I’ve been asked by people before if they could audit proof their business. That question is interesting as no business is audit proof in that there is always a great chance that CRA will audit your business. However, that being said, there are many things you can do to keep your business from being reassessed after an audit. The key here is that if CRA finds things wrong when you are first audited, then you may be audited again in future years. If they don’t find any issues the first time they audit the company, then they may never come back as they can see the company has proper backup documentation and paper trail and accurate reports.
Many business audits start with either a payroll or GST audit. Payroll audits may be simple trust examinations, where they just want to look at who the company is paying, and if all the remittances are being made to CRA. It could also be a full payroll audit that would look at much more, such as did any employees receive taxable benefits, did the owners receive benefits, are the shareholder loan accounts accurate and much more. GST audits on the other hand will look at all your income and expenses that incur GST and determine if you reported your GST accurately. Any of these audits can lead to a full audit if the auditor determines that one may be needed. In a full audit they may go through your entire business in great detail, not something any business would want!
As discussed in my prior blogs, you do not have to speak with CRA, you can request everything in writing and in the case of an audit you can authorize a representative, such as an accountant, to handle your audit. If you are ever going to send any documentation to CRA, do not send originals!!! Always send copies, because if they lose any of your documentation (hey have lost people’s documentation before!) then the onus is on you to still prove the numbers you reported on your tax returns. Now let’s get into some tips…
The first tip for audits is to never give CRA any of your printouts, handwritten papers, or any other personal documentation that may be mixed in with your business paperwork. Many people put notes and other things in their paperwork which can cause CRA to dig deeper to find more things to audit. Keep your notes and other documents to yourself. If you are audited, you should go through your documentation and pull out such documents.
More tips on my next blog!
