While the auditing process is meant to help maintain public confidence in the fairness of Canada’s tax system, it can be a stressful and onerous experience on a taxpayer. There are two main types of tax audits: business audits and personal audits. Read on to learn a bit more about each type, what you can expect if you’re selected for an audit of your own and how Liu & Associates can help.
A business tax audit is a process in which the CRA closely examines small and medium-sized businesses’ books and records to ensure they are complying with their tax obligations. Audits are also used as a way to ensure the business is receiving any monetary amounts they are entitled to.
How Are Businesses Chosen?
The business audit selection process is based on a risk assessment system. When choosing businesses to audit, the CRA will also look at any information it has on file and may compare it to similar files.
What Does an Auditor Look at?
A tax auditor will look at the company’s books, records and documents. Examples include but are not limited to:
- Previous tax returns
- Business records
- Personal records
Personal audits are very similar to business audits. The selection process and the documents that are reviewed are all of similar nature – the difference is that the focus is on personal taxes rather than company taxes. Again, the purpose of an audit is to ensure that your assessment is accurate. If you’re selected for a personal tax audit, the CRA will ask for you to submit certain receipts and records. Sometimes the submission of these documents will be enough, and other times an auditor will be sent out to complete a more thorough check. The audit may take place at a CRA office, or at your home.
Results of an Audit
Throughout the audit process, the auditor will openly identify any issues and discuss them with you. You are also welcome to raise any concerns you may have as well. At the end of an audit, one of three things will occur:
- No adjustments will be made to your assessment
- A reassessment will result in you owing more tax
- A reassessment will result in you receiving a refund
Don’t Sweat It
Audits may seem like a scary process, but if your documentation is accurate and in order there shouldn’t be any major issues that come up. Most errors that arise are honest mistakes that are easily amended. The best thing you can do to prepare for an audit is to keep track of your records for a minimum of six years.
If you or your company is selected to undergo an audit, contact the experts at Liu & Associates. Our team will ensure that your rights are observed and work to minimize any consequences. We act as a buffer between you and the CRA to minimize the time and stress that is so commonly associated with an audit. Give us a call today!