TAX TIP Small and medium business audits: What you need to know
Thursday, 10 March 2022 10:22.AM
Most taxpayers comply with the tax laws in Canada, but some don't. That's why audits are an important part of the Canada Revenue Agency's (CRA) range of activities that are in place to make the tax system fair for everyone.
The CRA recognizes the economic challenges that have resulted from the COVID-19 pandemic and the effect that the audit process can have on businesses. For this reason, we continue to proceed carefully to protect businesses and the broader economy that remains vulnerable due to the pandemic.
The CRA has information to help answer your questions about the audit process. The information below also applies to audits of COVID-19 subsidies.
The audit process at a glance
1. Should you be selected for an audit, a CRA auditor will contact you to start the audit process by mail or phone, or both, and will inform you of the time period(s) being audited and how to send the required documentation.
2. Currently, audits are being done virtually. You will be required to send your documents electronically, where possible, to the auditor using the instructions they have given you. The auditor will then review the documentation.
3. The auditor will review the submitted documentation and determine whether or not adjustments are required. If so, a proposal letter will be issued, giving you the opportunity to review the proposed adjustments and provide representations within 30 days, before the audit is finalized. If you do not agree with the adjustments proposed by a CRA auditor, you are encouraged to contact the auditor to try and resolve any disagreements.
4. After the audit, a final letter will be sent by mail or electronically (via My Business Account or Represent a Client) to notify you that one of the following will occur:
• No adjustments will be made to your previous assessment and/or subsidy claim(s).
• An adjustment will be made, resulting in more tax owing (reassessment), and you will have to pay the balance owing. If the audit was done on your subsidy claim(s), a notice of (re)determination will be issued outlining the adjustments made to your claim(s).
• An adjustment resulting in less tax owing will be made (reassessment), and you may be entitled to a refund.
How files are chosen for an audit
The CRA's risk-assessment systems identify tax returns and subsidy claims that are considered as high risks for non–compliance. The systems review factors such as the likelihood or frequency of errors in tax returns, or indications of potential non-compliance with tax obligations. CRA officers use various sources to determine whether an audit is required to address the risks identified.
Keep in mind
• Auditors can make copies of your records
During the audit, the auditor may ask for copies of your electronic records.
• You can send documents online
Your auditor will provide guidance on how to send documents online using the CRA's secure services. For more information, visit Submit documents online - Canada.ca
What does a CRA auditor examine during an audit?
A CRA auditor will examine books and records, documents, and information (collectively referred to as records). These include the following:
• business records (for example, ledgers, journals, payroll records, invoices, receipts, contracts, and bank statements)
• personal records of the business owner(s) (for example, bank statements for personal accounts, mortgage documents, and credit card statements)
• personal or business records of other individuals or entities related to the business owner(s) (for example, a spouse, family members, corporations, partnerships, or a trust)
What if you don't agree with the assessment?
If there are changes to your taxable income or taxes payable and you disagree with the CRA's assessment or reassessment, you have the right to object. In the case of an objection, you will generally not have to pay the additional taxes owed until your objection has been resolved. You can file an objection using this CRA web page: File an objection.
You also have the right to file a complaint if you are not satisfied with the service you received from the CRA. For more information, visit Service feedback, objections, appeals, disputes and relief measures.
To find out more about your rights and what you can expect when you deal with the CRA, see Guide RC17, Taxpayer Bill of Rights Guide: Understanding your rights as a taxpaye.
SOURCE: Canada Revenue Agency
-
Related materials:
- 18-Sep-2024 10:23 AM 📒🇨🇦🍁 Using an App or Website to Earn Income? Here's What You Need to Know About the Reporting Rules for Digital Platform Operators 💵
- 16-Sep-2024 12:00 PM 📒🇨🇦🍁 Making Changes to Your Business? The Canada Revenue Agency is Here to Help! 💵
- 18-Jul-2024 04:58 PM 🍁🏙️💵 City Of Toronto's Tax & Utility Relief Programs Provide Support for Low-Income Seniors and Low-Income People Living with Disabilities
- 21-Jun-2024 06:40 PM 📒🇨🇦🍁 Budget 2024 Government of Canada Launches the First Clean Economy Investment Tax Credits 💚💵
- 16-Jun-2024 10:27 AM 📒🇨🇦🍁 You've Got Questions and We've Got Answers! Here are Answers To Seven of the Top Business Tax Information Questions
- 10-May-2024 04:33 PM 📒🇨🇦🍁 Looking for the Fastest and Easiest Way to View and Manage Your Business Taxes Online? Use Our Digital Services!
