As per the Canada Revenue Agency, the CRA tax audit is an assessment review is the “examination of citizens who pay taxes’ books and records to determine the taxes, interest, and penalties payable under “the law precisely.” A CRA Tax Audit is the administration’s method for twofold checking the expense filings made by Canadians to ensure the assessments were” reported accurately and honestly.
This process is carried out by the Canadian government to keep a check on citizens of the country so that a proper module of the work is followed and everything works as per the rules and regulations. Such audits help to avoid corruption and many other illegal activities and safeguard the country.
Types of CRA tax audits
Canada’s tax system is working for the benefit of the citizens of the country. The auditing processes help to maintain public confidence with fairness and integrity so that the trust of the people is always kept in the government rules.
- According to Canada’s tax system, the primary focus is on the business entity. The business audits are conducted for small and medium scale business where the entire records of the company are checked.
- CRA gives time for the business audit but not so extended. The time is provided by the CRA officials to arrange the documents which are required by them.
- The officials do CRA Personal Tax Audit for a person whose source of earning is other than running a business. Sometimes serviceman shows duplicate documents or investment papers to avoid taxes. Personal tax is not done on a large scale; mostly it is conducted in the CRA offices where the person is asked to visit and submit the required documentation.
How does the CRA conduct business audits?
We discussed above that the major part of the CRA audit is conducted for the business entity and most of them are small and medium-sized businesses. The process of the review is not the same for all the companies; it might differ from the location or the audit requirement.
- Onsite audit means the location of the inspection will be the company location of the person. The audit officials will send the letter mentioning the date when they will visit the office of the person. Sometimes an onsite audit can also be a surprise.
- The other reason to conduct an on-site audit is the detailed investigation of the company. Sometimes, many issues are found in the tax filing and tax return according to the Canadian tax obligations, so the officials have to check all the documents of the company.
- The on-site audit allows questions to be addressed quickly and minimizes delays in completing the audit.
- This offsite audit is conducted in sporadic cases. In this process, the tax consultant or the owner of the company is asked to visit the CRA office.
- When the issue is not so big, and the officials have to crosscheck any one or two specific documents, then they prefer an offsite audit.
How and what files CRA selects for business audits?
The CRA audit is not just a random process which can be conducted in any manner. Sometimes the review undertaken by the officials gets questioned if they commit any mistake and harass the people.
- The CRA risk-assessment system selects files to audit based on many conditions such as the potential for blunders in assessment forms or signs of resistance with tax obligations.
- The CRA additionally takes a gander at the data it has on record and may contrast that data with similar records or consider information from other audits or investigations.
It is not possible to check all the documents during the audit so the officials from the CRA pre-decide the papers that they would check on their visit to the company. In the case of regular inspections, the list of documents are mostly known by the people, and they are mentioned below:
- The information available to the CRA such as tax returns previously documented credit agency hunts or property database data your business records
- Your business records, for example, records diaries solicitations receipts contracts and bank explanations your;
- Your files, for example, bank explanations contract archives and financial records.
- Individual or business records of different people or substances not being reviewed for model a mate relatives organizations association or a trust settlor, recipient and trustee and modifications made by your clerk or bookkeeper to touch base at pay for duty purposes.
The need for CRA tax auditor for CRA tax audit
A letter from CRA for the audit is a situation to get worried for most of the people due to mismanagement of the documents, but the main reason to send the letter is to inform you that you have been selected for an audit and specifies the scope of the examination. Here, in the message, they define the documents that you need to submit.
They can ask to submit particular receipts or records or all the receipts and records of a specific type, such as medical expenses, or to prepare for an audit of your documents in your home or place of business. To solve such situations, the CRA tax auditor is hired by the businessman.
- The job of a CRA tax auditor is to dissect the assessment records of people and organizations to guarantee that they are satisfying their Canadian tax obligations commitments and accepting any sum they are qualified for from the administration.
- Tax auditors typically manage multiple accounts at a time, working from CRA offices as well as inside the taxpayers’ premises.
- They work both independently and as a significant aspect of a bigger group of specialists and authorities in specific fields.
CRA tax audit is the process of a maximum of an hour or two in general. In case of any complications, the officials would require more time to complete the entire inspection. The best way to finish the audit on time without any further delay is to prepare in advance according to the requirement mentioned in the CRA letter.
A professional tax accountant or the tax consultant should be available with you during the audit process so that they can quickly respond to the questions asked by the auditors. Contact RC Financial Group today, our experts will help you to prepare for the audit and answer every question of the CRA officials.