A tax audit is a frightening experience, and if the results are bad it can be a very expensive one. The CRA tax auditor will ask to see books and records and bank account statements. There may be questionnaires to be filled out. Any information that is wrong, even if due to an error, will be used against the taxpayer. A tax professional such as one of our top Toronto tax lawyers should be involved as soon as the auditor contacts you.

CRA Tax Audit Process

What happens when you are audited? Typically, you will first receive a notice from CRA of their intention to audit. The notice will usually outline the preliminary information that they require from you. They may then follow up and request more information. The beginning of an audit is the best time to obtain legal representation. Tax auditors are not always reasonable, and may not listen to your reasoning for filing your returns the way you did. We will speak to the auditors on your behalf, and begin the necessary legal work it takes to resolve all issues relating to your tax return.

If you disagree with the outcome of an audit, it is especially crucial to obtain representation as soon as you have been reassessed by CRA. You have appeal rights, but you only have 90 days to appeal by filing a Notice of Objection. As experienced tax lawyers Toronto we can provide detailed assistance in filing your income tax objection.

Free Income Tax Advice

CRA Tax Audits

There are over 350,000 tax audit and review actions conducted by the Canada Revenue Agency on a yearly basis. Around 15,000 of these tax audits deal with “cash only” businesses (i.e. the underground economy). Additionally, an estimated 35,000 are tax shelter audits.

CRA may choose to audit a taxpayer for several reasons. Here are just a few:

Random selection

Third party tips

Comparison of information on returns to information received from third-party sources or

Past history of non-compliance

The Canadian income tax system is based on “self assessment”. This means that it is up to every taxpayer to properly report their annual income on their income tax return. The CRA performs audits to ensure the “self-assessment” tax system continues to work properly. While most Canadians are truthful on their tax returns, there are some who are not.

Most audits are done to ensure compliance with the Income Tax Act or the Excise Tax Act for GST/HST. A tax audit is an examination of a taxpayer’s returns and supporting records including bank accounts and receipts to make sure that income and expenses have been properly reported and are supported by accounting records.

Here are a few examples of issues that may arise in an audit that would cause a taxpayer to be reassessed at the end of an audit:

Overstated Expenses

Overstated Deductions

Overstated Credits

Underreported or unreported Earnings

Unreported offshore income

Unreported offshore income

Unreported offshore assets

Credits, such as for charitable donations, that are not supported by receipts

Be sure you have complete records detailing every expense and deduction you have claimed on your tax return!

Tax Lawyer Edmonton Assistance

If CRA has informed you of an impending income tax audit, or you have unfavourable tax audit results, give our tax lawyers Edmonton a call to set up an initial consultation. Our top Canadian tax law firm is your one stop tax assistance centre and can assist both during the income tax audit process and once the tax audit is been complete. CRA is not on your side, but our Edmonton tax lawyers are!