Audits can be stressful and time consuming for any business owner. However, there are some simple things that can be done to make your lives easier. Here are three simple tips to follow:
Donâ€™t file a tax return with errors
The CRA is more likely to flag your return for a follow-up or audit if they have found errors on your return in the past. Whether you file the returns yourself, or utilize a professional, itâ€™s still your responsibility to ensure that your return has been filed correctly. Always review your tax return for accuracy, and if you find a mistake after filing alert the CRA to it.
Provide Information the CRA Requests
Occasionally the CRA may request additional information to support a claim youâ€™ve made on your tax return. They are not looking to perform a comprehensive audit. They just want to make sure that particular amounts claimed are valid. Once you receive the notice gather the appropriate documentation and support and send it in within their deadline for response. Only send the information that is requested, sending more information may lead the CRA to look at other items they were never intending to look at. Failing to provide this information on time may raise another red flag with the CRA.
Claiming and Investment Loss
CRA will want to verify any losses claimed on investments in small business corporations. The tax rules regarding allowable business investment losses are complex so CRA will want to make sure they are followed correctly. Be sure you keep all documentation to support your claim for an allowable business investment loss because you most likely hear from CRA.
Itâ€™s not Worth It
For knowingly making false statements the penalties could be substantial. At the end of the day, work within the tax rules and guidelines provided by the CRA. While you may think there could be some gain in making false statements in order to reduce your tax liability, itâ€™s not worth it. The CRA takes these offences very seriously, and you will be heavily penalized.