Tax audits are very stressful! No matter how hard you try to keep your books in perfect order, the idea of having an auditor hanging around, scrutinizing your finances can be anxiety-inducing.
Let’s be real – an auditor’s job is to extract more taxes from you, but being audited doesn’t mean the Canada Revenue Agency (CRA) thinks you have necessarily done something wrong. Usually, businesses are chosen for a reason; it could be based on your industry, on red flags in your tax audit (sorry – they don’t tell us what they look for) or the types of expenses you submitted. But often a business is selected at random.
Here are 10 things that will usually help a tax audit go smoother.
A tax auditor is pretty powerful when determining whether you are in compliance with the law. The auditor can look at third-party records and even those of family members, to see if anything is missing. If you feel you have been treated incorrectly, the onus will be on you to prove your case within the time period allowed.
The best preparation for a tax audit starts with sound thinking at the time you are readying your financial statements and tax returns. Competent tax planning and accessible records are your main sources of defense during an audit. It also pays dividends to have a strong relationship with open communication with your book keeper and accountant.
Still concerned? Get assistance from Northbridge Insurance
Our counselors are here to help, but if you’re wary about handling a CRA audit by yourself, or require legal advice, then the Legal Assist service offered by our partner Northbridge Insurance may be able to help. Simply contact Northbridge Insurance for a quote, and you will receive one year of complimentary Legal Assist service. This means unlimited telephone access to a general legal advice helpline for business and tax-related issues at no additional cost.
As a CFIB member, you are also eligible for twice the Legal Expense Insurance coverage than is typically included in Northbridge’s commercial insurance policies. Paying lower legal fees means reducing the financial stress on you and your business.
If you have questions about tax audits, or would like a copy of our handout “What to do when the Auditor arrives” contact your CFIB Counsellor.