Protect Your Business From A CRA Audit
Posted On: 20/12/22 - 0

  • Business Audit

Learn why it is important to protect your business from a CRA audit.  Average amount charged for each CRA small business audit was a whopping $137,000.  (2018-2019)

What Is A Gross Negligence Penalty?

This dollar amount includes tax and late filing penalties. The CRA applied gross negligence penalties in 28% of small business audits. A gross negligence penalty is applied when the CRA believes that a person made a false statement or omission in a return. The CRA defines small businesses as those that earn up to $4 million in gross income in a year.

CRA Makes Request For Information In Your Business

Over the previous three years, the CRA completed 5,900 audits of small businesses. The CRA agency has several ways of obtaining information for an audit. One way is by issuing a request for information (RFI) to either the taxpayer or a third party, such as a bank. The CRA can also secure a compliance order via an application to the courts. This happens when the information is not provided voluntarily by the business owner.

In 2018-2019, the CRA issued requests for information in 39% of small business audit cases.

Recently, there has been an increased use of RFIs in small business cases. The CRA is increasing their use of indirect verification of income (IVI) tests and techniques.  This occurs when a taxpayer’s records are deemed to be inaccurate, inadequate or totally unreliable.

Tests and techniques may include investigating a taxpayer’s bank account. The CRA could also assess your approximate net worth over time and compare it to the industry norms. Canada Revenue could also examine the source and application of your company’s income to determine if there are any inconsistencies.

Most Common Audit Issues

Common audit issues is unreported income. Another issue was regarding capital transactions. There were several issues regarding corporate restructurings and ineligible expense claims.

We Can Help To Protect Your Business From An Audit

If you want to protect your business from a CRA audit and potentially save yourself tens of thousands of dollars in fines and penalties, call us. Align yourself with an accounting firm that is passionate about balanced books. We will keep you out of trouble and save you money.

.

12203-107 Avenue.
Edmonton, Alberta.
T5M 1Y9

Call us:
780.482.7297