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CRA Tax Audit Assistance

A tax audit is a frightening experience, and if the results are bad it can be a very expensive one. The CRA tax auditor will ask to see books and records and bank account statements. There may be questionnaires to be filled out. Any information that is wrong, even if due to an error, will be used against the taxpayer. A tax professional such as one of our top Toronto tax lawyers should be involved as soon as the auditor contacts you.

Our tax lawyers are here to help. Get in touch with Rotfleisch & Samulovitch P.C. for a consultation today. Contact us at 416 367 4222 or use the contact form.

 

Get Your Tax Problem Solved


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A tax audit is a frightening experience, and if the results are bad it can be a very expensive one. The CRA tax auditor will ask to see books and records and bank account statements. There may be questionnaires to be filled out. Any information that is wrong, even if due to an error, will be used against the taxpayer. A tax professional such as one of our top Toronto tax lawyers should be involved as soon as the auditor contacts you.

CRA Tax Audit Process

What happens when you are audited? Typically, you will first receive a notice from CRA of their intention to audit. The notice will usually outline the preliminary information that they require from you. They may then follow up and request more information. The beginning of an audit is the best time to obtain legal representation. Tax auditors are not always reasonable, and may not listen to your reasoning for filing your returns the way you did. We will speak to the auditors on your behalf, and begin the necessary legal work it takes to resolve all issues relating to your tax return.

If you disagree with the outcome of an audit, it is especially crucial to obtain representation as soon as you have been reassessed by CRA. You have appeal rights, but you only have 90 days to appeal by filing a Notice of Objection. As experienced tax lawyers Toronto we can provide detailed assistance in filing your income tax objection.

Free Income Tax Advice

CRA Tax Audits

There are over 350,000 tax audit and review actions conducted by the Canada Revenue Agency on a yearly basis. Around 15,000 of these tax audits deal with “cash only” businesses (i.e. the underground economy). Additionally, an estimated 35,000 are tax shelter audits.

CRA may choose to audit a taxpayer for several reasons. Here are just a few:

  • Random selection
  • Third party tips
  • Comparison of information on returns to information received from third-party sources or
  • Past history of non-compliance

The Canadian income tax system is based on “self assessment”. This means that it is up to every taxpayer to properly report their annual income on their income tax return. The CRA performs audits to ensure the “self-assessment” tax system continues to work properly. While most Canadians are truthful on their tax returns, there are some who are not.

Most audits are done to ensure compliance with the Income Tax Act or the Excise Tax Act for GST/HST. A tax audit is an examination of a taxpayer’s returns and supporting records including bank accounts and receipts to make sure that income and expenses have been properly reported and are supported by accounting records.

Here are a few examples of issues that may arise in an audit that would cause a taxpayer to be reassessed at the end of an audit:

  • Overstated Expenses
  • Overstated Deductions
  • Overstated Credits
  • Underreported or unreported Earnings
  • Unreported offshore income
  • Unreported offshore income
  • Unreported offshore assets
  • Credits, such as for charitable donations, that are not supported by receipts

Be sure you have complete records detailing every expense and deduction you have claimed on your tax return!

Tax Lawyer Edmonton Assistance

If CRA has informed you of an impending income tax audit, or you have unfavourable tax audit results, give our tax lawyers Edmonton a call to set up an initial consultation. Our top Canadian tax law firm is your one stop tax assistance centre and can assist both during the income tax audit process and once the tax audit is been complete. CRA is not on your side, but our Edmonton tax lawyers are!

Case Studies

We were retained by Don who runs a number of businesses near Kingston, Ontario and had various tax issues. One of his corporations was being audited for HST. His accountant was not able to properly represent him. We took over the audit file. We dealt with his bookkeeper to provide the records needed by the auditor and satisfied all of the auditor questions. All of the input tax credits (deductions) which were supported by receipts were allowed.

Z is based in Toronto and is in the business of purchasing cars for export. A GST/HST audit led to holds being placed on Input Tax Credit refunds of over $600,000, which the client relied upon for operating capital. We were referred by his accountant and retained when the accountant was unable to make any progress. We made detailed submissions to the auditor supporting the refunds and demanded a release of the withheld funds. After escalating to the auditor’s team leader we were successful in achieving rolling monthly refunds for the remainder of the audit. By the conclusion of the audit we had been successful in protecting the client’s cash flows and achieving a complete refund of the Input Tax Credits.

Dennis is retired and worked in finance. He lives in Newmarket, Ontario and in the Caribbean and had complex issues related to overseas holding corporations and assets. He retained our Toronto tax law firm to assist him with his CRA tax audit.The main tax audit issue was that the overseas bank accounts, assets and all supporting documentation were held in the corporation’s name. Our Toronto income tax lawyers reviewed the records and then instructed the accountant to provide all of the relevant tax books and records to the CRA tax auditor and supplied bare trust documents. Our Canadian tax lawyers provided a detailed explanation and rationale regarding Canadian income tax law and the bare trust concept and its treatment for income tax purposes that resulted in a complete acceptance of Dennis’s original filing position.

