The Canadian income tax system is based on “cra self assessment” whereby every taxpayer is required to properly report their annual income on their income tax return. Thus in such a system the onus of honestly reporting their income on a tax return is on the taxpayers. If the tax return submitted by a taxpayer does not have supporting accounting records when the CRA performs a tax audit to ensure that the system of “self assessment” continues to run smoothly the taxpayer will be issued with a tax reassessment for additional taxes owing. A tax audit, which is done to ensure compliance with the Income Tax Act or the Excise Tax Act for GST/HST, is basically 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. Random selection, third party tips, comparison of information on returns to information received from third-party sources and past history of non-compliance are some of the reasons why a taxpayer may be audited by the CRA. A tax audit is a frightening experience that can lead to large tax liabilities and therefore you should contact our Toronto tax audit lawyers as soon as the tax auditor contacts you.
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So what happens if you are being audited by the CRA? What should your first step be? Our expert Canadian income tax lawyers answer all of your tax audit questions. If you are being audited by the CRA you will first receive a notice from CRA of their intention to audit. In the notice the CRA will ask you for certain preliminary information and this may be followed by requests for more information. The information that a taxpayer presents, if found to be wrong even due to an error, will be used against the taxpayer. Our Toronto income tax lawyers will speak to the tax auditors on your behalf and present the necessary legal work to resolve the issues relating to your tax return. The CRA tax auditor may also ask to see books and records and bank account statements and there will be questionnaires to be filled out. Thus one should contact our Toronto tax audit lawyers at the very beginning of an audit.
What Should You Do If You Have Committed Tax Evasion but CRA has Not Yet Contacted You? Read more…
Tax audit assistance from our expert Toronto tax audit lawyer
CRA tax auditors are not reasonable and if they find a mistake they may not even listen to your reasoning for filing your tax returns the way you did. So if you disagree with your with the result of your income tax audit information, you only have 90 days to appeal by filing a Notice of Objection. Our expert Canadian tax lawyers will provide detailed assistance in filing your income tax objection. It is crucial to obtain representation as soon as you have been reassessed by CRA. Overstated expenses, overstated deductions, overstated credits, underreported or unreported earnings, unreported offshore income, unreported offshore assets etc are some of the reasons that may cause a taxpayer to be reassessed at the end of a tax audit. Our Toronto income tax lawyers are by your side and we will assist both during the income tax audit process and also after the tax audit is complete.
CRA TAX AUDIT - CASE STUDIES
We were retained by Don who runs a number of businesses near Kingston, Ontario and had various tax issues. One of his corporations was being audited for HST. His accountant was not able to properly represent him. We took over the audit file. We dealt with his bookkeeper to provide the records needed by the auditor and satisfied all of the auditor questions. All of the input tax credits (deductions) which were supported by receipts were allowed.
Z is based in Toronto and is in the business of purchasing cars for export. A GST/HST audit led to holds being placed on Input Tax Credit refunds of over $600,000, which the client relied upon for operating capital. We were referred by his accountant and retained when the accountant was unable to make any progress. We made detailed submissions to the auditor supporting the refunds and demanded a release of the withheld funds. After escalating to the auditor’s team leader we were successful in achieving rolling monthly refunds for the remainder of the audit. By the conclusion of the audit we had been successful in protecting the client’s cash flows and achieving a complete refund of the Input Tax Credits.
Dennis is retired and worked in finance. He lives in Newmarket, Ontario and in the Caribbean and had complex issues related to overseas holding corporations and assets. He retained our Toronto tax law firm to assist him with his CRA tax audit.The main tax audit issue was that the overseas bank accounts, assets and all supporting documentation were held in the corporation’s name. Our Toronto income tax lawyers reviewed the records and then instructed the accountant to provide all of the relevant tax books and records to the CRA tax auditor and supplied bare trust documents. Our Canadian tax lawyers provided a detailed explanation and rationale regarding Canadian income tax law and the bare trust concept and its treatment for income tax purposes that resulted in complete acceptance of Dennis’s original filing position.
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FAQ’s
What Happens If You Get Audited by CRA?
If you get audited by the CRA they will start by asking you for information. At that stage, it may be wise to contact a tax expert to make sure you do not make any errors when responding. Failure to provide the historical information being asked for makes it appear that you have something to hide, which can lead to your tax affairs being investigated further and maybe sanctions. We are here to handle your CRA audit the right way.
How Do I Deal With CRA Audit?
The best way to deal with a CRA audit is to respond quickly and do so accurately. If you are in any doubt about how to provide the information that is being asked for you should contact a tax expert to assist you. You should also do the same if you know that you have tax matters outstanding. Failure to provide accurate information will lead to further investigations by the CRA. Contact us today to get the assistance you need.
How Far Back Can CRA Audit Your Taxes?
Currently, the CRA can go back three years to audit your taxes. That is three years from the date that your personal income tax return was initially assessed by them. For some organizations and corporations, the normal limit is four years. However, if the CRA believes you have misrepresented your situation they can carry out an audit even after the three-year period has expired. In which case, it is wise to get in touch with us.