Tips to Avoiding a CRA Tax Audit
Posted On: 26/05/21 - 0

Tips to Avoiding a CRA Tax Audit

It is important to be in compliance with the Canada Revenue Agency (C.R.A.). This means we need to file both our personal and corporate (if applicable) tax returns annually. This could mean that you will have to pay your fair share of taxes. But, if you think that is a stressful situation, then you clearly haven’t come face-to-face with the reality of a CRA  tax audit. But, you can take solace from the fact that most business owners don’t have to go through a CRA audit. Business owners for the most part only go through a CRA audit when the CRA finds something fishy with their tax returns.  Or, if you have been the winner of the most unfortunate event of a random audit. We intend to help you minimize the risk of such an outcome.

Periodic Inconsistencies

The easiest way to attract the attention of the CRA is by being inconsistent with your tax returns on a year-to-year basis. For instance, if the CRA sees a two-fold increase in the tax deductions you’re seeking, the CRA would like to understand how that came about. If that’s the case, and your numbers are supported by the requested receipts, then you usually don’t have a reason to worry. If you decide to enlist the services of a small business accountant, they act on your behalf in the event of an audit which takes the pressure directly off of you.

Inaccuracies In Your Return

One of the quickest ways to get “red flagged” by the CRA is by not reporting all your income accurately (intentionally or purely by accident). Some businesses accept cash payments in return for their products or service with the belief that the CRA won’t notice. But, the reality is the CRA knows what to look for. They may assess your lifestyle and determine the possibility of you accepting cash payments under the table.

Recurring Losses

The CRA expects you to run your businesses with the expectation that you would be incurring profits (for the most part). It is for this reason that the CRA would flag you for a possible audit if you’re consistently claiming losses. The CRA may consider that this is being done to avoid paying applicable taxes. The same applies to a rental property where you’re consistently reporting losses.

Unrealistic Deductions

If a small businesses’ food, beverage or traveling deductions are multiplying by three or four times in the matter of a single year, you can safely conclude that the CRA will be interested to learn more. This also applies to the home office deductions you’re making. Suffering a CRA audit because of a literal falsification is one thing; suffering one because of an honest mistake is simply unfortunate. Why take unnecessary stress on when filing your taxes both personal or corporate? For peace of mind, seriously consider enlisting the services of a designated professional who has both the knowledge and experience with deductions and tax returns on a whole.

Do you have questions about the specifics of enlisting a business accounting firm for your business? Have you just been advised that you will be faced with a CRA tax audit? We are here to address your concerns. Please call 780-482-7297 and ask for Cheryl.

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

Call us:
780.482.7297