed or misinterpreted. • Give the auditor no more information than he/she is entitled to, and don’t talk any more than is absolutely necessary. • Don’t bring to an audit any documents that do not pertain to the year under audit or were not specifically requested by the audit notice. • Stick to the facts. You know much more about your business than the CRA auditor does, and in most cases Judges understand that we do not have the benefit of hindsight when making business decisions. • Negotiate. Ask the auditor about dis-allowances he/she is considering, and defend your position. Don’t try to negotiate the amount of taxes to be paid. Instead, negotiate tax issues — for example, whether a certain deduction should be allowed. Needless to say, our accountants know how to do that. • Appeal the result if needed. When you get the proposal letter from the auditor (the 30 day letter), call the auditor if you don’t understand or agree with it. Meet with him/her to see if you can reach a compromise. If you can’t live with the audit result, you may appeal within the CRA or go on to Tax Court. Ravinder Makkar Chartered Professional Accountant, Certified General Accountant 905-791-6666
Posted on: Wed, 14 Jan 2015 22:04:08 +0000
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