- 02-May-2024 06:23 PM 📒🇨🇦🍁 Need to Change Your Tax Return? You Can Do it Online!
- 24-Apr-2024 10:21 AM ⚕️💵🚬 Canadian Cancer Society Commends Tobacco Tax And E-Cigarette Tax Increases In Federal Budget 🚭
- 23-Apr-2024 04:28 PM 💵 New Canada Carbon Rebate Estimator Tells You How Much You May Get Back in Payments Starting April 15
- 20-Apr-2024 02:33 PM 📒🇨🇦🍁 The Canada Revenue Agency Has Options for You if You Owe Us Money or Have a Debt That We Collect for Another Government Department
- 19-Apr-2024 06:33 PM 📒🇨🇦🍁 Top 10 Tips for Your Platform Economy Tax Obligations
- 19-Apr-2024 04:24 PM 📒🇨🇦🍁 Reporting Your Capital Gains as a Crypto-Asset User
- 19-Apr-2024 02:34 PM 📒🇨🇦🍁 Are You Self-Employed? The Canada Revenue Agency Can Help You Understand Your Tax Obligations
- 18-Apr-2024 10:19 AM 📒🇨🇦🍁 NEW - Bare Trusts are Exempt from Trust Reporting Requirements for 2023
- 16-Apr-2024 02:27 PM 📒🇨🇦🍁 You Still Have Time - Last-Minute Tips to Help You File Before the Deadline!
- 01-Apr-2024 08:00 AM 💵 Keep The Cash, Care for Climate: Canada Carbon Rebates Being Paid Next Month
- 28-Mar-2024 10:33 AM 📒🇨🇦🍁 Vast Majority of Canadian Businesses Want Fast-Tracking of Clean Energy Tax Credits 🤝💰🤑
- 21-Dec-2023 02:37 PM 📒🇨🇦🍁 Businesses: Here Are the Top Changes this Year that Will Affect Business Taxes in 2024
- 19-Oct-2023 12:00 PM 📒🇨🇦🍁 Did You Know that there are Business Services that Can Make it Faster and Easier for You to Meet Your Tax Obligations?
- 14-Oct-2023 06:33 PM 📒⚠️ Warning: Watch Out for Tax Schemes Involving Multilevel Marketing Businesses!
- 20-Jul-2023 10:21 AM Taxpayers' Ombudsperson Requests That the Canada Revenue Agency Make Improvements to Respect Canadians' Right to Be Represented by a Person of Their Choice
- 05-Jul-2023 02:34 PM TAX TIP Get ready: the CRA is in its summertime benefit period!
- 19-Jun-2023 02:23 PM TAX TIP Applying for the Disability Tax Credit is Easy With Our New Digital Form
- 13-Jun-2023 02:46 PM TAX TIP June 15, 2023, is the Deadline for Self-Employed Individuals to File Their 2022 Income Tax and Benefit Return
- 18-May-2023 12:00 PM ONTARIO JOBS 💵 Moving Forward with Building a Strong Ontario
- 03-Apr-2023 04:33 PM TAX TIP CRA Debt Recovery Activities May Impact Upcoming Benefit, Credit, and Refund Payments
- 27-Mar-2023 10:21 AM TAX TIP Voices Prepares Voice Actors for Tax Season With Tax Education Campaign
- 26-Mar-2023 02:23 PM TAX TIP Valuing Your Cryptocurrency
- 23-Mar-2023 10:21 AM TAX TIP The CRA Would Like to Remind You That it Has Resumed Debt Recovery Activities; Here's How it May Impact Your Benefit, Credit, and Refund Payments
- 21-Mar-2023 02:33 PM TAX TIP 💵🏠 Less Than Two Weeks to Apply For $500 One-Time Top-Up
- 21-Mar-2023 12:00 PM TAX TIP Do You Work in the Sharing Economy? Here's What You Need to Know
- 18-Mar-2023 10:15 AM TAX TIP Confirm My Representative is Now Available for Business Owners
- 14-Mar-2023 08:20 PM TAX TIP Thinking of Calling Us? Before You Do, Find The Answers You Need for Tax-Filing Season!
- 12-Mar-2023 08:29 PM TAX TIP Ready to File Your Taxes? Here's Why You Should Go Digital
- 13-Feb-2023 02:22 PM TAX TIP Were You Invited to File Your Taxes Over the Phone?
