Are You Being Audited by CRA?
A Canada Revenue Agency audit can be a very stressful and anxious time. However, here are ways to handle a potential CRA audit and minimize the chances of facing serious consequences such as being charged with tax evasion or non-filer interest and penalties. Trust our team to help you if you are audited by CRA.
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Are You Being Audited by CRA?
Tax audits can be very scary. When you find out you are being audited by CRA, your first instinct may be to panic. In some ways, this makes sense. After all, a Canada Revenue Agency audit can be very intrusive and the consequences can be very serious. However, when a CRA audit occurs, it’s important not to react poorly or impulsively.
First of all, know that there are different types of audits. Some auditors will request information from you that you can simply mail or fax in. How you should react will depend on the type of audit you are facing.
In some situations, the CRA audit team is likely looking to confirm information that you listed on your income tax returns. For instance, they may want copies of receipts, invoices, or proof of certain deductions.
In other CRA audit situations, the agency will request additional financial disclosure, while others will demand to come to your home or business to perform the audit. In these audits, the auditor will look for areas that you have made mistakes in your return preparation.
CRA Audit Time Limit (How Far Back Can CRA Audit)
You may be wondering how far back can CRA audit. For individuals, the CRA generally has three years after the date of your tax assessment to conduct an audit. This means if you receive your Notice of Assessment for your 2018 taxes in June 2019, the CRA can go back and audit this return until 2022. However, if the agency suspects fraud, then there is no CRA audit time limit. It can go back as far as it likes. This is relevant because, if the CRA conducts a review and finds a serious issue with your 2016 return, it may then assume that you could have been fraud committed in prior years, and potentially go back through several years of returns. Therefore, if you’re wondering how far back can CRA audit, remember that they can look back quite far in certain situations.
CRA Audit Triggers
What does it take to get audited by CRA? Technically anyone can be audited, but there are several CRA audit triggers that could make you more likely to receive a call from the agency. For instance, if you claim a large amount of business expenses, the CRA may be interested in finding out more. The same is true if you have a lot of home office deductions or unusual deductions.
From these examples, you might be able to tell that those who are the most likely to be audited are self-employed individuals. This is because these returns are generally more complicated and because there are more possibilities for deductions and expenses, so there are more possible CRA audit triggers.
The CRA is also more likely to audit your business if you report repeated losses. If you’re losing money each year, the CRA may assume you’re claiming a hobby as a business or it may want to investigate to see if you’re reporting your sales accurately.
You may also get audited if you are making significantly less money than others who live in your neighbourhood. If you make much less money than your neighbours, the CRA could wonder how you can afford your lifestyle.
The CRA is also often interested in those who own offshore assets. If you own property or other assets abroad, the likelihood of a CRA audit is much greater.
What to Do if the CRA Wants to Audit
If you are contacted by the Canada Revenue Agency and told that they wish to audit you, it is important to respond correctly. You can’t hide from the CRA, especially once they have decided that they want to take a closer look at your situation. Not responding would be a bad idea, but so would responding incorrectly.
You should never agree to an audit when unrepresented, especially if you know that you don’t have all of your receipts and records, or if you know that you have used a bookkeeper that may have made mistakes. Even if you do not believe that you have done anything wrong, CRA auditors are specially trained to find issues with tax returns.
When the CRA (Canada Revenue Agency) finds one mistake they will assume there must be more and they will look. We are all human, so mistakes happen. It is vital to minimize the risk of a CRA auditor suspecting any potential issues. This is best done by working with a professional.
Trust our Team to Help with a Canada Revenue Agency Audit
At Farber, our tax audit solutions team has the experience and knowledge needed to even the playing field and resolve your tax problem. Our dedicated team is made up for ex-CRA, legal, and accounting professionals. We understand CRA audits and what it takes to successfully navigate one. When you meet with us, we perform a complete review of your file and provide you with representation through your audit. We always aim to hold audits in our office and do our best to make the process a smooth one.
If you think, know or feel that you are at risk of being audited, click here to contact us to find out what you can do.
Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:
- 1| Offer a comprehensive solution that is focused on achieving the most favorable possible outcome for your tax issue;
- 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
- 3| Offer a complete solution to your tax problems, including ex-CRA professionals in affiliation with tax lawyers from Farber Tax Law.