It’s time for another letter from the Canada Revenue Agency.
This one might give you some worry.
You’re being audited.
But let’s not worry too much. If you were truthful and accurate on your income tax return, you should be OK.
Your letter will describe why you are being audited, typically offering a specific tax claim, and provide your auditor’s and phone number. You have 30 days to provide the receipts and supporting information for why you made your claim.
According to the Canada Revenue Agency, you fell into one of four categories:
Computer-generated lists: The computer system compares select financial information of clients engaged in similar business or occupations and generate lists of returns with audit potential.
Audit projects: You may fall into a group that shows significant non-compliance with the tax laws.
Leads: Information from outside sources or other audits and investigations may have caused a red flag to show on your claim.
Secondary files: If you’re in a partnership (business or even marriage) with someone who has been audited in the past, you may be selected.
What happens now?
Once you have your receipts and supporting information compiled, your auditor may only conduct a review to ensure everything works out.
He may, however, have to visit you for a full examination of your books and records. If he is auditing your business tax return, he will want to discuss the nature of your business and tour the premises. You should be prepared for a full audit of your invoices, shipping and receiving records, expense accounts, inventories, investments, contracts, appointment books and all records related to the operation of your business.
Once he’s completed his audit, he will decide whether an adjustment to your tax return is necessary. You can request proposed adjustments be put in writing or have your tax lawyer evaluate the changes.
How long does it take?
That depends. An audit can last anywhere between a few hours and several hours to complete, depending on the complexity of your case and the organization of your financial records.
Can you help with my taxes?
We sure can. Contact one of our tax specialists and we can help you wade through the tax benefits and credits available to Canadians.