What Happens When The CRA Audits Your Taxes, According To A Tax Specialist
He spoke to Narcity about the process — and who gets selected for audits in the first place.
Let's be real, going through a CRA audit sucks in the best of circumstances. Having a team of people meticulously checking your personal or professional finances, searching for any mistakes or inconsistencies, can be nerve-wracking for anyone. It's probably more stressful than filing your taxes!
But it doesn't have to come as a surprise. Narcity spoke with Gerry Vittoratos from UFile about what you can expect if you ever get audited by the Canada Revenue Agency (CRA).
Who gets audited by the CRA?
The CRA can theoretically audit any person or business it sees fit, but that doesn't mean audits are random.
According to the CRA website, "the systems review factors such as the likelihood or frequency of errors in tax returns, or indications of potential non-compliance with tax obligations." Basically, if your tax return smells fishy, you might get audited.
"The main causes of audits are usually overly inflated claims for certain expenses," Vittoratos told Narcity.
Your chances of being audited also go up if you're self-employed, declaring employment expenses, or renting property. Businesses that operate on a largely cash basis like convenience stores, taxis, and restaurants are likely to be audited if there's any suspicion that they're underreporting your income.
What happens during an audit?
When an individual is audited, "the CRA will send a letter to the individual asking for receipts for the expenses they find unusually high," Vittoratos said. Typically the person is then given a month to collect the require receipts and send them to the CRA. Documents can also be submitted online.
Things get a bit more complicated when a business is audited. "It is not unusual for the CRA to visit the offices of the companies to comb through their accounting records," Vittoratos explained
What happens after an audit?
If it's determined that you don't owe any tax money to the CRA, then the process is over and you don't need to do anything else. If, on the other hand, you have taxes owing, you'll be expected to pay the balance — with interest charged for late payment on top of it, and potentially fees for underreporting to boot.
You do have the right to contest the CRA's assessment by filing an objection. Typically, you won't have to pay the balance owed until your objection has been addressed. You can also file a complaint against the CRA "if you are not satisfied with the service you received from the CRA."