So, you received a brown envelope in the mail. You dreadfully open it and realize that you’ve been selected! However, unfortunately, you did not win a prize but rather your business has been selected for a CRA audit. First thing’s first: do not panic. I repeat – do not panic. You know you’ve got this because your finances are properly being taken care of. You’ve got all the necessary backup (invoices, POs, receipts, payments, bank reconciliations, proper journal entries, financial statements so overall your books are in order.
1) Review the letter in detail. Understand what it is CRA is asking to review. Which years? Is there anything in particular they’re asking you about, i.e.: nature of a specific transaction / backup to some of the expenses you’ve declared as deductible, etc.
2) Start pulling out the data and organize it for each year the auditor required
3) Be proactive. After step #2, review the transactions and if one of them appears more complex in nature, prepare all the backup ahead of time. Make sure you know how to explain it
Once the audit starts, comply with the requirements, and do your best in answering the auditors’ questions and providing them with the information previously organized.
Your main rights and responsibilities
One of the main rights is the right to file a complaint. You can do so if you are not satisfied with service received from CRA.
Keeping satisfactory books and records for a minimum of six years. You must also make all relevant information available upon the auditors’ request.
To learn more about your rights and responsibilities, visit the CRA’s Taxpayer’s Bill of Rights Guide here.
Bottom line: to increase the possibility of having a smooth audit, keep your books and records in order, file your taxes and pay any amounts due on time and prepare to answer queries in a timely fashion.
To book your free consultation, contact MLHC here.