Q: I’ve operated a mechanic shop for the past eight years. Last week, I received a letter from Canada Revenue Agency (CRA) that I have been selected for an audit. I have always filed and paid my taxes on time. Why would they choose me and to what extent am I obligated?
A: Most Canadian taxpayers would happily go through life without experiencing an audit from the CRA. Unfortunately, this reality can become a nightmare.
Why else would CRA audit you but to find additional taxes owed to them? Do not be misled — the CRA does not assign an agent to spend up to several weeks at your office so that the audit may result with the taxpayer receiving a larger tax refund. Fantasy land is in Florida!
Individuals should check the letter and ensure it is not a request for additional information. A request can be resolved by simply complying — end of story. Businesses should clarify and confirm the purpose of the audit, such as payroll, GST, corporate taxes, etc. Advise your accountant immediately.
Audits are generally selected by CRA through computer-generated lists, specific groups, leads, or associated government authorities. Do not ignore its letters, as you will only delay the inevitable. Unlike a collection agency, the CRA does not go away due to lack of response by the taxpayer.
Unfortunately, although a taxpayer may have nothing to hide, an audit can be time-consuming and stressful. Maintaining proper records and files can reduce the time spent by the CRA at your office and ultimately result in a squeaky clean audit.
Henry Choo Chong, CGA, can be reached at: 416-590-1728 Ext.304. E-mail Money Matters: email@example.com.