Ah, the dreaded tax audit. While few taxpayers will ever actually face an audit, we all fear receiving that notice letter. Undergoing a personal tax audit can be a stressful and time-consuming experience – so how do you avoid it? While there is no sure fire way to ensure you never get audited, there are a few steps you can take that will minimize the chance of the CRA knocking on your door; read on to learn more!
1. Know Your Risk
Certain industries have been flagged as “high risk” by the CRA. Contractors, restaurant serving staff, and mechanics are just a couple of industries that are well-known audit targets. If you work in one of these industries, take extra caution in ensuring your tax filing is complete and accurate. Make sure you have all your supporting documentation for any deductions or credits you are claiming.
2. Don’t Ignore Further Information Requests
Most times, if the Canada Revenue Agency contacts you it will just be a request for further information. This is not the same as an audit. Now that reports are filed online, people don’t need to send in all of their supporting documents so sometimes the CRA will request these documents to be sent in. It’s important that you don’t ignore these requests as doing so can not only get your claim denied but also flag your returns for audits in the future.
3. Note Large or Unusual Expenses and Deductions
Certain types of expenses are more likely to be flagged by the CRA that others. Interest deductions, charitable donations and moving expenses are a few examples. Don’t let this scare you from claiming these on your next return, just make sure you understand the rules around claiming and keep your receipts in case you’re asked to provide further proof. Another audit red flag is drastic changes in income or expenses from year to year. Again, if your claims are legitimate there is nothing to worry about. Just make sure you have the appropriate supporting documentation and you’ll be good to go!
4. Get Help!
Having things done right the first time is the best way to avoid an audit. Having your taxes filed by a professional will not only maximize your return, but also ensure it’s filed correctly.
Looking for Tax Advice?
Whether you are looking to get help filing your personal tax return, or are currently facing an audit and are seeking professional advice, the team and Liu & Associates can help! Contact us to schedule an appointment today.