So you’ve just found out that you’re going to be audited by the CRA: now what?
Your first step, of course, should be to investigate your options for audit representation, as there’s nothing as effective as professional help when it comes to helping out with the federal government’s tax regulations.
Still, even if you’re able to obtain audit representation, you should still make yourself aware of the needs you’re going to have to fulfill during the coming process.
Here are 5 things you should know about CRA audits: whether you’ve been singled out for one or not, this is information that a small business owner should know.
1. Certain practices can get you audited, but the selection may also be random
There are a number of reasons – or audit triggers, if you will – that can spur the CRA into requesting an audit of a given tax year.
But in some rare cases, the selection is completely random – so don’t take the need for an audit itself to be an insult or a condemnation.
They can happen to anyone – yet another reason that audit representation is so important for a business to have.
2. A detailed audit will happen on-site
Though some audits do happen remotely – a detailed audit will happen at your business’ physical location. So keep all your documents, figures and other relevant materials on site!
3. You may need to present old documents – up to 7 years old
The CRA is within its rights to call on you to provide documents that are even 4 years old during the process of an audit – so you need to make sure no important pieces of paper have been lost in the last few years.
Anything less than 7 years old should still be on-hand in your office, no matter how low the likelihood of you having to prove your expenses to the CRA.
4. You need to provide documents needed for an “audit trail,” too
Sometimes, the CRA will require you to provide an audit trail – a series of documents that will show them the sequence that led to a specific purpose.
- Paper receipts
- Documents for personal or business purchases
- Other tax-related documents
So make sure you have every document related to operating your business, no matter how insignificant a cost may seem to be.
5. A tax audit can take an extended amount of time to clear up
Some tax audits can be wrapped up after the CRA representative has spent a few hours on-site at your business – others can take multiple weeks.
So know that there’s no standard operating procedure here – you simply have to follow the process along until it’s complete.
Of course, doing so, like managing all the other problems and standards detailed on that list, is much easier when you have an accounting and tax services firm on your side.