Frequently Asked Questions About CRA Tax Audits

A CRA tax audit is an examination of your tax or GST/HST filings by the Canada revenue agency to verify that your income and deductions are Fully and properly reported.Under our self-assessment tax system Canadian taxpayers are required to submit regular tax returns to the CRA. A tax audit is when a CRA Tax auditor examines a Canadian taxpayers tax return In more detail.

The Canada revenue agency uses various criteria to determine who will be subject to a tax audit. Anyone who has been reported by any third party will be audited as will anyone whose name was released in an international leak such as the Panama Papers. People who work in certain sectors of the economy that aren’t known to be part of the underground cash economy, such as construction, restaurants and hospitality have a higher risk of being selected for a tax audit.

You cannot stop a CRA tax audit once you have been selected for audit. All you can do is higher a tax professional to represent you and make sure that your rights are fully protected. If you fail to cooperate with the tax auditor a court application will be brought by CRA to force your compliance

You will be contacted by a CRA tax auditor who May ask you to send in information Or to fill Out a questionnaire Or arrange for an in person meeting. The tax auditor will ask for documentation to support the expenses claimed and will typically also ask for copies of bank statements To verify income and deposits.

The biggest single mistake is to deal directly with the auditor instead of through a tax professional such as a Canadian tax lawyer or accountant. The auditor will take notes of every statement made and will sometimes accidentally or deliberately get the information wrong. Failure to fully cooperate with the auditor and to provide all information requested, again through a tax professional, is also a common estate.

Normally CRA can audit a personal tax return for The previous three years And a corporate tax return for the previous four years. However if CRA alleges gross negligence or fraud there is no time limit on how many years back they can go to carry out an audit of a Canadian taxpayer. However the onus is on CRA to prove the gross negligence or fraud.

The most important thing to do when being audited by a CRA is to not deal directly with the auditor but to retain a professional such as a Canadian tax lawyer or accountant. It is also very important during the course of the audit to provide all relevant information and documentation to your tax professional. If you have done something wrong, such as not reported income or claim to improper expenses, it is essential that you retain a Canadian tax lawyer immediately and let the tax lawyer and know exactly what you have done improperly.

A CRA collections officer has the ability to seize bank accounts, which effectively freezes them, without a court order.The collections officer can also garnishee wages and put liens on property. In order for a collections officer to take action an assessment has to have been issued.Once an assessment is issued a Canadian taxpayer has the ability to Retain a Canadian tax lawyer to file a notice of objection, which will suspend all collection action.

A tax audit is Different than A tax investigation.The purpose of an audit is to determine if tax returns filed Are substantially correct.If a tax auditor comes across evidence of possible tax evasion the File must be referred to an investigator and the Canadian taxpayer has full rights under the Canadian charter of rights. The result of a tax investigation can be prosecution and as a result of a successful prosecution By CRA jail time is possible.

While a tax audit normally only goes back three years the tax auditor has the ability in certain circumstances to go back longer than that. A lack of records to support a tax audit can be a problem For the taxpayer. Therefore it is usually a good idea to keep tax records for a minimum of eight years and ideally for 10 years.

CRA will accept financial records in both hard Copies and electronic formats however they will still insist on obtaining original records. If original records are not available then alternatives may be acceptable. Usually a tax professional such as a Canadian tax lawyer will be required to intervene to persuade the tax auditor to accept other forms of audit evidence.

Taxpayers can and do go to jail for cheating on their taxes. Tax fraud is an offence that will result in penalties and sometimes jail time as well. Sentences range from a few months to 5 years. Given that the penalties for being convicted of tax fraud are so severe it makes sense to engage a tax lawyer if you are accused of this crime.

The best way to fight a tax audit is to hire a tax lawyer right at the beginning. Every step of the tax audit will then be scrutinized by a tax lawyer and the tax auditor will be monitored. If the tax auditor issues an adverse assessment, it can be appealed by way of having a tax lawyer file a notice of objection. If that notice of objection is also unsuccessful then an appeal can be instituted to the Tax Court of Canada.

How long it takes the CRA to carry out a tax audit varies considerably. Usually, it is between 8 and 15 months. If your records are in a good state, you co-operate fully and respond quickly to the assessor the audit process can go much faster. In particular, if the scope of the audit is limited. If things are more complicated you may wish to hire a tax lawyer to guide you through the audit process.

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Pro Tip

CRA Tax Audits

There are over 350,000 tax audit and review actions conducted by the Canada Revenue Agency on a yearly basis. Around 15,000 of these tax audits deal with “cash only” businesses (i.e. the underground economy). Additionally, an estimated 35,000 are tax shelter audits.

Get your CRA tax issue solved


Address: Rotfleisch & Samulovitch P.C.
2822 Danforth Avenue Toronto, Ontario M4C 1M1