- 09-Feb-2023 08:00 AM TAX TIP Electronic Filing Of Special Elections And Returns Is Now Available
- 30-Jan-2023 06:40 PM 📒🇨🇦🍁Taxpayers' Ombudsperson Recommends Ways To Improve Communication From The Canada Revenue Agency
- 24-Jan-2023 04:18 PM TAX TIP Seniors: We've Got Tips To Help You This Tax Season!
- 19-Jan-2023 04:28 PM TAX TIP Here's what you need to know if you're filing your taxes by paper
- 16-Dec-2022 02:39 PM Budget 2021 The Government Of Canada Launches Formal Consultations To Streamline Reporting Of Payroll Information
- 04-Nov-2022 10:43 AM TAX TIP Six month doubling of GST credit payment starts November 4, 2022
- 03-Sep-2022 10:22 AM Government of Canada Strengthens Access to Sexual and Reproductive Health Services for Youth
- 25-Aug-2022 02:20 PM TAX TIP Do You Have Questions About Filing As A Business For The First Time? The CRA Is Here To Help
- 05-Aug-2022 08:00 AM TAX TIP Here Are Answers To Five Of The Top Business Tax Information Questions
- 16-Jul-2022 08:00 AM TAX TIP Do you have questions about filing as a business for the first time? The CRA is here to help
- 21-Jun-2022 11:14 AM City of Toronto issues 2022 final property tax bills
- 03-Jun-2022 08:00 AM TAX TIP June 15, 2022, is the deadline for self-employed individuals to file their 2021 income tax and benefit return
- 17-Apr-2022 08:00 AM TAX TIP Businesses: Protect yourself from scams and fraud - know what to expect from the CRA
- 15-Apr-2022 02:22 PM TAX TIP Are you self-employed? The Canada Revenue Agency can help you understand your tax obligations
- 13-Apr-2022 12:00 PM TAX TIP How to find help if you can't pay your taxes
- 01-Apr-2022 10:22 AM TAX TIP Did you buy, build, sell or renovate a home in 2021? Here's what you need to know
- 28-Mar-2022 02:02 PM TAX TIP Make sure you maximize the benefits you are entitled to if you are First Nations, Inuit, or Métis
- 27-Mar-2022 12:00 PM TAX TIP It's tax time! You've got questions? We've got answers
- 26-Mar-2022 10:59 AM TAX TIP Do you work in the gig economy? Here's what you need to know
- 23-Mar-2022 04:22 PM TAX TIP How to verify the CRA has contacted you
- 21-Mar-2022 04:33 PM TAX TIP Do you work in the sharing economy? Here's what you need to know
- 20-Mar-2022 04:46 PM TAX TIP Making changes to your business? The Canada Revenue Agency is here to help!
- 19-Mar-2022 10:23 AM TAX TIP Are you a peer-to-peer seller? Here's what you need to know
- 17-Mar-2022 08:38 PM TAX TIP Are you a social media influencer? Here's what you need to know
- 15-Mar-2022 12:00 PM TAX TIP Before you call: Find the answers you need for the 2022 tax-filing season
- 11-Feb-2022 12:00 PM TAX TIP Avoid last minute delays at tax time by setting up My Account
- 07-Feb-2022 02:27 PM TAX TIP Investing in cryptocurrency
- 27-Jan-2022 06:33 PM TAX TIP What is cryptocurrency?
- 25-Jan-2022 12:00 PM TAX TIP Running a business is difficult; understanding your tax obligations
- 30-Nov-2021 08:00 AM TAX TIP Avoid last minute delays at tax time by setting up My Account
- 17-Nov-2021 02:14 PM TAX TIP Understanding the tax-free savings account (TFSA)
- 04-Nov-2021 04:33 PM TAX TIP Canada Revenue Agency announces maximum pensionable earnings for 2022
- 20-Jun-2021 05:33 PM TAX TIP Businesses: Watch out for Canada Emergency Wage Subsidy tax schemes
- 02-Dec-2020 12:00 PM TAX TIP What you should know during times of financial uncertainty
- 01-Sep-2020 02:03 PM TAX TIP Warning to Ontarians: Don't be fooled by the senior homeowners' property tax grant
- 30-Aug-2020 09:07 AM TAX TIP Last call! File your 2019 tax return to keep getting your benefit payments
- 29-Aug-2020 12:02 PM TAX TIP Watch out for offshore leveraged insured annuity schemes
- 28-Aug-2020 05:14 PM TAX TIP Watch out for offshore disability insurance plan schemes
- 13-Mar-2020 10:23 AM TAX TIP New online feature helps you see your uncashed tax cheques