CRA audits are scary –
Here’s what to do
CRA (Canada Revenue Agency) reviews and audits can be stressful. When the CRA or other provincial revenue agencies come looking for money they believe you owe it’s easy to start from a place of defense.
Gathering documents (some you have and some you might not) is time consuming and frustrating, but there are ways to make the review or audit process less stressful.
Follow these 5 best practice tips to come out of an review or audit with less stress and more money in your pocket!
1. Partner up
If you’re not already working with a CPA (Chartered Professional Accountant), now’s the time to start. CPA’s are trained professionals and have a wealth of experience in tax law, tax audits and in working with the CRA.
Work with a CPA on what the CRA is asking you for and prepare exactly what is asked in order to respond. Whatever you do, don’t ignore a notice from the CRA or any other provincial revenue agencies – it’s not going away.
2. Communication Is Key
When dealing with government revenue agencies, cooperate and be respectful. Be pleasant and courteous. Provide the information requested within the time period required. Be available for providing information but limit communication to only people who are required to receive the necessary information. This includes your bookkeeper
and your CPA.
3. Protect yourself
A large number of CPA’s in Canada offer a program called Audit Shield.
When you select to opt-in to the Audit Shield offering with your CPA it protects you from the additional costs, up to a prescribed amount, associated with being subject to an audit, enquiry, investigation or review (audit activity) by the CRA or other provincial revenue agencies.
For a small annual fee, Audit Shield covers the cost of the CPA’s time and the time of other associated professionals in order to work on and respond to government revenue authorities’ initiated audit activity on your behalf.*
Ask your CPA if they offer Audit Shield. It could save you thousands of dollars.
4. Review the outcome
At the end of an audit, review the finalization letter for any change in your tax return. If there are changes to be made, get a complete explanation of the changes. Advise the CRA auditor that you would like an opportunity to consider them and then send a reply.
Review the changes with your CPA and decide if you are in agreement or want to object. Some changes might appear small but have more serious consequences as they may set a bad precedent for future year’s tax filings.
5. Ask for an extension
Though you can’t ignore it, you are entitled to ask for an extension. If you find the audit happening at the worst possible time, request an extension from the CRA.
About Audit Shield
Watch the video below to learn more about how Audit Shield works.
Send your CPA an info sheet on Audit Shield.
Audit Shield is only available through a participating CPA accounting firm. Ask your CPA if they offer Audit Shield or let know them you are interested in being protected by sending them an info sheet.
* The service is limited to the detailed terms and conditions which will be provided prior to acceptance.