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How to prepare for a CRA audit


May 10th. 2016

A Canada Revenue Agency (CRA) audit is an unpredictable event that can end up consuming a lot of time and causing stress to unprepared small business owners. The CRA can choose to review your income tax returns, HST returns as well as your payroll account. Since avoiding an audit is not in your control, we have decided to focus on the ways that business owners can best prepare themselves for this event.

  1. Keep good records

The CRA’s review and assessment ultimately comes down to the quality of the documentation that is provided and how well it supports the numbers that are being audited. Therefore, it is important that you retain and organize all of your business invoices, contracts and other relevant documents to ensure assembling the audit support is simple and less time consuming.

 

Once you have gathered all the information that the CRA has requested, you want to ensure that your audit package is complete and easy to follow by ordering and referencing the supporting documentation pursuant to their initial requests and questions.

 

  1. File and pay taxes on a timely basis

Filing and paying your taxes late attracts unwanted attention from the CRA and could trigger an audit. Make sure you file accurate and complete tax returns by their due date.

 

  1. Keep business and personal expenses separate

One way to keep your business and personal expenses separate is by having different bank accounts and credit cards for your business and personal finances. When a personal expense has a business component to it, document the justification as to why it is a valid business expense.

 

  1. Be cooperative

Once you have been notified that your company has been selected for an audit, you should attempt to respond promptly to CRA’s requests and provide full cooperation to the agency.  Ignoring the CRA will not make them go away and may lead to more stringent audit measures.

 

  1. Seek professional help

As soon as you are notified of a CRA audit, you should contact your trusted S+C advisor to ask them for their advice and guidance. We can work directly with the auditor to provide the requested documentation and answer any questions that may arise throughout the audit.

 

If you have any questions, please don’t hesitate to contact us.


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